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THE WORLD OF OIL & GAS

INTRODUCTION TO THE WORLD OF OIL & GAS

TRAINING MANUAL
Course EXP-PR-DI040
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Introduction to the World of Oil and Gas

VTHE WORLD OF OIL & GAS


INTRODUCTION TO THE WORLD OF OIL & GAS

SUMMARY

1. ENERGY SOURCES .......................................................................................................4


1.1. Energy...what are we talking about? .........................................................................4
1.1.1. History of energy sources..................................................................................5
1.1.2. Forms of energy ................................................................................................8
1.2. Worldwide energy consumption ................................................................................9
1.2.1. Fossil energy: a disappearing species?...........................................................11
1.2.1.1. Oil...............................................................................................................11
1.2.1.2. Natural gas.................................................................................................14
1.2.1.3. Coal............................................................................................................16
1.2.1.4. The thorny problem of reserves .................................................................18
1.2.1.5. Oil reserves: for how much longer?............................................................19
1.2.2. Renewable energy sources: at what price?.....................................................21
1.2.3. Nuclear energy ................................................................................................26
1.2.3.1. User countries ............................................................................................26
1.2.3.2. Uranium reserves.......................................................................................26
1.2.3.3. Reserves and the future of nuclear energy ................................................27
1.3. The major stakes: what future will energy have? ....................................................28
1.3.1. Economic stakes: the management of energy consumption ...........................28
1.3.2. Geopolitics of oil and energies ........................................................................32
1.3.3. The Hubbert peak............................................................................................34
1.3.4. Mankind and the planet ...................................................................................35
1.3.4.1. Energy and environment: the stakes..........................................................37
1.3.4.2. Greenhouse effect......................................................................................37
1.3.4.3. Sustainable development ...........................................................................39
1.3.4.4. Technological risk ......................................................................................40
2. OIL AND GAS................................................................................................................45
2.1. Fossil fuel energy: a long travel through time..........................................................45
2.1.1. Big Bang theory...............................................................................................46
2.1.2. Our solar system and planet Earth ..................................................................47
2.1.3. Origin of life .....................................................................................................48
2.2. Oilfields and gas fields ............................................................................................50
2.2.1. The hydrocarbons ...........................................................................................52
2.2.1.1. Reminders and definitions..........................................................................52
2.2.1.2. The hydrocarbons ......................................................................................52
2.2.1.3. The paraffin hydrocarbons or alkanes........................................................54
2.2.2. Source rocks ...................................................................................................55
2.2.3. Sedimentation .................................................................................................56
2.2.4. Migration of oil up to the surface .....................................................................57
2.2.5. Reservoir rock .................................................................................................57
2.2.6. Cap rock, an impermeable barrier ...................................................................58
2.2.7. Hydrocarbon trap.............................................................................................59

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2.2.8. Preservation of oil and gas ..............................................................................60


2.3. Exploration for oil and gas.......................................................................................61
2.3.1. Where to look for fields?..................................................................................61
2.3.2. Exploration of the substratum..........................................................................64
2.3.2.1. Exploration by seismology..........................................................................65
2.3.2.2. Studies prior to drilling................................................................................67
2.3.3. Assessing the oil reserves before drilling ........................................................69
2.3.3.1. Reserve types ............................................................................................70
2.3.4. Logistics for setting up oil drilling .....................................................................71
2.3.5. Instructions for drilling operations ....................................................................72
2.3.6. Role of drilling mud..........................................................................................73
2.3.7. How to know if oil or gas has been found? ......................................................74
2.3.8. After drilling .....................................................................................................75
2.4. Production of oil and gas.........................................................................................76
2.4.1. Instructions for the development of the oil production centre ..........................77
2.4.2. How to produce? .............................................................................................77
2.4.3. The various recovery mechanisms ..................................................................79
2.4.4. Life of oil and gas fields ...................................................................................80
2.4.5. Abandonment and dismantling of a field..........................................................81
2.5. Transportation of oil and gas ...................................................................................82
2.5.1. Oil transport.....................................................................................................82
2.5.1.1. Transportation by maritime means.............................................................83
2.5.1.2. Transportation by land ...............................................................................85
2.5.1.3. Le stockage du ptrole ...............................................................................87
2.5.2. Le transport du gaz .........................................................................................87
2.5.2.1. Gas storage in tanks ..................................................................................89
2.6. Oil trading................................................................................................................90
2.7. Oil and gas refining .................................................................................................91
2.7.1. Oil refinery: instructions for use .......................................................................93
2.7.2. Refined oil products.........................................................................................97
2.8. Petrochemistry .......................................................................................................99
2.8.1. Polymerization...............................................................................................101
2.8.2. Petrochemical engineering ............................................................................102
2.9. Oil logistics and supply..........................................................................................104
2.9.1. Oil fuel depots ...............................................................................................105
2.9.2. A priority issue: security.................................................................................106
2.10. Consumption of petroleum products....................................................................109
2.10.1. The different types of fuel oils......................................................................110
2.10.2. Quality of service .........................................................................................111
2.10.3. Prices of crude oil fuels and the rate of the oil barrel...................................114
2.11. The major actors in the hydrocarbon world .........................................................116
2.11.1. The institutions and other organisations ......................................................117
2.11.2. World oil companies ....................................................................................118
2.11.2.1. Major oil companies ...............................................................................119
2.11.2.2. National oil and gas companies .............................................................121
2.12. Production and consumption statistics of oil and gas ..........................................123
2.12.1. Oil ................................................................................................................123
2.12.2. Gas..............................................................................................................126

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2.13. The future of oil and gas......................................................................................128


2.13.1. Oil ................................................................................................................128
2.13.2. Gas..............................................................................................................130
3. TOTAL .........................................................................................................................132
3.1. Total at a Glance (2005 figures) ............................................................................132
3.2. Promoting Progress and the Future of Energy ......................................................134
3.3. Customer-Focused Brands ...................................................................................134
3.4. Totals values ........................................................................................................135
3.5. Implementing a Proactive Ethical Process ............................................................135
3.6. Corporate Social Responsibility.............................................................................136
3.7. Strategy.................................................................................................................136
3.7.1. Upstream Strategy .......................................................................................137
3.7.2. Downstream Strategy ....................................................................................137
3.7.3. Chemical segment.........................................................................................138
3.7.4. Shareholder Base..........................................................................................138
3.7.5. A global group with European roots ..............................................................139
3.8. Focusing on broader employee diversity...............................................................139
3.9. Group Organization ...............................................................................................140
3.9.1. The Executive Committee and the Management Committee ........................140
3.9.2. Mission of the Board of Directors ..................................................................141
3.10. Total, A Multicultural, Richly Diverse Group ........................................................142
3.11. Total history.........................................................................................................143
3.12. Logo history.........................................................................................................151
4. YOUR SUBSIDIARY....................................................................................................153
5. GLOSSAIRE ................................................................................................................154
6. FIGURES.....................................................................................................................155
7. TABLES .......................................................................................................................159

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1. ENERGY SOURCES
Energy, what an enormous subject! As vast as the universe. Our universe is overflowing
with the boundless energy of billions of galaxies, all in ceaseless movement and each
made up of billions of stars radiating heat, light and electromagnetic waves. And among
this myriad of stars is the sun, generously spreading its rays over the earth and nurturing
life here on earth: the life of a multitude of organisms, including animals, which use this
energy to live and move around.

These organisms include a very special animal: Man. For several thousand years and
most notably in the last two centuries, humans have found the simple energy of their
muscles to be insufficient. We have built a modern industrial civilisation and, to make it
work, we have tamed the energy sources available in nature: for example, the wind,
moving water and the burning of wood. And more recently we have exploited the less
obvious resources, hidden under the ground or difficult to control; resources such as coal,
oil, natural gas and nuclear fission.

Today, Man has arrived at a turning point in his history. Those forms of energy which he
uses the most, based on fossil sources (oil, gas and coal), are going to become scarcer
and scarcer. Renewal will take millions of years! There is no miracle solution to this
problem, but there are a large number of actions which, put together, will enable us to
overcome the difficulties that lie ahead. It will be up to each one of us to play a role in
meeting the huge challenge of ensuring that our future children will be able to have access
to the energy that is essential for life.

Meanwhile, lets take off on our grand voyage around the energy question!

1.1. Energy...what are we talking about?

In Ancient Greece, several centuries before Christ, energeia meant working or in action.
French and English have kept this sense of the word. Energy is force in action everyday!!

Kicking a football gives rise to a movement of the ball in the direction of a team-
mate or the opponents goal. The force of the pass, or the shot, imparts energy to
the ball.

The flame of a gas cooker provides the energy necessary for the water to cook the
pasta.

The energy produced by the jet engines of a plane means that it will fly and not
crash to the ground.

The energy from a waterfall allows us to make electricity.

Light energy from the sun is responsible for the growth of plants.

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From the above, a first simple definition can be deduced:

Energy represents the ability to produce action. For example, it can give rise to
movement, it can change the temperature of a body or it can transform matter. Energy
comes from different sources that can be found naturally: wood, coal, gas, wind, sunlight,
moving water and uranium. It can take different forms, for example: heat energy, muscular
energy, mechanical energy, chemical energy and electrical energy. And energy is capable
of being transformed from one to another of its many forms.

1.1.1. History of energy sources

From the beginning of time, right up to the present, mankind has always been motivated to
use all the resources provided by nature to make his life easier and more pleasant. And, of
course, energy has always been mans best friend in this quest.

Figure 1 : Energy through the ages

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What is the oldest form of energy used by man? Without any doubt, it is fire! Our distant
ancestors, men of prehistoric times, learnt to use wood to keep themselves warm and to
cook their mammoth steaks - almost certainly burning their fingers a little at the start!

Energy from the biomass, in other words the energy used in chemical form by human
beings, had just found its first applications.

And then came the wind! The first sailing boats are thought to date from 3000 BC.

The use of wind energy was born. The first windmills appeared with the Persians, around
2000 BC. The technique would not be imported into Europe until the 12th century AD, a
thousand years later. The famous Dutch windmills sprung up throughout the countryside in
the 14 th century. All these enemies of Don Quixote were mainly used to grind grain or to
pump water. The Dutch, in particular, used them not only to dry out their polders, the land
tenaciously won from the sea, but also to turn their sawmills and to manufacture oils.

On the other side of the North Sea, England did not remain idle: it was there that the
shape of the windmill sails was perfected, using scientific calculations. In the 19 th century,
there were almost 10 000 windmills in England. Tiny windmills, used to pump water,
appeared in the countryside at the same time. Equipped with numerous blades and of
small diameter, they had very little in common with modern wind turbines.

After air water! Close cousins of windmills, watermills also go back to ancient times.
They represent a first stage in the domestication of hydraulic energy. They were used for
the same purposes as windmills. Dams have also existed for a very long time. The first
may have been built in Egypt, by the Pharaoh Menes, in 2900 BC. They were used to
store water for cultivation and for human and animal consumption. It was only after the
discovery of electricity, that they were used to produce energy.

These ancient energy sources are used even more nowadays, but of course, with vastly
improved technology. And other energy forms have made their entrance onto the stage:
modern energy sources. Modern, yes, even if they are not all young. First and foremost,
the energy sources that gave rise to the two major industrial revolutions were coal (which
was originally wood) in the 19th century and oil (as well as natural gas) in the 20th
century.

It is due to these fossil fuels that the rich countries have been able to make energy
available to their populations, in sufficient quantities to have enormously changed
everyones life.

Finally, the discovery of natural radioactivity in 1896 opened the way for control of the
atom. The energy from nuclear fission was born. This is the energy liberated when the
very large atoms of uranium are split. For those countries that made the choice (for
example France), it is an important means of production of electricity. It is the most recent
of energy forms, the first nuclear power plants dating from the 1950s.

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Figure 2 : Nuclear energy

And then, there are the energy sources of the future.

Of these, the use of solar energy remains the most recent (from the beginning of the
1970s). Strangely enough, the discovery of how sunlight could be changed into an
electrical current (the photovoltaic effect: the transformation of sunlight into electrical
current) is older than that of radioactivity, dating as it does from 1839. But industrialists
waited for the first oil crisis in 1973 before becoming seriously interested.

In the case of geothermal energy, the water in the deep substrata that is naturally warm
or very hot is used for heating purposes or for the production of electricity. Even if Asterix
and Caesar already knew of the existence of hot springs, they used them above all for
their baths. Like solar energy, the use of geothermal energy dates from the second half of
the 20th century.

And then, there are those sources we do not yet know how to handle Energy
sources that man has not yet managed to control to his advantage.

Perhaps the day will come when we know how to use

Natural electricity, otherwise known as lightning. A flash of lightning abounds with furious
energy. Unfortunately, after a lot of attempts that have failed, we still do not know how to
recover it. It is too intense and too violent, and besides, we dont know how to forecast
when or where it is going to occur next. At best, thanks to lightning conductors, we
manage to protect houses and buildings, where it could otherwise do an awful lot of
damage.

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The tides, sea currents and ocean waves all possess enormous energy, but we dont yet
know how to capture it economically. Research is ongoing. Only one plant exists that
produces energy from the tides on an industrial scale, and it is located in France. It is the
tidal plant at Reims in Brittany. The temperature difference between the surface and the
depths of the oceans also theoretically gives us a way to produce electricity. But at present
this thermal energy of the oceans seems to be too difficult and costly to recover.

And perhaps the inexhaustible energy source really does exist. It is nuclear fusion, the
energy of the stars, the transformation of two tiny atoms of hydrogen into an atom of
helium that is hardly any larger, liberating an enormous quantity of energy when there are
billions and billions of atoms that fuse together! Hydrogen is present in large quantities on
Earth; it is one of the components of water; so this source of energy would be abundant
and available for a very, very long time. For the moment, we are at the research stage, but
there are so many technical difficulties that no one knows if we will be successful one day.
In the meantime, the military know how to liberate this energy; but without being able to
control it: it is known as the H-bomb (the hydrogen bomb) that, unfortunately, cannot be
used for civil purposes such as producing electricity.

1.1.2. Forms of energy

Energy from these sources can show itself in different ways. We speak therefore of forms
of energy.

All these energy forms have one characteristic that is particularly interesting for our daily
life: they can be transformed or converted from one form to another. For example, an
internal combustion engine transforms chemical energy (the fuel) first into thermal energy
and then into mechanical energy by means of the pistons that are part of the motor.

Radiant energy from the sun is at the heart of the phenomenon of photosynthesis (the
process that helps plants develop and grow) and of the natural cycle of water (the
evaporation phase) .

Thermal energy is produced by solar radiation or by the burning of combustible matter


such as wood.

Mechanical energy gives rise to the displacement of objects or solid bodies.

Chemical energy is stored in matter, in the molecules, which need a large input of energy
for their creation. For example, explosives are concentrates of chemical energy.
The electrolysis of water produces chemical energy in the form of hydrogen and oxygen.
Energy is present in a chemical form in the battery if a car.

Electrical energy corresponds to the displacement of electrical currents in conducting


bodies (usually metals). It exists in nature as lightning, which moves through the air; or
again, in the form of static electricity (electric charges present on a non-conducting body).

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1.2. Worldwide energy consumption

Today, more than ever before, mans requirements for energy are colossal and ever-
increasing. The consumption of primary energy is continually increasing throughout the
world. (We speak of primary energy when it has to be transformed before being used
principally into electricity or into mechanical work in the engines of vehicles or other
machines.)

Energy consumption jumped 38% in


the 2 decades from 1982 to 2002. And
the rate of increase reduced only
slightly over the period: + 20%
between 1982 and 1992, and 15%
from 1992 to 2002.

Figure 3: View of the Eurostar.

Energy comes largely from raw


materials extracted from the ground
(oil, gas, coal, uranium).

Companies operating in these major sectors must meet an increasing world demand for
energy; they continually have to strike a balance between supply and demand, neither of
which are uniformly spread over the planet. There are the major producers of primary
energy materials who supply the world and the large consumers whose own energy
production does not satisfy their needs.

Companies in the energy sector much therefore also provide for the transfer of energy raw
materials from producers to consumers.

Moreover, once they have been extracted from the substratum, those energy raw
materials are not reconstituted and replaced. They are non-renewable energies sources.

A problem therefore exists concerning reserves, a problem that can be summarised in a


single question: how long will the energy resources, which mankind has been using for
the last 150 years, remain available to the world?

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Figure 4: Changes in world consumption (in % Mtoe)

It can be seen that, over a 20-year period, the share of oil (more than 1/3 of world
consumption in 2002) has reduced, whereas the shares of gas (1/4 of world consumption)
and of nuclear electricity (scarcely 2% of world consumption) have increased.

Oil and gas represent almost two thirds of world energy consumption; coal about one third.
Nuclear electricity and renewable energy taken together do not even attain 5% of the total.

The share of hydroelectricity has remained stable. The share of other renewable energies
is increasing, but although electricity production from new energy sources has been
multiplied by almost 10 in the 20-year period, its share in primary energy production
remains very small (0.23% in 2002).

In 2002, renewable energy sources represented just 2.4% of energy consumed


worldwide (2% in 1980) really very little!

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1.2.1. Fossil energy: a disappearing species?

Let us have a detailed look, on the one hand at the main consumers of fossil energy
throughout the world, and how their consumption has changed over the last 10 years, and
on the other hand at the zones of production throughout the world.

1.2.1.1. Oil

Consumption per
Consumption Variation of the
Country inhabitant
2004 103 b/d consumption / 10 years
(barrels/year)
United States 20 731 17% 25,4
Canada 2 294 30% 25,9
Mexico 1 970 2% 6,7
Brazil 2 140 28% 4,2
Venezuela 560 27% 7,7
Germany 2 650 8% 11,7
France 1 977 6% 11,9
Italy 1 881 1% 11,8
England 1 827 0% 11,2
Spain 1 573 41% 13,3
Holland 947 24% 21,2
Turkey 683 26% 3,4
Belgium 641 26% 22,5
Russia 2 770 13 % 7,1
Saudi Arabia 1 845 43% 27,4
Iran 1 510 34% 7,9
Egypt 590 32% 2,9
South Africa 502 22% 3,9
Japan 5 353 4% 15,3
China 6 400 102% 1,8
India 2 450 73% 0,8
South Korea 2 149 17% 16,4
Indonesia 1 200 54% 2
Taiwan 965 46% 14,9
Australia 877 12% 15,8
Malaysia 515 36% 7,4

Table 1: World fossil energy consumption in the world Oil

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Figure 5: World oil consumption 2004

Figure 6: World oil production 2004

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The principal consumer countries are, without any surprise, the developed
countries of North America, Europe and Asia. The grand champion of oil
consumption: the United States. With a little less than 5% of total world population,
America consumes a quarter of all the oil produced each year and that rate of
consumption is not slowing down: +16% in the decade from 1993 to 2003, about the same
as the average for the world as a whole.

In Asia, consumption is exploding. China has almost doubled its consumption in 10


years and there are no signs of it stopping there. In this period the consumption of the
whole of the Asia-Pacific zone has exceeded that of the North American zone.
With a 39% increase on average over the decade, Asia has become the new oil-
consuming giant. But who can blame these developing countries for wanting to offer their
populations the same comforts as those available to the rich countries?

Until today, increases in oil consumption have always been balanced by equivalent
increases in production, even if at times tensions have resulted in hikes in the price of
crude oil, such as in 2004/2005.

The countries that have made the biggest efforts over the last 6 years are not those
belonging to OPEC. Globally, OPEC production has even gone down slightly. There are
two main reasons for that:

In 1982, in a violent post-oil-crisis rebound, oil prices dropped significantly. That


was the year when OPEC decided to install its policy of quotas, that is to say, to
give each of its members a total volume of crude production that should not be
exceeded: the aim being to control production and hence prices, and to conserve
reserves for future generations. This policy has worked well on the whole. It has
allowed OPEC to dig less deeply into its reserves than non-OPEC countries, whilst
at the same time maintaining relative price stability.

Certain OPEC countries, in particular those of the Arabian Peninsula and Iraq,
possess very large reserves, but their production capacities have changed very little
for at least 20 years. Increasing capacity would mean very heavy investment,
which, for the moment, has not been forthcoming. The result is that, for many of
them, their maximum production year is situated towards the end of the 1990s.

On the other hand, exploration and development of new oil fields has made significant
progress in several non-OPEC regions (around the Caspian Sea, in the Atlantic Deeps, in
Brazil and in Angola, ).

Other countries, both OPEC members (Indonesia) and non-members (United States,
Norway, United Kingdom, Egypt) have seen their production drop in the last 10 years or
towards the end of the 1990s. For them it is a case of declining reserves: they have
probably already attained a production peak (1970 in the United Sates, 1996 in Indonesia
and Egypt, 1999 in the United Kingdom and 2000 in Norway) that they will never be able to
exceed in the future. Their production will gradually decrease in the coming years. These
countries have without doubt attained their Hubbert peak.

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1.2.1.2. Natural gas

Who are the main gas consumers worldwide?

Country Consumption 2004 (Gm3)


United States 635
Canada 96
Mexico 50
Argentina 38
England 98
Germany 101
Italy 81
Holland 51
France 45
Russia 454
Ukraine 86
Uzbekistan 50
Iran 86
Saudi Arabia 66
United Arab Emirates 40
Egypt 31
Japan 84
Indonesia 37
China 38
Malaysia 33
Thailand 30

Table 2: World fossil energy consumption in the world Natural gas

Figure 7: World gas reserves in 2004 (Gm / year)


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Figure 8: Gas consumption in 2004 (Gm /year)

Figure 9: Gas production in 2004 (Gm /year)

As in the case of oil, the major consumer countries for gas are the developed
countries and often also developing countries having significant production of their own
together with a large population (Iran, Egypt, Uzbekistan ).

Consumption of gas is increasing steadily every year, more rapidly even than oil. It
progressed some 24% during the 10 years between 1993 and 2003.

As is the case for oil, the Middle East has major gas reserves (41% of world reserves). But
its production remains limited (10% of world production). In fact, the major consuming
countries of North America and Europe draw on their own reserves, partly because the
distribution of gas is proportionally more expensive than that of oil. It is therefore
less attractive to bring gas from far away.
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1.2.1.3. Coal

Coal has represented more than 1/3 of world primary energy consumption for the last 30
years.

The principal consumer countries (figures for 2004) are the following; they are often
countries that have their own significant reserves.

Coal consumption (black coal+ brown coal) in


COUNTRY
millions of tons
China 2 062

United States 1 107

India 478

Germany 280

Russia 258

Japan 204

South Africa 195

Poland 153

Australia 150

South Korea 91

Greece 80

Turkey 70

England 67

Ukraine 78

Kazakstan 73

Taiwan 63

Czech Republic 63

Table 3: Consumption of coal (high-carbon coals + lignite) in millions of tons 2004

For most of these countries, the figures for consumption and production are relatively
close to each other (except for Australia, a major exporter). The same remark can be
made at the level of continents or large geographical regions.

Some countries are marginal coal exporters, others marginal importers. Compared to oil,
gas and uranium, coal is therefore much less important in terms of international
commerce.
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Of course, it is nevertheless transported within producing countries, from the production


areas to the electricity power stations and to the industrial boilers where it is used.

Figure 10 : Coal

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1.2.1.4. The thorny problem of reserves

The reserves of primary energy (oil, gas, coal, uranium) are represented by the volumes of
each raw material available within a country or in the world as a whole.

When we speak of reserves, we generally mean the quantities whose existence is certain:
these are proven reserves, which can be definitely relied on.

At the same time


technicians and forecasters
try to calculate what may be
the additional reserves that
mankind could have
available, in other words,
possible reserves.

Taking oil as an example,


we will see that the figures
for reserves, even proven
reserves, are in fact very
uncertain.

Figure 11: World oil


reserves on 01.01.2005

Let us look, first of all, at figures for oil reserves by country and by regions as at
01/01/2004. The figures given, in number of years of reserves, are based on the
production of each of these countries in 2004. The table shows proven reserves.

It can be seen that several countries in the Middle East, all members of OPEC, hold
between them 2/3 of world oil reserves; with a special mention for Saudi Arabia which,
alone, possesses of world reserves. In total, OPEC holds 80% of these reserves,
whereas the organisation currently only produces a little under 40% of the oil
consumed worldwide.

OPEC reserves are also very large when expressed in terms of years, often exceeding
100 years. The logical conclusion of all this is that the Middle East, which is already
a strategic region for oil production, is going to become more and more so in the
future.

These figures of reserves appear to be very precise. Nevertheless, they must be treated
with caution, because they can change rapidly form one year to another and they are
themselves uncertain. They vary and are uncertain for reasons that are at once technical,
economic, and political.

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Country Reserves (billions of barrels) Years of reserves


United States 21,4 11

Mexico 14,6 12

Canada 5 6

Venezuela* 77,2 82

Brazil 10,6 20

Ecuador 4,6 24

Norway 8,5 8

England 4,5 7

Russia 60 19

Kazakstan 9 24

Azerbaijan 7 62

Saudi Arabia* 261,9 79

Iran* 125,8 86

Iraq* 115 157

Kuwait* 102 118


United Arab
97,8 108
Emirates*
Qatar* 15,2 53

Oman 5,5 20

Libya* 39 71

Nigeria* 35 41

Algeria* 11,8 19

Angola 5,4 14

China 18,3 14

India 5,4 22

Indonesia* 4,7

Table 4: Proven reserves

* Member countries of OPEC (Organisation of Petrol Exporting Countries)

1.2.1.5. Oil reserves: for how much longer?

Oil reserves

Until the end of the 1980s, exploration results and technical progress in assisted
recovery methods in oil fields in production, effectively allowed renewal of reserves.
That is why it has often been said for 40 years, we have had 40 years of oil before us.
That was still the case in 2003, because the world had available 43 years of reserves.

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But for some years now, the renewal of reserves has no longer been guaranteed by
exploration: the oil fields discovered are fewer and smaller (with the exception of several
new regions, such as the Caspian Sea, for example). For the moment this situation still
has no effect on production.

But it is certain that one day; the offer of oil will no longer be able to keep up with an
ever-increasing demand. The result will not be sudden disappearance of oil in 40 or 50
years; but, instead, a peak, after which production will begin slowly but inexorably to
diminish. This peak, or point of maximum production, is called the Hubbert peak.

At the moment, experts do not agree between themselves as to exactly when this peak will
be reached. For the most optimistic, it will be in 30 years time, and for the most
pessimistic, in 5 years! The point at which the Hubbert peak occurs is a parameter playing
a role in the major challenges [link to 1.3] that await us in the coming years!

Gas reserves

World gas reserves are less concentrated regionally than those of oil. Nevertheless, the
Middle East accounts for 40% of these reserves. But there is a competitive area, made
up of Russia and the countries on the eastern coast of the Caspian Sea (Kazakhstan,
Turkmenistan), which hold some 32% of world reserves. It is also worth noting the
special case of Qatar, a tiny country on the Arabian Peninsula, which, with its super giant
North Dome field, possesses almost 15% of the gas reserves of the planet!

At present rates of consumption, gas reserves would last 20 years longer than
those of oil.

A brief reminder of the lifetimes represented by the reserves of different energy raw
materials estimated on the basis of 2003 consumption: knowing that each of them has also
its own Hubbert peak:

Oil: about 40 years.

Gas: about 60 years.

Coal: about 200 years.

Uranium: about 100 years

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1.2.2. Renewable energy sources: at what price?

Today oil and gas are still relatively cheap. That is the main obstacle to development of
renewable sources, which are more expensive. In the future, the prices of energy from
fossil sources should increase. At the same time those of renewable sources
should reduce, mainly as a result of technical progress and the manufacture of
equipment in longer production runs.

In the meantime, the renewable energy sources are therefore dependent on government
aid if they are to make progress. There is no mystery: renewable energy sources are
developing the fastest where they are the best supported, for example in Germany where
their use has been placed within a legal framework. Aid can take several different forms:

Grants and direct aid;

Purchase of the electricity produced at preferential tariffs, higher than normal tariffs
(this is the solution imposed by the French government on the EDF, the French
electricity distributor,);

Tax breaks for individuals who install systems of renewable energy production in
their homes.

The limits of renewable energy are physical limits: the maximum area of cultivation
that one can devote to the biomass for energy purposes, the number of wind turbines that
can be installed on a site where the wind blows frequently, the surface area that can be
devoted to the panels of a solar heating installation

In the medium-term future, even if many of them have significant development potential,
the renewable sources will not be able to supply the volumes of energy that the
planet consumes by using fossil energy.

The WETO 2003 report ( World Energy, Technology and Climate Policy Outlook) of the
European Commission even forecasts that the share of renewable energy in world energy
consumption is going to decrease progressively, from 13% to 8% between 2000 and 2030,
despite the expected development of these new energy sources. This is because our
consumption of energy will increase faster than the production of energy from
renewable sources.

This certainly does not mean that renewable energies have an insignificant role to play.
Continued development and further research into even more efficient technologies must
be pursued. Because in the longer term, it is those energy sources that will certainly
take over from fossil sources when the latter approach exhaustion. However, these
developments will go on alongside very significant energy savings, resulting in major
changes in our lifestyle, movement and work.

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The countries which have chosen the path of renewable energy sources:

All the renewable energies taken together scarcely represent 2.5% of world energy
consumption.

For the most part they are


used to produce electricity,
beginning with the principal
renewable energy source
currently exploited:
hydroelectricity (2.2% of
world energy production).

Figure 12: Electricity


production from
hydroelectric sources in
2004 (billions of kWh).

The example of hydroelectric energy:

The main producer countries for hydroelectric energy as at 2004

Country Hydroelectric production (billions of kWh)


Canada 334

China 328

Brazil 318

United States 268

Russia 165

Norway 108

Japan 94

India 84

Sweden 64

Venezuela 62

France 59

Paraguay 52

Turkey 46

Italy 41

Table 5: Electricity production from geothermal, solar, wind, wood and biomass sources in
2004 (milliards de kWh)

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The hydroelectricity producing countries are also the consumers, even if certain countries
such as France export a little electricity to their neighbours. Analysed by continent or
geographical region, hydroelectric energy appears to be more equably spread than the
non-renewable sources of energy.

The initial potential of developed countries has been largely exploited, and the possibility
of new hydroelectric dams is limited. On the other hand, looking at the figures, it appears
that Africa is far from having developed all its hydroelectric potential.

The principal countries producing electricity from other renewable energy sources are the
following:

Electricity production from renewable energy sources excluding


Country
hydroelectricity (billions of kWh)
United States 97,1

Canada 10

Mexico 8,8

Brazil 17,2

Germany 39,4

Spain 21,2

Finland 10,2

Italy 12,8

Denmark 9,7

England 8,1

Sweden 7,2

Holland 6,4

France 6

Japan 15

Philippines 9,8

India 6,4

New Zealand 3,8

Indonesia 6,1

Thailand 3,3

Australia 2,5

China 2,4

Table 6: Production of electricity from renewable energy sources excluding hydroelectricity


2004

2004 levels of production of electricity from renewable energy sources: geothermal + solar + wind + wood +
energy from waste (incineration and methane production)

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It is largely the developed countries that are involved, even if Brazil (biomass), the
Philippines (geothermal energy) and India (wind energy) stand out as pioneers of
renewable energy among developing countries.

Worthy of note is the tiny contribution from renewable energy in Russia and, above all, the
situation in Africa where solar energy would nevertheless appear to be a promising energy
source.

Research and technical progress for the future

The technological principles of renewable energies are available, but much more can be
expected from research into the improvement of efficiency of the techniques, for example:

Improvement in yields of photovoltaic cells: research is ongoing into crystalline


forms of silicon or other semi-conductors capable of going beyond the best yields
currently attainable (16%);

Learning how to install wind turbine farms at sea at lower cost;

Productivity improvements for plants destined as green fuel;

Continuation of tests of different installations for the capture of energy from


waves and maritime currents, in order to select the most efficient methods before
generalising their use;

Improvement in procedures for the management of electrical energy, so that


electricity resulting from intermittent energy sources, such as the wind and the sun,
can be better integrated into the distribution network.

The really positive surprise for mankind could come from the success of long-term
research, already begun, aimed at controlling nuclear fusion.

Nuclear fusion could theoretically allow us to achieve the energy dream: inexhaustible
supplies in large quantities. But we wont have an answer before 40 years at best.

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Figure 13 : Renewable energy sources

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1.2.3. Nuclear energy


1.2.3.1. User countries

In 2003, nuclear energy represented only 2% of the primary energy and 16% of the
electricity consumed worldwide.

In many countries, nuclear electricity represents only a very small percentage of national
production. In OECD countries, this percentage is on average around 25%.
In the emerging countries, the percentage should progress in the coming years, meaning
that a response can be found to the enormous requirements of these countries, whose
population continues to increase rapidly.

The choice of nuclear energy is currently under question in a certain number of countries:
Belgium, Germany, and Sweden. Under pressure from their public opinion, these countries
have had to undertake to close down their reactors, respecting programmes whose
duration varies from country to country. They will have to replace this energy by other
means of energy production, which will be compatible with respect of the Kyoto
undertakings concerning emissions of greenhouse gases.

1.2.3.2. Uranium reserves

Eight countries together account for almost 85% of world reserves. Estimated
reserves in 2001 (reserves exploitable at a cost of less than 80 US$/ton) are the following:

Uranium reserves in Percentage of the


Country
millions of tons world reserves
Australia 667 26,5

Kazakstan 433 17,2

Canada 315 12,5

South Africa 231 9,2

Brazil 162 6,4

Namibia 144 5,7

United States 104 4,1

Uzbekistan 90 3,6

Table 7: Electricity production from nuclear sources in 2003 (billions of kWh).

Most of these countries belong to the developed world, or are emerging or developing
countries, which are not among the principal countries with petroleum and gas reserves
(with the exception of Kazakhstan).

The reserves represent more or less 50 years of consumption at present rates, that is to
say largely comparable to those of gas and oil. However, they could be much larger than
that. Indeed, it is difficult to evaluate real uranium resources.

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A serious prospecting effort remains to be undertaken because the stocks available for the
moment are largely sufficient. There are therefore in all probability deposits awaiting
discovery. That is why some experts already speak of 100 years or so of proven reserves
as at today (more or less twice that of petroleum and half that of coal).

In fact total listed mining resources exceed 17 million tons, which is about 300 years of
current consumption. But conditions of access to these reserves, that is to say exploitation
costs, are very different.

And finally, exploitation of non-conventional uranium resources, for example those found in
phosphates or in seawater, would allow reserves to be multiplied by at least a factor of
100.

1.2.3.3. Reserves and the future of nuclear energy

Today, the nuclear industry is the object of numerous controversies in many parts of the
world; controversies often based on irrational fears.

The advantages of this energy source are widely recognised: the power that is available,
the competitive cost of the electricity produced in this way, and the ability to generate
electricity without harmful discharges into the atmosphere.

But the nuclear industry frightens people and certain countries have undertaken, under
pressure from their public opinion, to close down their nuclear reactors.

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1.3. The major stakes: what future will energy have?

Just what is economic growth? Simplifying things, it is the capacity to produce more
goods, products, merchandise and services each year than in the year before. And
what is the best means of ensuring an outlet for this ever-increasing production? Quite
simply by taking these products and services to the greatest number of people
possible, that is to say, to each and every one of us. There, in a nutshell, is the
principal of the consumer society in which we live.

For that society to work well, three fundamental elements are required:

The consent and the support of the people in the system: that is why we work
and receive a salary. In this way, we can buy the products and services resulting
from our work and ensure material comfort in our everyday life.

Money, that we call capital, for the construction, upkeep and development of
factories, production units and service companies. This invested capital earns
money through production and the growth of companies. A part of the money that is
generated is used to finance new productive investments, and so the cycle
continues. This is the principle (highly simplified) of capitalism, the predominant
economic system in the greater part of the world.

Energy to make the system work: producing and ensuring the transport and
distribution of the products, merchandise and services, consumes energy. Oil is the
form of energy that permitted the rapid economic development observed in the thirty
years following the Second World War (the Thirty Glorious Years): It is an energy
form that is liquid and hence easily transportable, has a high energy content and, up
until the present time, has been cheap.

1.3.1. Economic stakes: the management of energy consumption

Our society is evolving, therefore, in the direction of increasing production. Since it has a
need to constantly progress, it encourages a continuous increase in the demand for
products and services in the developed countries. The efficiency of the utilisation of energy
what is called the energy intensity (ratio of the consumption of energy to the Gross
Domestic Product, or GDP) is improving year on year in virtually all sectors; in industry,
agriculture, in offices and in homes. There is one exception: transport.

But that improvement is only sufficient to limit the annual increase in demand for energy,
not to reduce the absolute level of demand.

At the same time, our society has a natural tendency to extend the production and
availability of products and services to the developing countries. Such is the case in China
and India, where a part of the population is beginning to be able to afford material benefits
which are quite normal in the rich countries. The inhabitants of the prosperous areas of
these emerging countries want to install modern electrical appliances in their homes and
have a car to move around. They travel both for their work and for their pleasure. The
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means of production in these countries are developing to respond to these growing


demands. So energy requirements in these countries continue to increase substantially
and the energy intensity remains at a high level.

Thus, economic growth and energy consumption are intimately linked. Increased
growth leads to increased energy consumption. But the raw materials used to produce the
enormous quantities of energy that we need are not inexhaustible. Nor can their
production capacity be increased indefinitely.

Management of energy sources

The major issue in the coming years is going to be to respond to a two-fold challenge on
the energy front:

In the short term, over the next few years, at most the next thirty, (this concerns us
all directly!): to prepare ourselves for the Hubbert Peak for oil. The supply of oil
to the market will begin to decrease whereas the demand will increase
inexorably.

In the long term, over the next fifty years or a little longer, (this concerns the
children born today and those who follow): the beginning of terminal depletion of
fossilised energy sources; first oil, then, twenty years later, gas. At that time, all
that will remain will be coal reserves sufficient for several decades.

Several responses are possible to these two situations, each requiring investment of such
a magnitude that choices will have to be made. Those responses are the following:

Give priority to energy supplies, continually developing the production


capacity of fossil fuels, particularly oil. This response is based on optimistic
hypotheses for oil reserves. It is the path chosen by the United States, accepting
the May 2001 recommendations of the National Energy Policy Report, better known
as the Cheney report, after the name of the Vice-President of the United States.
Among developed countries, it is the choice that has also been made by Australia.

Advantages: the inhabitants of these countries will be able to preserve their


lifestyle for several additional decades. At the same time, the working of society
will not be put at risk. Social tensions will be avoided for some time.

Disadvantages: the problems of energy shortage are left for the next
generation, that is to say those born today (people who are under twenty today will
nevertheless experience these problems in their old age). At that time, the
difficulties will be even thornier since the room for manuvre, which we still have
today with the relative abundance of oil and gas, will no longer exist. Besides, the
ever-increasing requirements for oil could create serious international tension in the
production zones. Finally by emitting more and more CO2 we take all the ecological
risks as far as the consequences of the greenhouse effect are concerned.

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Take action, as a priority, on the demand for energy, by attempting to limit


energy consumption as far as possible. This is the direction recommended by
Europe, that of the control of energy consumption and the adoption of the Kyoto
Protocol.

Advantages: in this way we will respond in a more flexible manner to the


eventual problems. By anticipating them, their impact can be substantially
reduced. Equally we begin to limit the emissions of greenhouse gases at levels
already agreed.

Disadvantages: our way of life will be called into question. The progressive
abandonment of fossil energies will not be undertaken without profound changes in
our society; in our way of consuming, moving around, working and so forth.

Develop alternative energy sources. This response can accompany both


development of fossil energy availability and efforts to limit consumption. Two main
types of alternative energies exist: nuclear energy and renewable energy sources
(hydroelectricity, solar, wind, geothermal and biomass).

Advantages: It enables consumption of fossil energies to be reduced and their


final depletion to be delayed. Moreover, the alternative energy sources do not
emit greenhouse gases (or the CO2 is recycled, as is the case with biofuels)

Disadvantages: based on our current knowledge, alternative sources of energy


are not sufficient to replace the volumes of fossil energy that we are consuming
today.

Promote research into energy sources for the future. Currently this means,
above all, the fission reactors known as breeder reactors, and the nuclear fusion
process.

Advantages: if we manage to control them, these energies will be virtually


inexhaustible. They do not emit greenhouse gases.

Disadvantages: the techniques used are very difficult to control, above all in the
case of fusion. It is not yet known if we will succeed. Any eventual industrial
applications (fusion power stations or operational breeder reactors) will not exist for
at least fifty years. It is therefore impossible, as at today, to count on those
techniques to solve the problems of oil shortages awaiting us in the future.
Moreover, the research effort will be expensive: the experimental fusion reactor
project, ITER, will cost around 10 billion to construct and to run for 20 years.

The real energy issue for mankind is not therefore the choice of such and such a type of
energy, but that of control of consumption. In the short term, that would allow us to
economise on the use of fossil energy reserves and we could, therefore, better prepare for
the final depletion of a part of fossil energy resources (oil and gas), towards the end of the
century. In all the alternative strategies described earlier, whether we consume more or
less oil, whether we call on wind and solar energy rather than nuclear, or the other way

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round, we must prepare for changes in our way of life, in the sense of a making greater
economies in the energy we use directly (car journeys, heating, electricity ) or indirectly
(drinking water, everyday consumer products, international road transport ). And the
sooner we start, the better it will be.

For the moment, despite the Kyoto protocol, we havent really set off along the road! The
table below presents energy forecasts for the world as a whole, taken from the WETO
report (World Energy, Technology And Climate Policy Outlook) established by the
European Commission in 2003.

1990 2010 2030


Population, billions of inhabitants 5,2 6,9 8,2

Energy consumption, toe/inhabitant 1,7 1,8 2,1

Electricity consumption, kWh/inhabitant 1,8 2,4 3,7

Part of the renewable energies in the total energy consumption 13% 11% 8%

CO2 emissions tons/inhabitant 4 4,3 5,5

Energy production, millions of toe

Coal and brown coal 1 901 2 931 4 757

Oil 3 258 4 250 5 878

Natural gas 1 754 2 860 4 340

Nuclear 509 799 872

Hydroelectricity and geothermics 193 290 392

Wood and wastes 904 949 900

Wind, solar and small hydroelectricity 11 30 73

Table 8: Energy forecasts for the world as a whole, taken from the WETO report (World
Energy, Technology and Climate Policy Outlook) established by the European
Commission in 2003

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1.3.2. Geopolitics of oil and energies

Geopolitics studies the relationship between geography and the policies of nations. It takes
into account questions relating to raw materials including sources of energy, in particular
oil which became a strategic raw material in the 20th century. Strategic, not only because
it is vital to the functioning of the economy and society in general, but also because there
are risks involved in its supply situation.

So far, oil has remained plentiful and relatively inexpensive. We have not experienced
shortages, except in times of war, for example during the First World War when the
Germans sank American vessels which were supplying oil to the members of the Three
Nations Alliance (UK, France and Russia). The most recent oil shortages date from 1974.
In October 1973, war broke out between Israel and the Arab countries (the
Kippur/Ramadan war).

On the 17th of October, Arab oil producers decided to impose a petroleum embargo on
supporters of Israel (the United States, Portugal, the Netherlands, South Africa and
Rhodesia). This embargo was lifted in July 1974, following its failure. In fact, the major
petroleum companies, controllers of the distribution of world oil supplies, had allocated
shortages between all industrialised countries, those targeted by the embargo along with
the others.

For the last 30 years, the developed countries have become used to a situation of plenty.
Inexpensive oil and gas have made all alternative energy sources expensive in
comparison. Moreover, the dependence of consumer countries on hydrocarbon producers
has increased. A single model of economic development, that of the consumer society, is
tending to become the rule everywhere, even in China, the last major country with a
Communist political system. The result is globalisation: emerging countries and developing
countries have also become dependent on oil from producer countries.

Future challenges

So today, as the Hubbert Peak approaches, the whole world will be impacted by the
inevitable reduction in supplies. A shortage could also happen if a serious crisis
destabilises a major producer country, leading to a sudden drop in its production level.

Faced with this two-fold threat, two policies are open to those countries having the
financial means to react:

Reduction of their dependence on oil by developing alternative energy sources


(coal, nuclear, renewable energy) and above all by achieving significant energy
savings;

And/or ensuring that their energy supplies are safe from threat.

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The developing countries, on their side, have significant deposits of new types of energy
(solar, wind, geothermal, hydroelectricity) available for the production of electricity. But
they need aid from the rich countries:

On the one hand, to purchase and use the appropriate technologies, which are
expensive in investment terms;

Also to purchase the plant and equipment enabling them to use the electricity
produced (what is the point of having electricity if one has nothing to use it for?);

On the other hand, to train personnel competent in these technical sectors, to


ensure for example the distribution and maintenance of all the plant and equipment.

The geopolitical problems posed for hydrocarbons can be clearly seen from a map
of the world:

The Middle East, which is very rich in oil and gas, is a long way from European
consumers and even further from the United States and Japan. It is a region of
widely diverse countries, peoples, religions and political regimes. Its history has
been complex since ancient times. It is a region where the risk of conflict remains
high, but which, fortunately, also has factors of stability, such as OPEC (the
Organisation of Petroleum Exporting Countries). This producer organisation
includes many Middle Eastern countries and plays an important role in the good
management of world petroleum production, and, above all, in price stabilisation.

The other major zone rich in hydrocarbons Russia and the two states bordering
the east coast of the Caspian Sea, Kazakhstan and Turkmenistan can naturally
supply Europe to the west and Japan, South Korea and China to the east. But these
supplies will remain dependent on the goodwill of Russia, which can choose, in a
situation where production becomes inferior to demand, to favour supplies to
Europe or, on the contrary, to the Far East. Certain countries are attempting to
escape from this control: for example, in a bid to by-pass the Russian network, BP
and its partners have constructed an pipeline linking Bakou in Azerbaidjan to the
Turkish port of Ceyhan. A part of the oil from Kazakhstan could also take this route,
thus escaping from Russian control.

Oil and gas are found elsewhere than in these two major zones, but such regions have
smaller reserves. South America, and Venezuela in particular, export their crude largely
towards North America, because of their geographical proximity and the enormous
requirements of the United States!

The geopolitics involved in other energy sources pose fewer problems. Coal is much more
widely spread throughout the world, and the major users are in general also major
producers. As far as uranium is concerned, the greater part of the reserves are held by
rich countries (Australia, Canada, the United States). And, above all, the Hubbert Peak for
these two resources is situated much further away in time than for oil and gas.

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Access to coal and uranium resources should not be affected by international tension for
many years.

Hydroelectric dams built across very large rivers which cross several countries can create
tensions. For example, Syria and Iraq are protesting against current Turkish projects to
build 22 dams on the Tigre and Euphrates rivers, resulting in a reduction in the flow of
these two major rivers downstream from the dams. Water available for farmers would be
reduced, and the ecological balance of the rivers themselves and the land along their
banks threatened. That is without taking account of the threat for inhabitants downstream
posed by risks of dam bursts in a country like Turkey, which is subject to strong
earthquake activity. On the other hand, these dams would enable control of the rate of flow
of the two rivers, which would be favourable to farmers.

1.3.3. The Hubbert peak

The Hubbert peak results from rules established by the American geologist King Hubbert
in 1956. Using all the available data for production, reserves and the past pattern of
discoveries for a given raw material, it is possible to forecast its world production curve. It
takes a form close to that of a Gaussian or normal distribution, with production
increasing until a peak is reached, beyond which production decreases ineluctably.

King Hubbert made himself famous by forecasting the peak for the United States for the
year 1970, a prediction subsequently confirmed by the facts. It is the date of the Hubbert
peak that is particularly interesting, rather than the date of total exhaustion of petroleum
resources, which will not occur for at least 50 years.

Two schools of experts are at odds concerning the former date:

The optimists: for them it will be in 20 to 25 years, even 30 years. Their


arguments? World petroleum reserves are under-estimated. Regions overflowing
with oil remain as yet completely untouched (the oceanic deeps, the polar zones).
The bituminous sands until now little exploited will also contribute new reserves.
And above all technical progress is going to allow recovery of far more than the
current average of 30% of the oil contained in the substratum. Our best future oil
fields are those that already exist!

The pessimists: they expect the peak to occur in the next 5 years. Their
arguments? World reserves of oil are over-estimated. The proof: the oil reserves of
several Middle East countries increased by 50% in the 1980s, at the time of the
introduction of a policy of quotas by OPEC, without any major discovery to justify
that increase. Oil from the Polar Regions is an illusion because it will be too
expensive to extract. The treatment of bituminous sands is very expensive in
energy terms and represents an ecological catastrophe. Finally, to believe in an
extraordinary increase in the recovery factor, is to believe in Father Christmas!

As far as gas is concerned, the Hubbert peak is displaced some 15 years after that of oil.

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Figure 14: The Hubbert peak


1.3.4. Mankind and the planet

In the 20 th century, up to the beginning of the 1970s, we thought that relations between
Man and the Earth were harmonious. We firmly believed that raw material and energy
resources would be available for a long time. Then, awareness of the limits of fossil energy
resources began to grow, but only gradually. The principal danger envisaged at the time
was of out-of- control population growth ( a doubling of world population every forty years)
leading rapidly to the impossibility of feeding all the inhabitants of the planet from the
middle of the 21 st century. This fear has now disappeared. The rate of growth of
population has significantly diminished. Today, there are 6.5 billion people on earth, and
population should stabilise at about 10 billion before the end of the century.

But, in the meantime, other risks appeared towards the end of the 1980s regarding the
materials that had been thought to be inexhaustible and without any particular value: air,
water, forests, the flora and fauna.

Air? Pollution of the air by residues from our activities (ozone, SO2, nitrous oxides,
fumes) poses threats to our health, even if measures have been taken to impose limits
as far as possible: the norms regarding atmospheric pollution are more and more severe.

In Europe, they are defined in European Union (EU) directives and are constantly evolving:
for example, in December 2003, the EU, the United States, Japan and China signed an
agreement concerning problems of pollution resulting from means of transportation.

Research within the framework of this agreement will enable new anti-pollution norms to
be defined in these countries.

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The increase in the rate of discharge of greenhouse gases into the atmosphere threatens
radical change in the climate of the planet.

Water? With the increase in population, access to drinking water is becoming a problem in
many countries: 1.2 billion human beings are deprived of water and 2.5 billions do not
have access to purifying installations. Each year, 8 million people die after consuming
contaminated water. All United Nations agencies have a water resources component in
their programmes, but there is no single UN organisation in charge of water-related
problems.

Two institutions are working on the issue: the CME (Conseil mondial de leau, The World
Council for Water), created in 1996 and based in Marseilles, and the GWP (Global Water
Partnership). The CME currently brings together 330 members: governments,
multinational companies, NGOs, research centres, foundations, banksThe objective of
the two organisations is the same, to study water problems worldwide and to come up with
a policy for the management of water resources. Producing drinking water does not pose
insurmountable technical problems: one uses water purification plants or sea-water
desalination installations.

However this latter solution is very costly in energy terms. An initial solution would be
waste limitation. For example, the Worldwatch Institute, an inter-disciplinary American
research organisation, formed in 1974 to study environmental problems on a world-wide
scale, estimates in its 2004 report that losses of drinking water by waste and leaks are
30% in Paris and 50% elsewhere in France.

Forests? Their rate of disappearance is increasing in the countries where they were so
vast that no one worried in the early days of their exploitation: in the Brazilian Amazonian
Basin, in Indonesia

Flora and fauna? We realise today that the problems go much deeper than the risk of
disappearance of several emblematic animals: the giant panda, the snow leopard, the
Sumatra tiger The real problem is species which are disappearing in their thousands, at
a rate much more rapid than that of natural disappearance. Bio-diversity itself appears
threatened.

All these problems are due to the impact of human activity. That is obvious in the case of
forests and pollution. Most independent experts consider that it is also true for climate
change.

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1.3.4.1. Energy and environment: the stakes

During the second half of the 20th century, the average temperature of the earths
atmosphere increased by 0.5C. That doesnt seem much, but scientists think that this
increase has already had consequences:

The recent frequency of record years: 1999, 2002, 2033 and 2004 were the four
hottest years since the start of meteorological recordings in the 19 th century (study
by James Hansen, of the Goddard Institute for Space Studies at NASA);

An increase in the number of natural disasters, all causes taken together:


o 10 to 20 per year from 1900 to 1960,
o 70 to 80 per year from 1960 to 1980,
o 160 to 220 per year from 1980 to 1990,
o 350 to 400 per year between 1990 and 2000, in other words, double that of
the previous decade.

Among the causes of natural disasters, the number of earthquakes remained quite stable
from 1980 to 2000, whereas the frequency of hurricanes and floods increased. Indeed, it is
disasters linked to the climate that are becoming more numerous:

an increase of between 10 and 20cm in the sea level;

the displacement of tropical species towards the North, such as barracudas


along the French coasts and tropical African fish in the Mediterranean. There have
also been changes in the behaviour of migrating birds: migrations have been
delayed, shortened in distance or even cancelled altogether.

Scientists think that global warming is very probably due to a massive discharge of
greenhouse gases by human activities. These emissions result above all from our
consumption of fossil energy.

1.3.4.2. Greenhouse effect

What is the greenhouse effect?

It is a natural phenomenon! Earth receives its energy from the Sun in the form of heat and
light. A part of the energy entering the atmosphere is absorbed by the atmosphere and the
remainder heats the Earth. The Earth does not retain this energy and sends it back
towards the exterior in the form of infrared radiation. The natural greenhouse gases,
steam and carbon dioxide (CO2), retain part of this radiation, leaving the rest to
continue its journey into space. The infrared radiation warms the atmosphere: if neither
steam nor CO2 existed in the atmosphere, the average temperature on Earth would be
18C, whereas thanks to those gases, it is +15 C.

To accelerate the growth of plants in a greenhouse, horticulturists increase the ambient


temperature by saturating the air with steam.
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Why has the greenhouse effect become a problem?

If the quantity of CO2 in the atmosphere increases, then more infrared radiation is
retained and the temperature increases. On Venus, which does not receive very much
more solar energy than the Earth, the atmosphere contains virtually only CO2, and its
average surface temperature is +420 C!

By burning very large quantities of fossil energy (coal, oil, gas), man is gradually
increasing the concentration of CO2 in the atmosphere. And his activities discharge other
gases with an important greenhouse effect:

methane, CH4, produced by waste tips, rice cultivation and the breaking of wind
from cows. Its length of life in the atmosphere is 12 years, and its greenhouse effect
21 times stronger than CO2.

nitrous oxide, N2O (laughing gas), discharged by nitrogen fertilisers. Length of life in
the atmosphere 150 years; greenhouse effect 310 times stronger than that of CO2.

gases of the fluorine family like the CFCs, used as cooling agents in air conditioners
and propellants in aerosol canisters. Length of life in the atmosphere 120 years;
greenhouse effect 16000 times stronger than that of CO2.

Sulphur hexafluoride, SF6, used as a leak detector and as an insulator. Length of


life in the atmosphere 50 000 years; greenhouse effect 24 000 times stronger than
CO2.

Who is responsible?

Principally the developed industrial countries. The recent arrival of emerging countries
amongst the emitters of greenhouse gases only heightens the problem. An American
emits on average about 20 tons of CO2 per year, a Russian half of that, a Frenchman one
third, a Chinese 10 times less, and an Indian 20 times less.

What are the activities producing greenhouse gases? If we take France as an example:

road transport accounts for 25% of the total;

industry in general for 20%;

agriculture 19%;

living accommodation, offices, businesses and state administration 18%;

energy processing 13%;

waste discharge in tips 3%;

transport other than by road (excluding international air transport) 2%.

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What are the solutions?

The only truly realistic solution is a major and rapid diminution in CO2 emissions. The
theoretical level for stabilisation of the quantity of CO2 in the atmosphere corresponds to
an emission of 0.5 tons of CO2 per year per inhabitant, that is to say about half of that
generated today by an Indian, or by a Paris to New York return flight, or a 1500 km trip in
an SUV!

The Kyoto Protocol is a first step in the direction of reducing greenhouse gas emissions.

1.3.4.3. Sustainable development

The United Nations Organisation insists on the right of every human being alive today and
to be born in the future to have access to drinking water, to a sufficient and balanced diet,
to basic health care, to education and to democracy. This is the minimal base of what is
called sustainable development, that is to say the well-being of present generations
without compromising that of the generations to come.

Today, out of a population of more than 6 billion, 1.2 billion earn less than one dollar a day
and 3 billion less than two dollars! Many among them do not benefit from the totality of the
rights insisted on by the United Nations.

Meanwhile, in the rich countries, everything around us says: well-being is the power to
continually buy all sorts of new things. To supply this hyper consumer society with goods
and merchandise, it is an inescapable fact that consumption of energy must remain at a
very high level and always be on the increase. Very high or too high? At current rates,
depletion of the greater part of our fossil energy reserves is foreseeable before the end of
the 21st century. But problems of soaring cost and deficits in energy availability will no
doubt show themselves well before.

Growth or recession?

Certain forecasters think that before we find ourselves trapped by the physical reality of
limits on resources and therefore enter into a period of compulsory recession, the rich
countries could give thought to the possibility of committing themselves to a society with
negative growth.

This would imply a realisation that human happiness can be something other than the
plentiful supply of consumer goods whilst preserving growth for those who have not yet
obtained the fundamental rights of human beings. But a society of negative growth
remains to be defined in its entirety and would necessitate upheavals that we are perhaps
not yet ready to accept.

Others are not convinced of the imminence of the difficulties and see no reason to
question the economic orientations of our world. For them, growth continues to remain the

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best means of fighting poverty and unemployment. They think that scientific and technical
progress in the future will solve the problems before fossil energy sources are depleted.

The near future, probably the next 30 years, will decide in favour of one or the other
interpretation. In the meantime, it is up to each of us to think about the question, to make
our own decisions and, perhaps, to put the fruits of our reflection to work in our daily life,
whether it be in one direction or another. First and foremost, it is essential to understand
and to analyse the data relevant to the problem, the risks and the hopes. Read read a
lot! and listen, rejecting over-simplification (a real effortbut useful!). It is an unavoidable
personal challenge to anyone who is interested in his or her future. By making use of our
knowledge and finding time for reflection, we will be better equipped to respond to the
challenges and issues of life.

1.3.4.4. Technological risk

Any human activity can be the origin of an accident. They have an element of risk. This is
true in daily life: in the car, on a sports field, at sea Even at home since, every year,
there are 18 000 deaths due to domestic accidents in France.

This also counts for activities which make use of technology: there is no zero risk .
Starting the moment that man decides to produce, to transport or to mould a material for
his profit, risks appear. A technological risk is the possibility of an accident on a site that
uses dangerous products or processes.

These products and processes may amplify the consequences of the accident. The factory
personnel, the neighbours or even the environment are also liable to be affected,
sometimes dramatically. So it is essential to be able to define the risks, in order to better
counter them.

Measuring technological risk

Where are the biggest risks to be found? The activities presenting technological risk.

All industrial activities generate risks, mainly linked to the products that are stored or
manufactured:

Mining industries: those presenting operational risks (roof falls, firedamp


explosions, and dust explosions in coal mines ) and those using highly toxic
products (mercury salts, cyanides);

Nuclear power plants, where highly radioactive material is both manipulated and
produced. Security measures are extremely severe, for example to anticipate the
risk of fusion of a reactor core, or of an escape of radioactive material into the
atmosphere;

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Chemical industries produce and/or use large quantities of substances that are
often dangerous. These products are used in the manufacture of plastics,
pharmaceutical products, fertilisers, sometimes explosives In certain conditions
they present risks of explosion or of the emission of toxic substances;

Petroleum and petrochemical industries use, store and process gas, oil and all
their derivatives. These plants must anticipate risks of fire, explosion, marine and
ground pollution;

Iron and steel industries process metallic derivatives at very high temperatures
and can present risks of explosion and the escape of molten material.

Very large hydroelectric dams, with the risks of bursting and consequent
submersion of everything downstream;

And other places, such as large grain silos, where explosions can happen caused
by conflagration of dust

What are the risks? How are the consequences of a technological accident measured

An industrial accident can have three types of impact:

Mechanical: an explosion causes a shockwave resulting from the sudden pressure


increase at the centre. Specialists calculate the excess pressure engendered by the
explosion and in this way determine risks to health (eardrums, lungs ) and to
goods and property.

Thermal: this results from combustion of a product, sometimes accompanied by an


explosion. The consequences for people (1 st, 2 nd and 3 rd degree burns), are
determined by calculating the amount of heat received per unit of surface area.

Toxic: the inhaling or digesting of substances that are irritant, harmful or toxic, or
the contact of such substances with the skin or mucous areas. The effects on
human health can be immediate (acute toxicity), or long-term (chronic toxicity), and
range from the benign (irritant substances) to the fatal (toxic substances).

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How can the consequences of a technological accident be quantified?

The seriousness of a technological accident is defined by taking account at one and the
same time of the gravity of its effects (cf. above) and of the area affected. For example, a
roof collapse at the bottom of a mine does not have an impact over the same area as a rail
accident.

In February 1994, the European Union decided to adopt the European scale for industrial
accidents. Based on 18 parameters, this scale is extremely precise and enables clear
definition of the impact and consequences of accidents. The scale contains:

2 parameters related to the quantities of dangerous materials (Q),

7 parameters related to human and social aspects (H),

5 parameters concerning consequences for the environment (ENV),

4 parameters covering financial aspects ().

For each of these parameters, there is a scale of 6 levels permitting quantification of the
seriousness of the effects of an industrial accident.

All that having been said, industrial activities are not like the devils cauldron:

The activities have a reason. They supply the products necessary in our daily lives
(energy, food, plastic materials, fertilisers, pharmaceutical products )

It is therefore essential to anticipate the risks. Prevention is an essential for public


health. The protection of people and the safety of installations come before
performance.

Anticipating industrial risks

What are the regulations in force?

In France, as in numerous other countries, the State defines a legal framework for
measures for the prevention of technological risk.

Depending on the types of product stored or manufactured, companies whose activities


imply an element of risk are classified according to three levels of potential danger:

Companies subject to declaration are those that can be involved in low level risks
or problems. There are some 450 000 such companies in France, ranging from pig
farms to candle making workshops to small gas storage units.

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Companies subject to authorisation are those that can be involved in significant


risks. For example, storage units for more than 1.5 tons of ammonia, paper and
carton warehouses... There are about 61 300 such companies in France.

Companies subject to authorisation with the same constraints as a public


utility (they are commonly known as Seveso classification companies). In this
case, the risks are major and require control of urban planning around the site.
Included in the list are sites using or storing more than 20 tons of a highly toxic
substance, or other high-risk sites. There are 1239 in France.

In each of these cases, the company submits its activities to the Prefect of the region who
determines the safety measures to be taken.

In order to define the level of danger applicable to the site, the nomenclature ICPE
(installations classified for the protection of the environment) is used. This text defines the
levels of quantities of product and types of activity beyond which the site is subject to one
or another of the three danger level classifications.

Finally, since what is known as the Bachelot law was passed in July 2003, plans for the
prevention of technological risks (PPTR) have been progressively put in place.

This law reinforces the legislation on industrial risks by putting into place:

Comits Locaux dInformation et de Concertation (CLIC) , local committees for


information and consultation, which keep the public informed and involved in the
prevention of industrial risks;

Protective measures to be taken by local people if their buildings do not provide


sufficient protection in the case of an accident;

Measures of control of urban planning which restrict the construction of dwellings


around the sites. These measures can also impact on existing urban planning to
safeguard or displace existing populations.

In Europe, a directive exists for industrial risks: the SEVESO directive of 1982. Since 1996,
it has been extended by the directive 96/82/CE known as SEVESO 2:

New products were added to the list of dangerous substances.

The legislation no longer aims simply at one particular installation within the plant,
but at the whole site as soon as at least one of the installations has the SEVESO
classification.

This directive defines two classification levels according to the substances stored
on the site and their quantity.

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The SEVESO directives also aim at improved exchange of information between member
states and give a lot of attention to the potential cross-border impact of serious accidents.

At an international level, the prevention of technological risks is covered by:

Convention n174 of the International Labour Organisation (ILO) concerning the


prevention of industrial accidents (Geneva 1993),

Convention of the Economic Commission of the United Nations for Europe (CEE-
UNO) concerning the cross-border impact of industrial accidents (Helsinki 1992).

What do industrial organisations themselves do to limit technological risks?

Risk prevention is essential for industrial organisations. Safe surroundings where one
feels at ease are essential for working.

Above all it is necessary to evaluate the risks to which the enterprise is


exposed and to measure the potential impact.

Then, steps must be taken to reduce risks at source. This is achieved by ensuring
satisfactory handling procedures for the products, providing safe installations,
ensuring systems of surveillance and detection and rigorous training of
employees. Finally it is essential to ensure strict control of the application of all
these safety measures.

Then procedures, which are to be applied in the case of an accident, must be


put in place to ensure that the impact of an accident is brought under control as
rapidly as possible. These procedures include fire safety installations (lances,
extinguishers ), equipment to limit the impact of an explosion (protective banks,
water curtains ) or of pollution (leak-proof installations ) and evacuation plans
for the populations involved.

To ensure the safety of sites and the control of operations and equipment installations,
emergency safety teams have been set up on all industrial sites. These intervention
teams have two essential missions: to ensure the security of each employee at his
post (what is called the operational security aspect) and to protect industrial
installations (what is called the control of technological risks).

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2. OIL AND GAS


Discovering oil has been a formidable stroke of luck for man. Being a liquid and hence
easily transportable, it makes a perfect energy product. When burnt in small quantities,
it produces sufficient energy to turn the motors that drive all sorts of vehicles and make all
sorts of machines work. Moreover, it can be transformed into a huge number of products
which have themselves become the raw materials of our day-to-day lives: plastics,
synthetic textiles and many other diverse and varied products. Natural gas, which
belongs to the same family as oil, that of the hydrocarbons, is systematically found with it
in all the oil fields. Natural gas is a highly efficient energy product, especially for
burning. In addition, certain of its compounds are used to manufacture polymers that are
the basic elements of everyday items.

But the stroke of luck represented by oil and gas has also become one of the major
challenges of the present time.
The ever increasing consumption of hydrocarbons threatens the ecological balance of our
planet, particularly that of the Earths climate. Solutions will have to be found in the coming
years and that will have an impact on each and every one of us.

How are these hydrocarbons formed? Where are they found? How are they extracted and
treated? The answers to these and other many questions are in the following pages! You
will also find information there about the hydrocarbon business and about the actors in the
petroleum business: large oil companies, research organisations

Ready to explore this world that is a little bit special, but fascinating at the same time?
Here we go!

2.1. Fossil fuel energy: a long travel through time

Where do hydrocarbons come from? It is a fossil energy source. OK, that is clear, but
where do fossil energy sources come from? They were formed very slowly a long time ago
from dead animals and plants. Yes, alright, but where did those animals and plants come
from? They developed thanks to the energy of the sun. I believe you, but in that case
where did the sun come from?

Like young children who always have another question when you give them an answer, we
dont immediately get to the question that is buried deep down in each one of us. Where
do we come from? And, essentially the same question, where does our world come from?

So lets try to give an answer, starting at the beginning: where does our universe come
from? Then we will talk about our planet in the solar system and about the miracle of the
appearance of life and the hundreds of millions of years that were necessary to see that
life evolve into Man, as we know him.

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2.1.1. Big Bang theory

We have all taken advantage of a warm summer night, far away from the lights of the city,
to stretch out on our backs and contemplate the wonder of the star-filled sky; this immense
universe where our sun is but a tiny pinhead among billions and billions of other such
objects. We consider the miracle of ourselves: a miniscule collection of matter that is able
to think and dream, with a role to play in this concerto of the stars. And we know that all
that matter, even the infinitely small part that each of us represents, probably has the
same origin.

The Universe is one!

We have succeeded in giving it an age. The universe is 14 billion years old, three times as
old as the Earth! It was born out of an extraordinary event, almost beyond the scope of our
human brains to imagine: the Big Bang.

The entire universe, as it exists now, gathered into a single microscopic point that
suddenly expanded at fantastic speeds, hurling unimaginable quantities of matter
and energy in every direction.

And, after that colossal expansion, which is still going on, finishing up with what we
observe in the sky today: some 100 billion galaxies, each containing several tens of
billions of stars; and all those galaxies are inexorably moving away from one another.

Figure 15 : Genesis of the Universe

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2.1.2. Our solar system and planet Earth

On the scale of the age of the universe, the creation of the sun is very recent indeed. It
was only five billion years ago, on the periphery of our Milky Way galaxy, that an
enormous mass of hydrogen was concentrated held together by gravity to form the
sun. The pressure and temperature of this gigantic sphere of gas increased sufficiently to
start nuclear fusion reactions between the hydrogen atoms. As a result enormous
quantities of energy were released: the very heat and light that warms our planet and
maintains life.

It is thought that the planets were formed at the same time as the sun, or a little after. The
giant outer planets (Jupiter, Saturn, ) consist mainly of gas that did not attain sufficient
mass to become a star. The interior planets close to the sun (Earth, Mars, Venus ) are
said to be telluric because they are composed of rocky matter, agglomerations of cosmic
dust, ice and heavy matter expelled from the sun. Everything happened under the effect of
gravitation.

Our earth is 4.6 billion years old. Its primitive atmosphere was largely composed of
nitrogen, carbon dioxide and water vapour. As it condensed, this water vapour gave
rise to a primitive ocean (called Iapetus), surrounding a single continent (Gondwana). If we
look at a map of the world, we can see that things have changed an awful lot since; that is
the effect of plate tectonics

Panges in the Triassic End of the Triassic End of the Jurassic

End of the Cretaceous Today The 12 tectonic plates

Figure 16 : Plate tectonics

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2.1.3. Origin of life

Already-ancient traces of bacterial activity (stromatoliths) can be found in certain


calcareous rocks 3.85 billion years old. On Earth, which is 4.6 billion years old, the
appearance of life was therefore rapid.

Figure 17: Scale of geological time.

Where does life come from?

That is still a mystery. Until the 19th century, scientists believed in spontaneous
generation. If you put a dirty shirt, seeds and a piece of cheese in a hermetically sealed
recipient, then after some time, you will find a mouse the Belgian doctor Jan Batist Van
Helmont wrote completely seriously in 1650.

It was the experiments of Louis Pasteur that put an end to this belief. The theory of vital
force, which stated as a principle that only living matter could manufacture the elements
of which it consists, was overtaken in 1953 when Stanley Miller, a young student preparing
his thesis, carried out an experiment that made him famous. He prepared a mixture of
hydrogen, steam, methane and ammonia, meant to represent the composition of Earths
original atmosphere and containing the four main elements making up living (organic)
matter: carbon, hydrogen, oxygen and nitrogen. Then he subjected this mixture to
electrical discharges simulating lightning and solar radiation.

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After letting it rest for several days, he was surprised to find cyanhydric acid, carboxylic
acids and several amino acids in short, a part of the elementary building bricks of life.

However even if we know how to simulate the fabrication of the bricks, no-one has yet
been capable of artificially constructing the building, a living cell with its reproductive
material based on DNA. And nothing indicates that one day we will manage to do so.
Created in the oceanic trenches near hot hydrothermal springs? By catalysis on the
surface of certain damp rocks under bombardment by solar radiation much stronger than it
is today? By panspermia, that is to say from very primitive living organisms travelling
through space on comets or asteroids arriving from outside the solar system? Or by
something else? At present, no one knows.

All living beings on Earth, including human beings, are the descendants of these very old
original living cells. Between the creation of primitive cells and the animals, plants and
human beings of today, time has elapsed, a lot of time. Time necessary for the
appearance and evolution of more and more complex and more and more specialised
organisms adapted to their environment and living beside some of the survivors of species
that had appeared earlier. Life making billions of trials and errors before a new viable
being was generated, more evolved than its ancestors. Hundreds of thousands of years
before certain monkeys that have disappeared today began to stand up and walk erect
whilst at the same time the fingers of their feet atrophied to become toes.

And, life had a hard life! Destructive climatic changes, waves of volcanic eruptions,
cataclysmic collision with a giant asteroid, colossal fires on a planetary scale, each time
life fought back against catastrophe, even if many species were lost on the way!

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2.2. Oilfields and gas fields

The oil and the gas will be found underground. So its there, under our feet that they form
and wait to be found. But is it possible to find oil or gas anywhere, under the Eiffel Tower
or in ones garden?

There are underground accumulations of oil and gas the reservoirs in various places
around the world. But, nevertheless, certain conditions must be combined for these
accumulations to form.

What we call the oil genesis according to 7 fundamental stages, is unavoidable and
above all very, very slow.

First, a material, capable of transforming into oil, is required; and this in


sufficient quantities: this is the source rock.

Then the conditions needed for the transformation (maturing) of this potential
into oil and gas must be combined.

Then all these new oils and gasses are displaced (migrations) towards the
surface.

During this migration, they must encounter a rock capable of accumulating


large quantities: the reservoir.

"Reservoir: This is the term, used by scientists, to describe the place where a
concentrated amount of oil and gas is found. So there are underground oil and gas
reservoirs. While, to a layman, the word "reservoir", will be interpreted as an actual
cistern or as the gas tank of a car.

Actually, a reservoir is formed in a rock, meaning a


solid, containing lots of small pores in which the oil
and the gas accumulate. Its from these types of rocks
that we obtain the oil and gas that we use every day.

This reservoir must be leak proof. So a barrier is


required (overburden), an impermeable rock which
prevents the oil and gas from continuing their journey.
This rock is the overburden.

Figure 18: Derrick in the setting sun (Italy).

Then, in order to accumulate quantities of oil or gas


which are commercially feasible for exploitation, the
subsoil should have a form (a closed form) which
is large enough: this is the trap.

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Finally, once they are comfortably nestled in their trap, the oil and gas must not be
destabilized by exterior stress. Good conservation conditions are required.

Figure 19 : The formation of a deposit

When oil & gas engineer teams study a zone, one of their main objectives is to determine
if these seven steps actually have a good chance of happening.

The whole of these seven steps is called an oil system.

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2.2.1. The hydrocarbons

2.2.1.1. Reminders and definitions

In nature, the substances are always mixed. After separation of the various components of
a mixture, pure substances are obtained. There are two kinds of pure substances:

the compounds which are the pure substances, liable to decompose into other pure
substances.

the elements which are the pure substances that resist to all decomposition.

a. Molecule

A molecule is the smallest part of a pure substance, an element or a


compound, which keeps the same properties as this substance.

All the molecules of a same pure substance are identical.

The molecule is made up of atoms.

b. Atom

The atom is the smallest part of a molecule.

Its in the form of atoms that the elements play a part in the constitution of the
pure substances.

The atom is made up of electrons which circle around the nucleus which is
made up of neutrons and protons.

2.2.1.2. The hydrocarbons

These are des chemical compounds which are solely made up of carbon and hydrogen
atoms.

The paraffin hydrocarbons or alkanes are part of the family of hydrocarbons.

We find these along the whole chain of oil exploitation, from the reservoir to storage.

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Figure 20 : Molecular structures of saturated hydrocarbons - CnHn+2

Figure 21 : Molecular structure of branched saturated hydrocarbons

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Figure 22 : Molecular structure of an aromatic hydrocarbon CnHn

2.2.1.3. The paraffin hydrocarbons or alkanes

They are composed of carbon and hydrogen atoms, the simplest amongst them being
methane with chemical formula CH4. Its a clear gas. From the general formula CnH2n+2, we
then get ethane C2H6, propane C3H8, etc...

Beginning from five carbon atoms, the hydrocarbons are liquids. Each equivalent carries a
name with a numeric prefix (penta, exa, hepta, etc...) corresponding to the number of
carbon atoms of which its composed. The designation "ane" indicates its being part of the
group of the alkanes.

Often the liquids are called the C5+.

a. Isomers

There is but one methane, one ethane and one propane, but starting from
butane there are several possibilities for binding the carbon atoms with the
hydrogen.

So there are two alkanes with four hydrogen atoms: normal butane and
isobutane. They have the same formula C4h10, but are notably distinguished by
their boiling temperature.

Starting from six carbon atoms, the number of isomers increases very rapidly.

b. Some alkane properties

The boiling temperatures increase with the number of carbon atoms. We have
seen that at a standard temperature, starting from five carbon atoms, the
alkanes are liquid (the ones we find in storage).

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Though the density of the alkanes is in close accordance with their amount of
carbon atoms, this is not the case for the viscosity.

When the number of carbon atoms in an alkane is superior to 14, they congeal
at a temperature higher than 0C.

2.2.2. Source rocks

The oil and gas consist of hydrocarbons, molecules composed of carbon and hydrogen.
We know that these hydrocarbons cannot exist for very long at the surface of our Earth
because they are attacked by oxygen and devoured by bacteria that live in surroundings
where air is present (aerobic bacteria). Thus, they are quite rapidly transformed into
carbon dioxide (CO2) and water. Incidentally, hydrocarbons do not exist in deep layers of
the Earth because, beyond a certain depth (around 10 km), they would be destroyed,
since the temperature is too high (the further you plunge underground, the hotter it
becomes!).

So, where do these hydrocarbons come from? Their composition shows that they result
from a transformation of organic matter consisting of living organisms that died a
long time ago.

When a plant or an animal dies on the surface of the earth, other living creatures
generally recycle its matter. What is not devoured by predators, like vultures or
bacteria, is oxidised into carbon dioxide and water, and this carbon dioxide feeds
the growth of new plants. Nevertheless, a tiny part, perhaps 0,1%, of this organic mass
escapes from the implacable cycle.

In certain cases the remains of dead beings sink to the bottom of the seas. In this
environment, very calm and poorly oxygenated, the organic remains are mixed with
mineral matter (particles of clay, very fine sand) to form dark and foul-smelling mud. This
bad odour is characteristic of the action of anaerobic bacteria which dont need air to live
(they are a lot less greedy than their cousins on the Earths surface).

Rock rich in organic matter

A part of this organic matter is therefore preserved. The animals that produce it are
minuscule or microscopic: principally marine plankton. The plant debris is carried away by
the rivers that feed the sea.

This organic matter, mixed with mineral sediments, accumulates little by little.

For large quantities of oil or gas to be produced later, the proportion of organic
matter must be sufficient, that is to say at least 1 to 2%, to constitute the source
rock for our oil. 1 to 2 % does not seem a lot, but exceptional conditions are required
to attain this percentage: a lot of plankton or plant debris and not too much mineral
matter.

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A warm climate favourable to plankton; the absence of mountains nearby to limit the
volumes of mineral sediment; and a delta or mouth of a major river to carry a lot of plant
debrisall of these elements contribute to the formation of the source rock. Nevertheless,
whilst this rock remains on the surface of the sea floor, it is unable to produce oil.

2.2.3. Sedimentation

The sediments that accumulate on the sea floor gradually become thicker. It is a very
slow phenomenon. From a few meters to a hundred or so meters every million years,
the source rock is pushed down gradually under the accumulation of sediments that
continue to be deposited. Fortunately, their weight provokes a progressive sinking which
leaves room free for further sediments that continue to accumulate. This phenomenon,
known as subsidence, is characteristic of sedimentary basins.

It is a phenomenon of large amplitude. With the progressive sinking the sediments can
reach several thousand meters in thickness, sometimes more than 8000 meters (8 km!) at
the centre of the basin. The heat increases in the source rock that is gradually pushed
down and buried, the temperature of the substratum rising on average by 3 C with
every hundred meters of extra depth. The organic matter is also crushed more and
more by the weight of the sediments, the pressure increasing by 25 bars per 100
meters. Consequently, at a depth of 1 km, the temperature is already 50C and the
pressure 250 bars. The organic matter is transformed very slowly as the atoms of carbon
and hydrogen are reorganised and brought together. The nitrogen, sulphur and
phosphorous, other essential elements for life, are gradually eliminated and the organic
matter is transformed into kerogen.

A temperature of around 100C is necessary for the kerogen to begin to generate


liquid hydrocarbons, oil and gas. This corresponds roughly to a burial at between 2200
and 3800 meters. The sinking continues and the production of liquid hydrocarbons
attains a maximum, a peak. The liquids produced become lighter and tend more and
more towards gas. Between 3800 and 5000 meters, the kerogen begins to produce
the lightest of the hydrocarbons, methane gas. Thus, gradually, the source rock
produces liquids and finishes by producing gas, before, finally, exhausting its
potential. The interval between the depths at which the source rock produces liquids is
called the oil window. The interval at which it produces gas is called the gas window, of
course!

The relative proportions of liquid and gas produced depend on the nature of the
source rock. For example, if the organic debris of which it is composed is principally
of animal origin, it will produce proportionately far more liquids. Conversely, if plant
debris dominates, it produces above all gas and not many liquids.

In fact, if we consider oil generated at a depth of 3000 meters, and estimate an average
sedimentation of 50 meters every million years, then 60 million years will have been
necessary for these dead animals to be transformed into liquid hydrocarbons. It is
not surprising that we classify oil as a non-renewable energy, is it?

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2.2.4. Migration of oil up to the surface

The newly born hydrocarbons are molecules of small size and they take up more
space in the source rock than the original kerogen. They are therefore going to be
permanently expelled into the rocks that surround the source rock. The gas and oil being
lighter than water (which impregnates all the rocks in the substratum) then begin a slow
rise towards the surface. That is migration. If they can, they slide between the mineral
particles of rocks to climb vertically. Their speed of migration depends on the capacity of
each rock in their path to allow the circulation of fluids. This capacity is called the
permeability. If an impermeable rock stops them, they follow a lateral path along this rock,
still in an upward direction, or they pass by paths through cracks and weaknesses in the
rock. The molecules of gas that are smaller and more mobile climb more quickly and slide
more easily into rocks that are not very permeable.

A proportion of the hydrocarbons, mainly gas, are dissolved in the water that impregnates
the rocks they traverse. Other hydrocarbons remain stuck to the grains of the rocks. These
hydrocarbons interrupt the ascent; they represent what are called the migration losses.
Such losses can be very significant, especially if the oil and gas take the longest path
upwards.

If nothing stops the hydrocarbons reaching the surface, the lightest fractions (gas and
volatile liquids) are dispersed into the atmosphere before being destroyed. The heaviest
are oxidised or devoured by bacteria. The only ones that continue to exist for some
time are the extreme, heaviest fractions, in the form of almost solid tars buried a few
meters to tens of meters below the Earths surface.
The extra-heavy oil, Athabasca, as an
outcrop or scarcely buried, is
particularly difficult to exploit because
of its very high density and viscosity.

In the raw state it looks like a thick and


sticky paste, thus its name of natural
tar.

Figure 23: The extra-heavy oil of


Athabasca

2.2.5. Reservoir rock

Oil and gas develop in a sedimentary basin. They are generated then migrate within
sedimentary rocks. These rocks have one characteristic in common: they are all
deposited in water (an ocean, a sea, a lagoon, a lake..) in the form of grains. These
grains can be very large (gravel, for example), finer (sand) or of minuscule size, forming
mud. These grains are in contact one with the other, but empty space remains between
them, space that defines the porosity of a rock. This is measured as a percentage of
the total volume of the rock.

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Why are oilmen so interested in the porosity and the permeability of rocks? Quite simply
because, for a rock to contain large quantities of oil or gas, it must have good
porosity (sufficient empty space where the hydrocarbons go to replace the water), and
good permeability (so that the petrol and gas can move rapidly when the time comes to
pump them in order to exploit them). A rock that posses both a good porosity and a good
permeability, is a reservoir. The better these two petro-physical characteristics of the
rock, the better will be the reservoir.

If the rock is fractured, its qualities as a reservoir are improved.

Rocks that make a good reservoir are, in the majority of cases, sandstones or carbonates
(calcareous and dolomite). Clays possess a lot of space between the particles of which
they are composed but these particles take the form of flat sheets that are piled tightly
against each other. Their permeability is virtually zero.

2.2.6. Cap rock, an impermeable barrier

Once the hydrocarbons begin to migrate through a reservoir, continuing to rise in the
water, a barrier is needed to stop them. If such a barrier is absent the reservoir will be
nothing but a transit zone and the hydrocarbons will not be able to accumulate.

To stop the hydrocarbons, an impermeable rock, called a seal or a cap rock, is


necessary above the reservoir. Cap rocks are often clays and sometimes layers of
crystallised salt. But any rock sufficiently impermeable will do the job. Some very
compact carbonates work very well, for example.

Figure 24 : The oil and gas chain

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2.2.7. Hydrocarbon trap

The reservoir has the capacity to accumulate very large


quantities of hydrocarbons. The seal prevents them from
rising towards the surface. But all that is insufficient for the
accumulation of the hydrocarbons and for the formation of
an oil or gas field.

Indeed, once they arrive under the seal, these hydrocarbons


slide into the empty spaces where they can continue to rise,
via all the escape points. It is therefore necessary to have a
large, closed volume so that the hydrocarbons
accumulate in sufficient quantity to be profitably exploitable.

Figure 25: An anticlinal trap

This closed volume is called a trap. It is created by


deformations in the rock layers. The lower its escape point
compared to its summit, the bigger the trap.

Figure 26: Salt dome trap..

A trap filled with hydrocarbons can depending on


conditions contain just oil or gas, or both. If there is oil and
gas, the latter, being lighter, will collect at the top of the trap
with the oil lying beneath.

It is important to remember that even when it appears there


is only oil, significant quantities of gas is present. The gas is
dissolved in the liquid. Similarly when it appears there is
an accumulation of gas only, there is invariably present a
fraction of light liquids called condensate.

Furthermore, a little water always remains stuck to the grains


of the reservoir rock. This is called the residual water.

Figure 27: Fault trap.

Different types of traps exist. We classify them into two main


families: structural traps, far and away the most numerous,
and stratigraphic traps.

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2.2.8. Preservation of oil and gas

Once cosily installed in their trap, the hydrocarbons are not completely protected from
change. We know that they dont like oxygen and bacteria. However when an
accumulation of oil is too close to the surface, rainwater always ends up by entering into
contact with it. This water carries oxygen and voracious bacteria which begin to attack the
oil, provoking a significant diminution in the proportion of light and average liquid
hydrocarbons, as well as a liberation of gas. After a while, all that remains are the heavy
and viscous hydrocarbons that are difficult to exploit. If it has not escaped the gas is less
attractive to us than the initial oil. This latter will have undergone serious deterioration:
what a waste!

The bacteria responsible for the alterations cannot survive at temperatures in


excess of 50/55C. The oil therefore remains protected as long as the temperature
remains above this level. Broadly speaking, we can say that it is necessary to start
worrying when the accumulations of hydrocarbons are found at a depth of less than 1000
meters.

The accumulations found deeper are nevertheless not completely protected from
upheaval. This time the threat comes from rock movements. These tectonic
movements, if they happen, can destroy the trap, by significantly reducing its closure, even
destroying it, or more often, breaking the seal by fractures or by cracks which the trapped
hydrocarbons are going to rush into and escape. The trap is thus finished; empty!

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2.3. Exploration for oil and gas

Oil and gas are found in the depths below ground. They have been waiting for us for
millions of years. So it is necessary to go and look for them, and to do that there is only
one way: to dig until you reach the deposits. These deposits are deeply buried, often
several kilometres underground. Wielding a pick is not sufficient to make the oil gush! We
use the technique of drilling.

From the surface we can try to guess


where the deposits are and propose
hypotheses. But were never sure that
they exist until we have reached them
by drilling, until the hypotheses have
been verified.

Figure 28: A view of the installations


and petroleum equipment at Prudhoe
Bay, in the National petroleum
reserve of Alaska.

Exploratory drilling is very expensive. It is better not to make a mistake when we


decide! There are several ways of knowing where to drill. Certain techniques even allow us
to see below ground. It is by putting together the ideas and the work of a whole team that
we can maximise the chances of success.

After the exploratory drilling we decide, according to the results obtained, to continue or to
stop the work in that area.

2.3.1. Where to look for fields?

Oil and gas develop in sedimentary basins. We are therefore going to be interested in
those zones where superimposed layers of different rocks have accumulated over tens of
millions of years.

Sedimentary basins are numerous on


the surface of our planet.

They can be found, of course, at


sea, but also on land, in zones that
were in the past covered by the sea.

Figure 29: Map showing sedimentary


basins worldwide.

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In the early days of the petroleum adventure, nowhere had been drilled: the basins were
totally untouched by exploration.

Today, virgin basins are very rare. Only a few such zones remain, because their climate or
geography is very hostile, or because they are still protected for ecological reasons, such
as in the Antarctic. Therefore we know which zones are rich in oil or in gas (or both), those
are the prolific basins. Others are less rich and some totally sterile.

Moreover, the sedimentary basins


have been more or less explored.
Those known for a long time have
been the object of numerous drilling
operations and are in little danger of
revealing new, super-giant deposits or
even ones of a biggish size: we say in
this case that the exploration is
mature.

Figure 30: Map of the continental shelf

This is the case, for example, in the North Sea. The petroleum companies who explore are
obviously going to aim at positioning themselves in regions which are still far from mature,
to be able to discover big volumes of hydrocarbons.

Nevertheless, exploration work remains to be done, even in the mature zones. There, it is
a question of looking for smaller and subtler deposits (more difficult to see or to get
images). Drilling can also be done alongside fields already discovered.

The frontiers?

Can a petroleum company undertake drilling wherever it wants and whenever it wants?
No, because what is under the surface of the earth belongs everywhere to the state.

This is not only true on land, of


course, but also at sea.

Figure 31: Map showing oil and gas


regions worldwide.

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A country is owner of the mineral resources


situated up to 200 nautical miles off its coasts and
on the whole of its continental plateau (see
illustration).

The definition of maritime frontiers sometimes


gives rise to bitter disputes, above all when there
is oil involved!

Figure 32: Map showing exploration and


extraction in the North Sea.

All the petrol companies are interested in regions


where an oil or gas potential exists. They are in
competition. And the states, the owners, know it!

Therefore, to better valorise their underground


riches, these countries put the companies in
competition, offering zones for exploration by
auctioning them to the highest bidder, under a
form of international tender.

Interested companies send in their propositions: an undertaking for the total amount to be
spent and for the volume of exploration work to be completed over a given period (in
general from 2 to 5 years). The companies often act in groups of associates of 2 or 3
companies, which allows them to share the expenses (enormous!) and the risks (high!) if
their propositions are accepted.

At the due date of the tender operation, the countries examine all the offers and choose
the company, or association of companies, that is going to be responsible for drilling the
proposed zones. Once a company has obtained the exploration licence (or permit), work
can begin.

The company can at any moment negotiate the sale of part or all of its interests in the
zone it has just acquired. For this reason, a sort of permanent market in zones for
exploration exists. For some of the zones, exploration is just beginning. For others, drilling
has already been carried out and, according to whether the results are positive or
negative, interest in the zone increases or diminishes and its traded value likewise. Within
all oil companies, there are teams of specialists who permanently follow all the
propositions for sale of interests throughout the world.

The sales or the exchanges of interests are the object of bitterly disputed negotiations.

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2.3.2. Exploration of the substratum

The potential petroleum traps are deeply buried underground. Those directly visible from
the surface have been drilled for ages. To identify potential traps, explorers employ a type
of echo location called seismic search, the seismic reflection. Seismology gives an image
of the substratum, but this image is fuzzy and not totally reliable. Competent and
experienced people are needed to interpret it: the geophysicists. And it is also necessary
to rely on local regional knowledge: studies, the surface geology, drilling operations
already completed Finally a synthesis of the study of all this data must be established,
doing ones best to forget nothing in the reasoning which leads to the conclusion that
there, we must drill there, because the chances of finding oil or gas are very good!
Visualising the substratum is a team task.

Figure 33 : Seismic analysis on land and at sea

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2.3.2.1. Exploration by seismology

In the early days of petroleum exploration, one had to be content to drill the traps visible
from the surface, generally the anticlines (bulges of the geological layers in the
substratum). But it was very quickly realised that this was no longer sufficient: many
structures are masked by deposits of sediments that were laid down on top by the
subterranean movement that created the trap.

In addition, traps situated under the sea are completely invisible to the eye.

From the 1930s on, the miracle method was developed: seismic reflection. Its principle
is simple: waves, caused by an explosion or by a heavy mass falling onto the
ground, are sent through the ground. These vibrations move outwards in all
directions. When they meet a geological layer, some of the waves are reflected (as
with a mirror) and return towards the surface, whilst the others are refracted,
continuing their way deeper. And so on.

By placing very sensitive receptors


(geophones) at a distance from the
transmitter, a complex series of waves
can be recovered and recorded. The
first to arrive are those which moved
along the surface, then come those
which were reflected by the first
geographical layer, then those reflected
by the second, and so on.

Figure 34: View of the vibrator trucks at


the time of a seismic operation, in
the Kharyaga field in Arctic Russia.

In this way the time can be measured that a wave reflected by


a geological layer takes to move from transmitter to receiver.
By changing the position of transmitter and receiver numerous
times, an image can be constructed of the substratum and the
geological layers in time and in 2 dimensions (2D).

Hypotheses are then constructed concerning the speed of


wave propagation in the different layers. This allows
construction of an in-depth image that is extremely interesting
for the geologists and drillers. Based on this image, a more
detailed section can be developed.

Figure 35: View of a geophone and a collection box at the


time of a seismic operation.

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Using the whole series of these 2D


images in time and in depth, maps of
the substratum are drawn to evaluate
the hydrocarbon traps.

Figure 36: Workers in the marshes


during a seismic data acquisition
campaign (Gabon).

In order to obtain a more precise and


reliable image of the substratum, the
technique of 3D seismic is used: it is
more expensive, but a lot more efficient than the 2D.

Often, it even allows the hydrocarbons in the geological layers to be identified directly.

The receivers are placed in layers in


order to construct an image of the
substratum in volume (in 3
dimensions).

Figure 37 : Computerised 3D model of


a natural gas reservoir

The technique of the 4D seismic goes even further, bringing into play the fourth
dimension, time. On a field in production, several successive recordings are made by 3D
seismic, at regular intervals of time. Later, comparison of the recordings allows the
evolution of the field to be followed during its production phase.

At sea, the seismic recording is


made from a boat trawling behind it
a series of floating receivers, the
hydrophones.

It is easier than on land because there


is no natural obstacle to the
displacement of the transmitter and
the receivers of the waves.

Figure 38: Seismic acquisition at sea,


in the Palanca oilfield (Angola).

Computer analysis of the seismic waves that are recorded is extremely complex and
necessitates very significant calculating capacity. Only progress in computing has made
this type of operation possible. The computing power used is indeed similar to that used in
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weather forecasting. The result of the computer analysis is an imagery of the substratum in
2 or 3 dimensions.

The integration of this data by the geophysicists is done with the aid of extremely
sophisticated programmes that help
them to reconstitute the forms and
physical properties of the geological
layers.

Using suitable glasses, the virtual 3D


vision of the substratum allows the
interpreters to better understand the
geometry of the substratum.

Figure 39: view of the geovision (in 3d)


room in the CSTJF

The CSTJF (Centre Scientifique et Technique Jean Feger) at Pau (France) is a research
centre specialised in geological research and in hydrocarbons.

Seismic imagery is unfortunately not perfect and never 100% reliable. Problems can
occur at the recording stage. There are difficulties of access in mountainous zones or in
tropical forests (which slows down the work!). In addition, land with a soft and
heterogeneous surface generates alterations in the waves that are often difficult to correct
at the time of analysis. In the depth sections, it is also possible to have images that do not
correspond to reality (artefacts), just like mirages. These are not always easy to
differentiate from the genuine signal. Moreover, the signal weakens with depth (the farther
it has to travel, the more energy it loses!).

Finally seismic speeds are not known with precision, above all in little-drilled zones where
the speeds have not been able to be measured. This can result in errors in the seismic
sections and the maps in depth.

2.3.2.2. Studies prior to drilling

The seismic sections and the in-depth geological maps of the different layers are
indispensable, but they are not sufficient. Before drilling, numerous studies are
undertaken.

Regional studies first. On land, the geology of the surface is studied and attempts are
made to extrapolate what is happening deep below the surface. On land, as at sea, the
results of neighbouring drilling operations are found to be useful. One is able to see
whether those drilling operations found reservoirs.

One is able to see whether those drillings found reservoirs and their seals and whether
they revealed accumulations or traces of oil and gas. If the results are positive, then
attempts are made to know if these conclusions can be extrapolated to the zone it is
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hoped to drill. If they are negative, one asks the question why and whether that is going to
influence the intended drilling. By comparing with seismic sections from already drilled
zones, attempts are made to see if the source rock, the reservoirs and the seals continue
as far as the present zone or not.

The question then is to know if they


have preserved their qualities over the
distance. The regional history of
movements in the earths crust is then
studied: tectonics, in order to know the
conditions of formation of the traps.

Figure 40: Meeting concerning the


logs (geological sections) of the
Peciko p13 oil at Balikpapan
(Indonesia).

Finally, a good look is taken at the sedimentary characteristics of the zone, to try to
reconstitute the epoch and the conditions of deposition of the rocks that subsequently
became reservoirs or seals.

Local studies are based principally on seismic sections and


on in-depth maps of the zone. The object is to spot the
reservoirs and their seals and the potential traps, and to
define their geometry and the quantities of oil or gas they
may contain. These potential traps are called prospects.

Figure 41: A senior gelologist and the head of the


geosciences department for activities on the oil field of al
Khalij, at Doha, in Qatar.

In parallel, the geologists evaluate the uncertainties and the


risks of being completely mistaken!

Other local studies can be made, for example a reconnaissance of the very small
quantities of hydrocarbons on the surface. An increase in these surface indices compared
to the average can reinforce the idea that there is oil or gas trapped just below.

The synthesis of regional and local studies allows a full evaluation of the zone to be
explored, by gathering together all the technical arguments indispensable to a decision: do
we drill or not? The main thing is to forget nothing and to build a coherent analysis, using
all the data.

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2.3.3. Assessing the oil reserves before drilling

Exploration drilling operations is very expensive: at a minimum 3 to 4 million euros on


land and 20 to 60 million euros at sea, but it can exceed 100 million euros for very deep
drillings or those in difficult conditions. If the drilling is a success and it opens up
hydrocarbon production, the investment is reimbursed by the production of oil. But if it is a
failure, the company loses its investment. That is the reason why oil companies weigh
very carefully the pros and cons before taking the decision to drill!

By the end of the studies in a zone, geologists and geophysicists have defined a certain
number of prospects. For each prospect they have calculated a range of probabilities for
the accumulation of oil and gas. With the oil field engineers, they have also calculated a
range for the potential reserves. The reserves represent that part of the accumulation
that can be extracted and brought to the surface for exploitation. Why a range for the
reserves and not a unique figure? Because all the parameters entering into the calculation
of the accumulations and of the reserves are not precisely known before the drilling.

1 : Hoist support
2 : Drilling rig
3 : Mobile hoist
4 : Hook
5 : Injection Head
6 : Mud injection column
7 : Rotating feed table for the drill train
8 : Draw-works
9 : Engine
10 : Mud pump
11 : Quagmire

Figure 42 : Drilling

An oil company possesses prospects all over the world. But exploration budgets are
limited and all the prospects cannot be drilled in the same year. A team exists therefore,
which manages all the prospects.

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These people, technicians and experienced economists, decide each year the allocation of
the exploration budget between the different subsidiaries worldwide. They approve, or not,
the drilling propositions forwarded by the technicians or the subsidiaries.

2.3.3.1. Reserve types

Proven: Discovered reserves which are reasonably sure to produce in the current
technical and economical conditions - 90% chance that the final reserves are > or =
to this value.

Probable: Discovered reserves which are reasonably sure to produce in technical


and economical conditions hardly differing from the current conditions - 50 %
probability of existence.

Possible: Reserves that have not yet been discovered and which have less chance
of being produced - 10 % chance that the final reserves are > to this value.

Figure 43 : Proven reserves

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2.3.4. Logistics for setting up oil drilling

Once the studies are terminated and the decision to drill taken, the drilling equipment must
be installed at the location selected on the prospect maps. The co-ordinates of the
locations are very precise, but the place on the ground that corresponds is not always
easy to prepare. For that, a site study is undertaken, without forgetting the impact study,
that is to say a complete inventory of the site before work starts (environmental impact ).

At sea, the depth of the water is measured and the seabed studied to find out, for
example, if it can support the piles for a drilling platform. Equally, certain climactic data
are studied: wind force, wave height, strength of currents. The necessary steps are taken
to know the worst extremes of bad weather that are possible, in order to protect the
installations from the worst storms.

In certain closed seas sheltered from the extremes of bad weather, such as in the
Netherlands, the drilling sites are surrounded by a veritable wall that avoids any
contamination of the sea by waste or by polluting products.

On land, obstacles can be found: inhabited zones, very uneven broken land, marshy
areas Those responsible for the site study determine the location that is the safest and
the nearest possible to the co-ordinates planned.

Then roads are constructed to bring in the equipment and to take it out at the end of
drilling. On the site itself, the areas intended for the drilling operations, the technical
buildings and accommodation are cleared of trees and undergrowth, raked, flattened and
cleaned.

Le montage des installations

Setting up the site takes several days.


At sea, the equipment used (drilling
platform or boat) is brought to the site
by tugs, or arrives under its own
power.

Figure 44: Drilling site at Yariapo


(Bolivia).

During the drilling period, a major logistics operation is maintained. The site must be
supplied with equipment (drilling pipes, tubing), with products for the mud and with food for
the personnel. The replacement of teams who go on rest leave must be planned, as must
the comings and goings of people whose presence is not permanently necessary (shuttles
on land and helicopters at sea).

Very often, the first well drilled is a water well.

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At the end of drilling, the site must be


restored to the state it was in before the
work began. All pollution must be
cleaned up, and, in particular, any
quagmire must be carefully eliminated
(residues of used drilling mud full of
polluting matter), so that it doesnt
spread into the surrounding nature.
Sometimes vegetation is replanted so
that the site recovers its appearance
prior to drilling.

Figure 45: Drilling site at Yariapo


(Bolivia), after end of drilling.

2.3.5. Instructions for drilling operations

The hydrocarbon prospects, the objects of exploratory


drilling, are deeply buried. These prospects are often at
depths of 2,000 to 4,000 m, sometimes as much as 6,000m
(the equivalent of 20 Eiffel Towers!). To get there a hole has
to be drilled. The derrick (or mast) is the support for the
drilling system. It is a metallic tower thirty or so meters high,
which is used to introduce the drilling pipes vertically.

Figure 46: The drill bit has very hard steel teeth or inserts.

At the end of the first drilling tube, is the drilling tool, in


general a tri-cone (trepan) equipped with teeth or very hard
steel pastilles.

The trepan attacks the rock, a little by applying pressure, but above all by turning at
adapted speeds, which can be very high: it pulverises the rock into small pieces. As the
drill bites deeper into the substratum, a new nine meter drill pipe is added. It is screwed to
the preceding one. And so the well progresses. The set of drill pipes with its trepan is
called the drill train. For very hard rocks, the teeth of the trepans are not strong enough.

Tools are then used that are made out of a single block of tungsten or set with diamonds;
nothing resists them!

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The tubing

To avoid collapse of the hole, a large hollow steel cylinder is inserted along its full length
(like the drill pipes, it is fed down in segments and screwed one to another). It is the tubing.

Once the tubing is installed, the


drilling restarts, but the diameter of
the hole has become smaller: the
tubing that has just been inserted
occupies space and reduces the
initial diameter of the hole. Thus a drill
hole of 50 cm diameter at the start
can be reduced to 20 cm after the
insertion of several tubes.

Figure 47: Operators working on a


drilling derrick on the Raissa, in the
Mahakam delta (Indonesia).

2.3.6. Role of drilling mud

By circulating continuously, the mud cools the drilling tool, helps to attack the rock by
injection under pressure and cleans out the hole carrying away the pieces of crushed
rocks. It is also indispensable for the maintenance of the borehole, insuring that the risk
of collapse is avoided. The drilling mud is generally water-based with the addition of
numerous products. First solid particles (often clays) used to increase the density. And
then diverse chemical products used for properties adapted to the nature of the land being
drilled and to ensure the stability of the mud.

The density of the mud must be accurately calculated and precisely controlled. If it is
too heavy, it is likely to penetrate at high speed into the reservoirs where the pressure is
lower and the drilling is then in danger of entering into losses (instead of coming back up
to the surface, the mud will disappear into the substratum). If it is too light, the water in the
geological formations being drilled, at a higher pressure than that in the mud column,
invades the hole and the drilling enters into gains. Unless the drilling team reacts very
rapidly to this situation, the result can be an out-of-control eruption.

The composition of the mud is specially adapted in each case, to the rock formations being
drilled. The mud engineer, the mud-man, must continuously verify that it remains
homogeneous and stable in its composition. He must also react very rapidly in the case of
a problem and be ready to modify the composition of the mud as quickly as possible when
required. Despite his name, which is not flattering, the mud-man has a very major
responsibility on a drilling site!

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2.3.7. How to know if oil or gas has been found?

It is the role of the geologist based permanently at the drilling site. There exist several
ways of knowing if a geological layer impregnated with hydrocarbons has been found.
The direct methods allow the presence of hydrocarbons to be confirmed. The gas
dissolved in the mud is analysed continuously. When a rock is drilled, small quantities of
methane gas are always liberated. It is what is called the gaseous background. If it is
stable or it remains proportional to the rate of progress of the drilling, then everything is
normal. But if it rises suddenly it is a signal to be on the alert! It is possible that one has
entered a hydrocarbon reservoir. The geologist is also constantly examining the drilling
spoils. He washes them to remove the impregnated mud and passes them under an
ultraviolet lamp. If the spoils contain hydrocarbons, they will emit an orange fluorescence.

Core sampling

If the geologist thinks that the well is going through a reservoir, he can ask for a core-
sample. In this case the tube string is lifted and the drilling tool replaced by a core-
sampler. The tube string is lowered again and drilling continues but this time without
grinding the rock: the sampler gently cuts out and swallows a cylinder of the rock
that is raised once it is filled.

The core-sample is very useful: one


can see if it contains hydrocarbons,
the reservoir characteristics can be
directly measured and it can be used
as a support to indirect methods of
evaluation.

Figure 48: View of the scanner in the


core-sample library at the Centre
Scientifique et Technique Jean
Feger in Pau (France).

The direct methods allow us to know if there are hydrocarbons in the rocks being drilled
through, but they dont give sufficient indications of the quantities that are present. For
that, indirect methods exist, based on logging tools. These are tools that are lowered to
the bottom of the borehole by cable. Then they are lifted slowly back up and on their way
record certain data.

It is by analysing the recorded data that the characteristics of the reservoirs and the
proportions of gas or petrol contained in the pores of the rock can be defined.

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Figure 49: Geologist working in the


core-sample library of the Centre
Scientifique et Technique Jean
Feger in Pau (France)

Finally, there exists another direct


method of hydrocarbon detection, a
test that can be carried out: a pressure
reduction is applied to a vertical
interval where an oil or gas reservoir is
thought to exist.

The fluids contained in the rock are precipitated into the borehole and generally even climb
back up to the surface. In all cases, they can be recovered and analysed.

2.3.8. After drilling

When an exploration drilling is initiated, nothing is certain. In the past, only one exploration
well in seven finally ended up as a productive deposit. Today, evaluation methods have
been refined and little known zones are much more rare. So the average is rather one
success in three or four exploration wells.

In the case of success, certainly one is encouraged a lot! But, nevertheless, it is not the
case that the field is going to be put into production immediately. Even if some of the
uncertainties have been removed (there is oil and gas, there is a reservoir ), it is still
necessary to drill several wells so that the deposit can be very well defined and the
uncertainties further reduced.

These complementary wells, which allow the deposit to be better understood,


constitute the appraisal.

As soon as the exploratory well is finished, a full study of the prospect, now called a
discovery, is re-launched and a programme of appraisal is established.

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2.4. Production of oil and gas

There we are, the exploration phase has finished:

The production contract is signed with the country owning the rights below ground.

The hydrocarbons discovered


by the initial exploration well
have been confirmed by the
appraisal drilling.

The oil and gas deposit is now


better known.

Figure 50: Overview of the PUQ


(Production Utilities and Quarters)
platform and of the Elgin-Franklin
offshore platform during a storm
(Scotland).

Many of the uncertainties, concerning the form of the deposit, the existence and the
characteristics of the reservoirs and the lines of contact between hydrocarbons and
water or between the hydrocarbons themselves, have been significantly reduced.

All the knowledge gained encourages us to think that exploitation of the oil or gas will be a
profitable operation. But, it is vital not to make a mistake! The exploration stage is
expensive enough (several tens of millions of euros per well), but moving on to the
development phase and subsequent extraction operations is even more ravenous for
investment. We are often talking in terms of hundreds of millions of euros, sometimes over
a billion!

Enormous thought goes into the best way of extracting the hydrocarbons, attempting to
recover the maximum quantities of oil and gas in the safest conditions.

These forecasts, studies and the eventual construction of the installations constitute the
development stage of the field. Once everything is in place, extraction can start. The life of
an oil field continues for many years.

Then comes the time when the decision is taken to terminate operations. Finally, the site
must be restored to its natural state.

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2.4.1. Instructions for the development of the oil production centre

Look before you leap, the essential motto for production! The decision will be influenced
above all by economic considerations: is it profitable to begin extraction of the deposit that
has been analysed? Profitable that means that by selling the oil and gas to be
extracted, we will be able to cover all the expenses of studies, construction of installations
and of extraction operations during the life of the field. Cover the expenses and make a
little profit as well!

These profitability calculations are complex, not so much from a theoretical point of view
(no need to be Einstein ), but, above all, because there are many parameters and
factors which come into play.

Some of these parameters are very uncertain: for example, who can predict the price of a
barrel of oil in 10 years time, when the oil field will be halfway through its life? We are
forced to postulate hypotheses.

All the available technical data is collected: the depth and the form of the deposit,
the characteristics of the reservoirs, the types and distribution of the hydrocarbons,
the accumulated volumes of oil and gas in the substratum.

An attempt is made to estimate the number of wells that will be necessary. The
production installations (for drilling, treatment of products brought to the surface,
temporary storage and dispatch) are selected and sized in accordance with the
technical data. Several different projects can be envisaged. After detailed
comparison, the project having the best overall potential is retained.

At the same time a production simulation is established, covering the whole period
from the beginning to the end of the life of the field. This simulation is known as a
production profile. It is a forecast of the annual production volumes from the field,
which then enables the economists to establish economic forecasts on the basis of
hypotheses for the hydrocarbon selling prices.

Once the project appears economically solid, the decision to develop the field is taken: we
move on to the stage of building the installations. At sea or on land, we are talking of an
enormous site that grows out of nothing and will exist for a number of years, fifteen or so
on average.

2.4.2. How to produce?

Production consists of bringing the hydrocarbons contained in the substratum to the


surface. This requires the use of a large number of wells. A field spreads over a vast area,
at least several km and sometimes more than 100 km. A traditional well (vertical or
slightly deviated) only draws oil or gas from a radius of a few tens of metres.

Moreover, such wells only cross the reservoir over the limited height of a vertical or near
vertical cross section. A large number of vertical wells would therefore be necessary to
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completely extract the contents of a reservoir. The horizontal well technique has totally
revolutionised the industry, because such wells have a much greater length of contact with
the reservoir. Thus, the technique enables a significant reduction in the number of wells
necessary for a given development. Production drilling presents a number of challenges.

What is the principle of extraction?

The basic principle is to generate pressure at the bottom of oil or gas wells, inferior to the
pressure in the reservoir. As a consequence of this pressure difference, the hydrocarbons
will move towards the well and thence to the surface. In practical terms, the well is totally
lined with tubing right down to the reservoir.

This tubing, difficult to move once it is fixed into position, guarantees the operational
effectiveness of the well throughout its working life. The oil and gas are brought to the
surface via another tube, in oil field jargon the (extraction) tubing, placed in the lining. This
tubing is detachable and can be changed whenever corrosion or deposition
problems appear.

Sometimes, the oil field pressure is sufficient for the hydrocarbons to make their own way
to the surface; in this case the well is said to be eruptive. In other cases wells are never
eruptive. And in all cases, the oil field pressure diminishes gradually as production
continues.

After a certain time, it is no longer


sufficient for eruptive extraction and it
becomes necessary to stimulate
production, what is called assisted
recovery.

On arrival at the surface, the output


from the extraction wells begins its
journey through the surface
installations.

Figure 51: Principle of oil extraction in


ocean deeps.

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2.4.3. The various recovery mechanisms

Figure 52 : The various recovery mechanisms

The PRIMARY recovery: The field produces by means of its own energy. Meaning
that natural energy is used for the production of the fluids (initial pressure, rock
compressibility, oil or gas compressibility, gravity, capillary forces. No outside
energy is provided.

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The SECONDARY recovery: This solution is used when the natural energy is
insufficient for the production of the fluids. The field then produces thanks to an
outside action such as; water injection at the low points or in the aquifer (sometimes
water injection starts together with the production, to increase production), gas
injection at the high points or in the gas, or gas cycling by gaseous hydrocarbons
(dry gas injection in the condensate reservoirs).

The TERTIARY recovery: Use of complex methods such as the injections of


miscible fluids, thermal methods and chemical methods. This method is called EOR
(Enhanced Oil Recovery)

2.4.4. Life of oil and gas fields

Events dont necessarily always go as planned! Surprises can happen which will modify
production forecasts. Good surprises: for example a field that continues in production
beyond the time expected, 10 or 20% more oil volumes than were envisaged, its great for
business! Or bad surprises: for example the productivity of a well can be inferior to
forecasts. The quantity of oil produced each day can also be much lower than forecast,
putting at risk the final profitability of the whole operation. The real disaster is when we are
forced to prematurely stop production: an enormous investment almost entirely lost!

These surprises demonstrate clearly that the knowledge that can be gathered about the
substratum is always uncertain, even if one has done everything possible to reduce this
uncertainty. That is why, during the whole life of the field, re-evaluations are made on
a regular basis of the reserves remaining to be extracted new evaluations that can
go in an upward or a downward direction. They are essential in order to know when the
operation must be stopped.

The life of a field is variable: in general from 15 to 30 years. Longer for a really big one
(a super-giant with a life of 50 years or more), shorter for deep-sea fields (5 to 10 years)
because of the very high operating costs. The total life consists of 3 stages: the initial
period (2 to 3 years) with a growth in extraction quantities as wells are sunk one after
another. Then a long steady period during which annual production is stable. Finally a
period of reduction, which varies from field to field, before the final closure.

All the oil and gas contained in the substratum is not extracted, far from it!
Depending on the type of reservoir, recovery can vary from 10% to a little more than 50%
for oil fields. For fields of gas alone, we can often reach 60 to 80%.

Therefore, significant quantities of oil remain in the substratum when operations are
terminated. One of the challenges for the petroleum industry is to try to improve these
recovery rates. Just a few percentage points gained on a major oil field represent
enormous volumes. One percentage point of additional recovery in all the fields of the
world would represent 2.5 to 3 years of annual worldwide consumption!

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2.4.5. Abandonment and dismantling of a field

The answer is simple: as soon as the oil or gas starts to be more expensive to extract than
it is sold for. In general that happens because of a drop in production, as a consequence
of pressure reduction in the field. It can also happen when the proportion of water
extracted increases rapidly, or again, for oil wells where the gas is not commercialised,
when the proportion of gas makes a sudden jump (when the pressure descends beyond
the thermodynamic bubble point). More rarely (fortunately!), a well can be prematurely
abandoned following a bad surprise, for example a well productivity significantly below
forecast.

The life of a field also depends on


the price of oil and gas. It is obvious
that if the price of a barrel of oil goes
from 25 to 50 dollars, all fields will be
exploited longer than was initially
planned. On the contrary, if there is a
long-term drop in prices, certain
fields will be abandoned earlier than
planned.

Figure 53: Dismantling the North


East Frigg platform (Norway).

When a petrol company abandons a field, its life does not necessarily stop even then. If
the field is no longer profitable for one company, other smaller companies may be
interested in taking it over, because their overheads are lower, or they are satisfied with a
profitability lower than that demanded by the major companies. Or again, the smaller
companies may be content with production volumes that would no longer satisfy the large
companies.

The national company of the country


involved sometimes also takes back
fields abandoned by the companies.

Figure 54: Drilling site at Yariapo


(Bolivia).

Quand la dcision de fermer


dfinitivement un gisement est prise,
on ne laisse pas le chantier
labandon pourrir et rouiller.

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Les installations sont dmanteles et


les matriaux recycls. Seules les
ttes de puits sont conserves, pour
des raisons de scurit. Des quipes
de spcialistes arpentent les lieux,
la recherche dventuelles pollutions.

Figure 55: Drilling site at Yariapo


(Bolivia), after end of drilling.

Elles sont charges dun nettoyage attentif et complet du site. Une fois ce nettoyage
termin, cest au tour dquipes de rhabilitation dintervenir. Elles reconstituent autant que
possible le site initial avec sa vgtation dorigine. En mer, les plates-formes fixes sont
dmanteles avec soin, en vitant toute pollution accidentelle. In any case, well heads are
closed and consolidated with concrete according to strict international rules

2.5. Transportation of oil and gas

The largest quantities of oil and gas discovered are to be found in developing countries, far
from the major consumers. These producer countries easily meet their own needs and
export the greater part of their production.

On the other hand, developed countries, major energy consumers, are not self-sufficient in
oil and gas, far from it: they are therefore hydrocarbon importers. Even in developed
countries that are also major producers, such as the United States, the production zones
are often far from the centres where crude and gas is required.

As a result, for several decades now, enormous quantities of oil and gas have been
transported all over the world by sea and on land.

2.5.1. Oil transport

Whether the oil transport from the production sites towards the refineries is done by sea or
land, the main question is that of safety and of respect to the environment. At sea,
maximum precautions must be taken to prevent black tides as well as voluntary
pollutions; the wastes in the sea from the cleaning residues from the vessels which must
be severely opposed. On the ground, the state of the pipelines must be surveyed and worn
materials must be replaced.

The large quantities of transported oil are not always used immediately. This also counts
for part of the products which come from refineries, these being called the finished
products. So, safe storage sites must be foreseen for the oil products.

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2.5.1.1. Transportation by maritime means

Annual quantities of oil transported by sea are enormous. Almost 38000 oil tankers
navigate the seas and oceans, transporting this fabulous liquid energy source from the
points of extraction to the points of consumption. The enormous majority of hydrocarbons
transported reach their destination. For example, in the period 2000/2004, according to the
accident statistics of ITOPF (International Tanker Owners Pollution Federation) almost
99.99998% of oil transported arrived at its destination without problem.

The organisation of maritime transport of oil is complex and many companies and skills
are involved in a voyage (building and maintaining the boat, inspecting it regularly,
choosing the crew, deciding the route to be taken )..

Countries have responsibility for


organising safety and security
regulations worldwide and above all
for ensuring their respect by all
involved. These regulations, which can
appear complicated, formalise many
decisions taken jointly at an
international level for the well-being
and safety of everyone.

Figure 56: The Iranian tanker Iran


Dena

The quantities of oil transported by petrol tankers are enormous: between 1.5 and 1.9
billion tons annually for the last 20 years. Going back further into the past, comparable
figures were 500 million tons in 1960 and 100 million tons in 1935. Expressed in tons, oil
represents between one third and one half of total marine commerce worldwide,
depending on the year. Oil-carrying ships, more commonly known as tankers, have a
whole range of different capacities. They are classified according to their transport
capacity measured in tons of crude.

Figure 57: Map showing principal


movements of oil worldwide in 2003 (
in millions of tonnes)

The capacity of the total petroleum


fleet is around 280 million tons.

The main routes for the transport of


crude oil leave from the Middle East
towards Europe and the United
States via the Cape of Good Hope to
the south of Africa, or via the Suez
Canal if the ship is not too big.
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Other routes exist in the direction of the Far East (Japan, China, South Korea) via the
Malacca straight (between Sumatra and Malaysia). A large tanker takes between 15 days
and a month, from the time it is loaded in the Middle East, to deliver its crude oil in Europe.

For the transport of refined products, other routes exist, generally shorter, either within
European waters or further afield for trade between Europe and the United States or
Europe and Asia

Transport costs fluctuate considerably according to supply and demand and the time of the
year.

Who owns these giants of the seas? How is maritime transport organised?

It is the question that always comes up when an accident occur, or ways of avoiding them
are discussed.

In discussing maritime transport, a distinction must be made between the owner of the
ship on the one hand and the owner of the petroleum cargo on the other. The two are
rarely the same. In the past, most oil companies owned maritime transport subsidiaries.
But today, apart from one or two exceptions, tankers no longer belong to the oil
companies. They are only owners of the cargoes, for organisational reasons.

After the 1973 oil crisis, certain oil companies lost control of the management of
hydrocarbon reserves to the national companies of the producer countries. This meant
that, at the same time, they lost the possibility of planning transportation as they wanted.
They have therefore delegated maritime transport to specialist companies who are more
flexible in their organisation.

As far as transportation safety goes, the owner of the tanker is not the only person
responsible. The country where the ship is registered must also verify the condition of
the boat and the procedures on board and many countries undertake those duties very
seriously.

However, certain countries make available registration of vessels for very low costs in
terms of taxes; on the other hand they do not ensure serious technical controls. These
countries are consequently accused of making available flags of convenience.

The individual or company who provides the vessel (who is often also the owner) has
the responsibility of correctly equipping it and of ensuring its safety and security. That
individual or company must therefore have the vessel inspected and certified regularly.
The certification is carried out by an organisation of vessel classification, which issues
an authorisation to sail. And finally, the same person or company providing the vessel
has the responsibility of choosing the crew and ensuring its competence and motivation.

How does an oil company go about finding a vessel for the transportation of a cargo
of hydrocarbons?

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Oil companies with a transportation requirement, make a preliminary list of vessels


available at the dates that are suitable and then choose one particular vessel. They verify
that it meets their criteria in terms of construction, management and training of the crew,
etc.

In general, the characteristics of a vessel, its state of maintenance, the quality of its
services, are periodically checked during inspections carried out by specialists mandated
by the oil companies. The information gathered during these inspections is recorded in
large shared computerised databases such as the SIRE (Ship Inspection Report
Exchange), set up in 1993. Between April 2004 and April 2005, the SIRE registered 10
000 reports concerning the inspection of 4000 vessels. According to the information
obtained about the vessel, the oil company decides whether to use it or not.

Each company therefore uses its own criteria to refuse vessels that it considers unreliable.
For example, it can exclude a vessel because of its age, the classification organisation
involved, the training of the crew or unfavourable inspection reports.

2.5.1.2. Transportation by land

The petroleum industry has chosen to favour maritime transport for its products, for
reasons of greater flexibility. Overland transport by pipelines nevertheless remains
important, in particular in vast countries such as Russia. It is also necessary to bring oil,
destined for transport by ship, to a port. Finally, in the industrialised countries, there are
major pipeline networks transporting crude to refineries situated inland and also handling
the finished products coming out of the refineries and destined for major centres of
consumption.

Oil pipelines are large diameter tubes


that can transport enormous quantities
of oil, up to several tens of millions of
tons per year. The oil circulates by
means of pressure maintained by
pumping stations located every 60 to
100 km. The oil travels in the pipelines
at speeds of around 2m/sec (7km/h).

Figure 58: Pipeline on land.

As for maritime transport, safety and security are important elements for pipelines. But
normally there are no serious oil spillages. In fact, as soon as the pipeline is damaged by
accident or sabotage, pumping is stopped and pollution remains limited. But things
become more serious if the state of the pipelines is not kept constantly under surveillance.
Oil is always corrosive to a greater or lesser extent, because it contains acidic gases (CO2,
H2S). The pipes deteriorate from the inside and if they are not changed in time, they finish
by leaking. This problem exists for example in certain areas in Siberia.

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Figure 59 : Oil pipelines and projects (1)

Figure 60: Gas pipelines and projects (2)


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The construction of major pipelines crossing several countries requires intense


negotiation. Behind these negotiations are questions of the geopolitics of energy
requirements and geopolitical questions in general. For example, what will happen with
the new oil reserves in Central Asia, around the Caspian Sea? Will the new oil pipeline
take oil to the East, to China, ensuring a reliable supply to that country which is an ever-
increasing user of energy; or to the southeast, across Afghanistan and Pakistan; towards
the southwest, across Iran, the most economic route; or to the northwest, to Russia which
would therefore be able to retain control over the final destinations?

2.5.1.3. Le stockage du ptrole

The crude oil that arrives at its destination is not always immediately treated in a refinery.
In addition, the developed countries have realised for a long time now the strategic
importance of oil. They are committed to holding stocks of petroleum products (crude and
finished products) equivalent to 3 months of import quantities. These commitments have
been incumbent on members of the European Union since 1968. Depending on the
country, the strategic stocks are managed by state or private organisations (or both). In
France, the objective of the organisation responsible for petroleum stocks is to ensure that
each region has available 10 days consumption of petrol and 15 days of diesel and
heating fuel.

Petroleum products are stocked in tanks of varying size that can often be buried
underground. In France there are 50 or so storage centres for liquid products. The main
concern of the managers of these centres is safety and security. Fire safety certainly; but
also prevention of the risk of pollution of land areas and water tables in the case of a leak.
There are regular inspections of the condition of the tanks and their resistance to
corrosion.

2.5.2. Le transport du gaz

Overall, the problems of transport and of storage of gas are the same as for oil. Producer
and consumer countries are far apart and gas has to be taken from one to the other.

But in detail, things are quite different.


Overland or underwater transport
by gas pipeline is preferred.

Figure 61: Map showing principal


movements of gas worldwide in
2003 (in millions of cubic meters).

Unlike oil, the gas is in a gaseous


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state at normal pressures and temperatures. This means that, for the same quantity of
energy, it occupies a volume 600 times greater than that of oil. Therefore, there is no
question of chartering vessels to transport gas in its gaseous state. That would cost 600
times too much!

The most usual method of transportation is therefore by gas pipelines. There are
underwater gas pipelines, such as those which link Norwegian gas fields to European
terminals or those linking North Africa to Sicily. And of course, overland gas pipelines like
those that bring Russian gas to the European Union. These gas pipelines are not visible:
for reasons of safety and security they are buried underground. The compressed gas
circulates at high speed in a gas pipeline, with the aid of compression plants positioned at
regular intervals along the network.

But in certain cases the construction of gas pipelines is technically impossible or too
expensive, for example to bring Nigerian gas to Europe, or to take gas from Qatar to
Japan. To resolve this problem, a method of maritime transport based on the liquefaction
of the gas (LNG, liquified natural gas) has been introduced.

Figure 62 : The LNG chain


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Figure 63: View of the Gasandes gas pipeline, a 460 km-long pipeline linking the
Argentinian network to Santiago in Chili across the Andean mountain range.

2.5.2.1. Gas storage in tanks

Gas consumption is not regular throughout the year. In France, for example, seasonal
variations go from 1 in summer to 8 in winter. Storage of gas is therefore essential to
enable matching of supply and demand. The most obvious method is that of storage in
liquid form in giant tanks. But there is something better! The gas can be stored in
natural underground reservoirs, as if one created an artificial gas deposit. Storage
capacities are enormous, measured in billions of m.

And there is no need to refrigerate the gas to liquefy it. Suitable geological sites must
possess good reservoir and cap rock conditions and be located at a sufficiently shallow
depth (around 500m), so that injection of the gas is not too expensive in energy terms.
Such ideal sites are not numerous

In France today there are 10 or so in


operation. The most important is that
of Chemery, in the Loir-et-Cher
(capacity 7 billion m).

Figure 64: An aerial view of the LNG


plant of Bontang, with its storage
tanks and loading quays for
methane tankers.

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2.6. Oil trading

Trading means doing business. The term petroleum trading describes the financial
operations associated with commerce in hydrocarbon cargoes. The organisation of this
business is complex.

All the major oil companies have trading subsidiaries. Their


main objective is to ensure a regular supply of crude oil to
their refineries, to meet the oil supply demands of the
processing plant at any one time.

Figure 65: Crude oil trading floor in Geneva (Switzerland).

The traders role

The traders role is to purchase the oil that is necessary in terms of quality and
quantity a little time in advance. But if we talk about selling, we automatically talk also
about buying. A skilful trader can quite possibly buy a cargo of oil at a rather low price to
quickly resell it at a profit, if others need the cargo more than he does and are ready to pay
the price. So, it is not rare for a cargo of oil to change ownership during transport,
sometimes several times: destined initially for the United States, it is purchased during
transport by a refiner in Rotterdam in the Netherlands and finally finishes up at the Fos-
sur-Mer refinery, which had a more pressing need for it.

The trader also handles negotiations for the finished products produced by the
refineries. And of course, if the company doesnt need it for its own refineries, he handles
the sale of crude oil that it owns.

Traders buy and sell cargoes on a


real market, organised on a
worldwide basis; dealing in quantities
of oil which exist physically and which
are due to be transported shortly or
are even already in transport.

These markets are called spot-


markets.

Figure 66: Traders responsible for


essence and naphtha operations on
the trading floor in Geneva
(Switzerland).

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So, the trader buys crude to supply a refinery that is going to transform it into petroleum
products required by the consumer. Between the date of purchase of the crude and
delivery to the consumer of the refinery production from this cargo, several months could
have elapsed. And during that period, the crude price could have varied: if it has
increased, there is no problem.

But if it has gone down, the selling price of the refinery products has also dropped: result,
our trader has lost money on the refinery products manufactured from an expensive crude
and sold cheaply as a result of a drop in oil prices. To provide protection against this risk, a
financial mechanism exists, called covering. This operation takes place on a special
market called the futures market.

The trading operation can generate significant profits. That is the reason for the existence
of trading companies independent of the petroleum industry and whose aims are solely
financial. These companies operate a little on the spot markets, but above all on the
futures markets.

2.7. Oil and gas refining

The petrol or diesel that we put in the tank of our car, the domestic heating oil that we burn
for heating in the winter, the cylinder of gas which contributes to the delicious dishes we
prepare, and all the chemical products that play a part in our everyday lives they all
come from oil. But we never use crude oil directly.

Why is that? Why arent there motors and boilers that run on crude oil? The reason is very
simple: crude oil is an unstable mixture of several hydrocarbons, in varying
quantities according to the density of the product, and there is not just one crude
oil, but a multitude of different crudes. In fact, each oil field has its own history and its
own particular composition of different hydrocarbons.

Some, black and viscous, contain many heavy molecules.


Others, brown and freer flowing, are lighter. They contain
more or less dissolved gas. And all of them contain varying
proportions of sulphuric or acid products, very corrosive for
metals. Of course, a universal motor adapted to each and
every fuel doesnt exist, nor does a boiler that is resistant to
very aggressive corrosive action.

Figure 67: The refinery at Anvers (Belgium).

That is why the crude oils must be purified and transformed into products having an
almost constant composition, well adapted to their use.

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These transformations are carried out in refineries. Nevertheless, the oil coming into the
refineries is not the same oil as the one which came out of the wells. The oil has already
been cleaned by eliminating water, acid gases, and so on even before shipping

But the overriding objective of a refiner is to respond to the demand for petroleum
products. Today, the development of road and air transport has accelerated, and the
demand for light products has soared. At the same time, we burn a lot fewer heavy
products to produce electricity or for heating. Worldwide demand is for about 40% light
products (automotive fuels), 40% middle range products (boiler fuel, diesel) and 20%
heavy products.

The only crude oil corresponding more or less to these


proportions is the light crude from the Algerian Sahara. But
the majority of crudes extracted in the world contain more
heavy products.

Figure 68: Extra-heavy oil.

Refineries composed uniquely of a single distillation tower,


as in the past, are therefore no longer sufficient. Other
production plant is necessary in order to transform (we also
say to convert) the heavy products into light products.
Several refining techniques exist to do this.

It is because of the costs of transformation that the heavy


crude oils are less expensive than the light oils.

This need to adapt refineries to the demand for petroleum products also explains the
location of refineries throughout the world [link to focus:

Where are the refineries situated?. A


lot of them are in the developed
countries, the very large consumers,
even in those that do not have any oil!
By constructing refineries on their
own territory, they guarantee for
themselves an independent refining
policy.

Figure 69: The crude oil refinery at


Feyzin (France).

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2.7.1. Oil refinery: instructions for use

How do we treat crude oil, this mixture of molecules ranging from the lightest to the
heaviest? We are going to heat it, make it evaporate progressively. For example when we
heat the bottom of a saucepan of water, first small bubbles appear before we reach 100C:
this is gas dissolved in the water that is beginning to escape. Then, at 100C, the water
boils vigorously and evaporates completely. On the bottom of the pan, we find whitish
residues of salts, which must be heated to a very high temperature if they are to vaporise.
For crude oil, the principles are the same.

The crude that arrives in a refinery is going to undergo a series of operations, to


finish up with products that we, or industrial users, need in our daily life. There are
three main types of operations:

Separation, to obtain the different types of products from the heaviest to the
lightest,

Transformation (or conversion), to modify the natural proportions of each type of


product in order to respond to consumer demand,

Upgrading, to eliminate undesirable compounds and modify the characteristics of


certain products to make them compatible with the norms.

Separation is accomplished by fractional distillation. The crude oil is injected at the


base of a 60 m high tower, called a topping unit or an atmospheric distillation column
(because the pressure used is close to atmospheric pressure).

There, it is heated to 350/400C. Most of it evaporates and begins to rise inside the
column. All that is left at the bottom of the tower are the heavy products, the residues. As
the vapour rises, its temperature goes down.

The heaviest fractions of these vapours are going to


condense into liquids, which can be recovered on trays
situated at different levels in the column. And so on, until the
top of the column where the temperature is 150C.

There we recover the final vapours that have not been


condensed: the petroleum gases. This principle allows
recovery of 10 or so different types of products, from
bitumens to gas, which are called the petrol cuts or fractions.

Figure 70: Column of an atmospheric distillation plant in the


Provence refinery at La Mde (France).

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But the heavy residues of this first distillation have in fact retained a significant portion
of average density products. So they are subjected to a second, more vigorous
distillation, this time under vacuum. Diesel is recovered at the top of the vacuum
distillation column, and fuel oils at the bottom.

Conversion: Market demand is for large quantities of light products, but the separation
has given significant proportions of heavy fractions. However, we dont have to stop there;
the heavy molecules can be broken down into small pieces! The major operation to
convert heavy products to light products is called catalytic cracking. It is carried out at
high temperature: 500C, in the presence of a catalyser (that is to say a substance which
encourages chemical reactions without participating directly in them).

This treatment is very drastic: more than of the heavy fractions are transformed into gas,
petrol and diesel.

The result is even more efficient if hydrogen is added


(hydrogen cracking), or if the procedures of carbon
extraction are introduced into the process (deep conversion).
In fact, all heavy fractions can be transformed into light ones,
but a price has to be paid. Deep conversion operations are
large consumers of energy.

Figure 71: Catalytic cracking plant with fluidised catalyst in


the Donges refinery (France).

Upgrading: the products from the distillation and conversion


operations must be stripped of molecules, in particular
sulphur, that are corrosive or harmful to the environment,

The desulphurisation of diesel is undertaken at 370C,


under a pressure of 60 bars and in the presence of
hydrogen. The sulphur atoms leave the hydrocarbons and
bond with the hydrogen to produce hydrogen sulphide, H
2S.

This latter product will then be treated to isolate the


sulphur, resulting in those large yellow heaps that one
sees in certain refinery yards (today sulphur is stocked in
tanks maintained at a temperature sufficient to keep it in a
liquid state)..

Figure 72: The desulphurisation plant in the Anvers


refinery.

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The European norms concerning sulphur emission into the atmosphere are very severe.

They have become even more so since the 1 st of January 2005: the refiners will have
several years to bring their plants into conformity, that is to say, to rethink and redesign
their desulphurisation units to lower even further the sulphur content of fuels.

Moreover, certain products, such as petrol, cannot be used


directly in automobile engines because of their self-igniting
properties (when your engine goes boom). They have an
octane rating that is too low. The octane rating measures the
tendency of petrol to avoid self-ignition.

Figure 73: Alkylation plant at the La Mde refinery (France).

The nearer it is to 100, the better it is! The numbers 95


and 98 at the petrol pump represent the octane rating.

Modern automobile engines, with a very high compression ratio, need petrol with a high
octane rating.

The main operation that enables the octane rating to be increased is called catalytic
reforming.

The petrol goes through four successive reactors. 500C, 10 bars of pressure and
platinum as a catalyst. Those are the conditions necessary so that we find a good product
at the pump!

Other methods also lead to an improvement in the octane rating (alkylation, production of
the ethers MTBE (methyl tertiary butyl ether) and ETBE (ethyl tertiary butyl ether), which
have excellent anti-self-ignition properties.)

There is another upgrading procedure, applied in this case to butane or propane gas
and to kerosene. This is the sweetening process.

The products are washed in soda to rid them of mercaptans, nauseating and corrosive
sulphuric products (a mercaptan R-S-H is an alcohol where the sulphur atom has taken
the place of the oxygen atom).

All these operations must be carried out in conditions of the utmost security.

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Figure 74: Refining

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2.7.2. Refined oil products

Figure 75: The refining process, from crude oil to the final product.

Basically, things are simple:

Butane and propane gas, in the form of LPG (liquid petroleum gas), are going to be
used for domestic requirements and in gas-fuelled vehicles;

Petrol and diesel will be used as automobile fuels;

Naphtha goes off to a petrochemical complex, where it undergoes amazing


transformations;

Kerosene will be consumed as aviation fuel;

Diesel fuel will make our diesel car engines work;

Domestic fuels will be used to keep us warm in the winter;

Oils will be the base for all lubricants;

Bitumen products will seal the roads.

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But, for certain products that he is going to offer customers, the refiner will upgrade the
fractions even further, beyond the processes of conversion and upgrading already
discussed. He will carry out judicious blending of different products to arrive at a finished
product of quality, respecting environmental norms. For example, for petrol, he will be able
to mix petrol from direct distillation and catalytic reforming, and add ETBE and certain
additives that are beneficial for engine-life and performance. Each petroleum company
selling petrol, jealously guards the secrets of these substances!

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2.8. Petrochemistry

From chewing gum to training shoes, and lipstick to


throwaway bags, oil is everywhere in our daily life (although,
fortunately, not in original sticky and nauseating form). They
result from the miraculous transformation achieved by the
alchemists of modern times: the petroleum chemists.

Figure 76: CD-ROM case in polyethylene.

Petroleum chemistry and plastic products in particular are


sometimes criticised, but without the colours (pigments and
paints), which enliven our favourite objects like our CDs and
DVDs, our snowboarding anorak we would live almost in black and white! Indeed, the
products [link to focus: The products derived from oil] resulting from the chemistry of oil
(petroleum chemistry) are numerous and varied. They contribute to our comfort, our
pleasure and our safety.

For all those who were born after 1960, these products are so much part of everyday life
that one cannot imagine being without them. Nevertheless, their appearance in our daily
life is really very recent. Old people will be able to tell you: they were young children and
adolescents without knowing polyester sportswear, Nike, Adidas and Reebok training
shoes, plastic bags which are so practical, and even the outer casings of mobiles,
scooters, televisions and computers. Incredible?

The facts are there: in 1950, the


consumer products resulting from
petroleum chemistry attained only 3
million tons worldwide, of which half
were plastic products. In the year
2000, 192 million tons were produced
of which 140 million tons were
plastics.

Figure 77: Example of derived


products from the petrochemical
industry: soles of sports shoes.

Why did these products arrive so late on the market when the era of the massive use of oil
started at the beginning of the 20 th century? Around the 1930s, the petrol, diesel and
kerosene produced in enormous quantities by refineries had guaranteed outlets: all types
of vehicles. But the refiners found themselves with unimaginable quantities of a product,
naphtha (also called heavy petrol), which was unsaleable and unstockable because it was
inflammable and polluting.

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Naphtha is the distillation cut which


comes after kerosene and before
petrol. Researchers thought about this
apparently insurmountable problem and
found the solution. Thanks to the
astonishing chemical versatility of
the polymerisation reaction, naphtha
is today the origin of the majority of
products derived from oil.

Figure 78: Usine Arkma de Balan


(France) qui fabrique les grands
plastiques de notre quotidien.

How do we get from this liquid to all the plastics that we call polymers, synthetic fibres,
detergents, etc.? We use petrochemical techniques the principle of which is called steam
cracking.

Figure 79 : Petrochimistry
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2.8.1. Polymerization

The outer case of a mobile, a CD case, a polyester football jersey, sunglasses or the
bumper of a scooter, theyre all solid!

What do we do to get from naphtha, this heavy petrol, without any doubt at all a
liquid, to all these products, generally solid and so varied? By the magic of a
chemical reaction called polymerisation!

What does it consist of? Certain molecules of hydrocarbons, the monomers, are capable,
under special conditions of temperature and pressure and in the presence of catalysers
(compounds encouraging the triggering of a reaction), to join together into a unique giant
molecule, the polymer.

Polymers, enormous heavy molecules, have very different physical properties from their
monomers. They can be very hard and shock-resistant, or on the contrary, soft and
pleasant to the touch. Some resist heat very well, others are virtually biodegradable. They
can be rigid or conversely very elastic. Look at Lycra, present in so many clothes how
could we manage without its marvellous elasticity?

In fact the monomers form a chain of which the characteristic property is to be rigid or very
soft according to the nature of the links. Over time, researchers and industrial companies
have selected the most interesting polymers to manufacture the products we find around
us. Research into new and ever more effective polymers continues, thanks to the infinite
richness of organic chemistry which continually presents us with new surprises

Figure 80: The polymerization reaction

The polymerization reaction modifies the chemical nature of compounds by inducing the
molecules of monomers to unite in long chains of molecules called polymers, in the
presence of a catalyser.

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2.8.2. Petrochemical engineering

The polymerisation reaction is applied in particular to the petrochemical bases.

The main petrochemical bases are: naphtha, diesel, and butane. These petrochemical
bases are treated in chemical plants in units called steam crackers. The aim is to break
down the molecules under the action of heat in the presence of steam to obtain the
following basic products:

Alcenes (olefins): ethylene, propylene and butadiene (ethene, propene, butene);

Aromatic hydrocarbons (cyclic unsaturated hydrocarbons): benzene, toluene,


xylene;

Synthesised gas, a mixture of hydrogen and carbon monoxide, CO, produced by


the partial oxidation of methane from natural gas

Figure 81: Schematic representation of steam cracking.

In general steam crackers are situated on the sites of large refineries: indeed they use
products resulting from the refining operation. The technique of steam cracking is a close
cousin to the techniques used in the refining process.

Once our polymers are manufactured, there is still a lot to do! In fact they often take the
form of granules or powders. They must be transformed to give them shape, texture,
colour and the properties that we expect from them: resistance to shocks, heat and wear,
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rigidity, flexibility or elasticity, and also pleasantness to the touch To this end, they will
undergo a series of treatments: heating, fusion, moulding, adding of other products but
there we are leaving the petrochemical framework and entering that of the plastics
industry, the textile industry and the cosmetics industry!

Figure 82: View of a steam cracker at the refinery at Feyzin (France)

This steam cracker, belonging to the petrochemical activity in the refinery at Feyzin
(France) is used for the production of the main intermediaries in chemical synthesis by the
pyrolisis of petrol at more than 820c, in the presence of steam.

Figure 83: View of the aromatic essence extraction plant (Feyzin, France).

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2.9. Oil logistics and supply

Each person, in the home and with his or her motor vehicle (scooter, car), is a user of
petroleum products. Between the refinery, where heating oil, diesel, petrol and gas are
produced, and the end user, there is a distribution network that is responsible for getting
these products to their final destination. Making available to each person the right product,
at the right time, at the right place and at the lowest cost and in optimum conditions of
safety and security, is the objective of petroleum logistics.

Figure 84: Diagram of the petroleum logistics chain.

In all countries, the logistics operation comprises the


same stages. The aim is to ensure that all the products
are permanently available to meet the needs of all users:
private individuals, road users, industrial plants, public
services

The supply, storage, transport and delivery of products must


also take place under the best possible conditions of safety,
security and respect for the environment.

Figure 85: Aerial view of the Gennevilliers depot (France).

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2.9.1. Oil fuel depots

Whatever the country, petroleum refineries are never very numerous. Some countries do
not even have any. In any case, taking the petroleum products directly from the
refinery to the customer would be too complicated: it would require large numbers of
road tankers covering enormous distances. The products therefore transit by
intermediary storage centres, which are responsible for supplying a region: these
are the petroleum depots. These depots are also necessary for another reason: to meet
possible interruptions in the supply chain, for example a halt in the supply of crude oil to
the refinery or a drop in the output of finished products. In fact, the operators of the
petroleum distribution network in many countries, including France, are responsible for
maintaining stocks equivalent to 3 months of consumption, quantities known as strategic
stocks.

The petroleum products are taken from the refineries to the depots by bulk transport
methods: pipelines, trains of tanker wagons, river/canal barges, boats. Depot capacities
are very variable, on average between 10 000 and 300 000 m3. The principal products
stored are heating oil, petrol and diesel, as well as special diesel fuels used by farmers
and fishermen, and aviation fuel

Figure 86: Simplified cross section of an oil tank.

A petroleum depot consists of 10 to 30 steel tanks. A tank can be as large as 60 000 m3.

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Each depot has 3 to 12 loading bays for the road tankers that will deliver the products to
different consumers.

In France, there are 60 or so main depots, belonging to the major petroleum operators.
They supply filling stations and numerous secondary depots run by independent retailers.
The road tankers used transport 10 to 30 tons of one or several products (in the latter
case, the tankers are divided into compartments).

The products are regularly inspected throughout the whole


distribution chain, from the refinery to the end user, to
guarantee the maintenance of product quality and the
absence of contamination by mixing.

In France, the petroleum operators must meet the demands


imposed by a steady reduction in the number of depots:
more than 300 depots of more than 400 m3 were closed
between 1973 and 2001.

Figure 87: A hydrocarbon storage tank at the petroleum


depot in le mans, with fire extinguishing system in the
foreground

2.9.2. A priority issue: security

Petroleum products are dangerous, being subject to risks of fire, explosion and pollution.
The safety and security of depots and the distribution chain is therefore an absolute
priority. In Europe, regulations are very strict. Like refineries, petroleum depots are
classified under Seveso II and are therefore very regularly inspected by the appropriate
administrative departments.

A depot is equipped with numerous safety systems, particularly at the level of each
storage tank:

Safety valves and, for tanks


containing volatile products,
floating screens which restrict
the dispersion of hydrocarbon
fumes;

Figure 88: Shot of the loading of a


Total road tanker at the sprl
petroleum depot at Hauconcourt
(France).

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Alarms and automatic stopcocks in case of leaks in a pipeline;

Fire-fighting installations, both fixed (automatic spray systems, water curtains)


and mobile (water cannons), with sufficient reserves of water and foam products
(emulsifiers), to extinguish any possible fire.

Fire-fighting drills take place once a month and there are annual simulation exercises with
firemen.

Figure 89: The different types of installation in the petroleum depot

Respect of the environment is also ensured. Each depot possesses the following
installations:

A recovery unit for fumes emitted on tanker loading bays, in order to protect air
quality;

Holding basins to recover surface water runoff, and separator-decantation systems


to decontaminate them;

Leak-proof and easy to inspect retaining dikes around tanks and pipelines, to
ensure protection of surrounding soils from product seepage;

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A waste collection system (oily rags, mud from the bottom of tanks), the waste
being subsequently incinerated by specialist companies.

And finally, safety and security of the final distribution operation is not neglected. Delivery
tanker drivers must have a special licence for the transport of hydrocarbons. Tankers and
equipment are inspected regularly. Similarly, the petroleum companies inspect the
systems at the points of delivery, even if they dont own them.

Figure 90: Loading of fuel in a depot and recovery of fumes in a storage tank.

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2.10. Consumption of petroleum products

For most people, the biggest act of consumption of petroleum products is filling up the fuel
tank of the car. But drivers are not the only users of these products! They are consumed:

In transport: all fuels, not only for private cars (petrol or LPG), but also for transport
company trucks, planes operated by airlines, diesel locomotives for the railways,
etc. ;

In the home: heating oil, LPG or town gas, supplied in bottles, tanks or by the gas
distribution network, for heating and daily requirements such as cooking;

In industry: industrial boilers, thermal electricity power stations operating with gas
or fuel oil, industries using the non-fuel products from refineries that are known as
speciality products;

In the petrochemical industry: naphtha and gas for petrochemical processing to


supply raw materials for the manufacture of plastics, textiles, etc.;

In the public works sector: the main product used is bitumen for all road surfaces
from local roads to motorways and on to aircraft runways;

In agriculture: for tractors or other agricultural machines, greenhouse heating and


drying.

The distribution network

These products have to be delivered to all the users. How is


this done? A very dense distribution network exists. The
major users, industrial plants, are supplied directly from the
refineries by rail (tanker wagons), by river and canal barges
or even by pipelines carrying finished products.

Figure 91: A night view of the relais de Chanterennes on the


a10 motorway at Brie-Saint-Forge (France).

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2.10.1. The different types of fuel oils

What are the different types of fuel? It is only necessary to think of the different types of
vehicles: cars, trucks, and planes.

For land-based vehicles, two main types of motor are in use: the petrol engine and
the diesel engine. They are quite old now, since they were invented in the 19 th century.
Both work on the same principle: that of explosion. They are internal combustion engines.
A mixture of air and fuel introduced into a cylinder catches fire and produces combustion
gases. These gases move a piston in the cylinder.

The energy of the piston moving linearly is converted by a crankshaft into a rotating
movement that takes the drive to the vehicle wheels. So what is the main difference
between the two types of motor? The ignition of the air/fuel mixture in a petrol engine is
caused by external means, by an electric spark provided by the spark plugs. Ignition in
diesel engines on the other hand is automatic: the high pressures and resulting high
temperatures in the cylinder are sufficient to cause spontaneous ignition.

The first explosion motor (1806) worked with hydrogen and the very first diesel motor
(1892) with coal powder! Things have changed a lot since then. Petrol engines work on
95- or 98-octane petrol and diesel engines, as their name implies, use diesel fuel. Both 95-
and 98-octane petrol is lead-free; a major advance as far as environmental protection is
concerned. Until the end of the 20th century, the best anti-knocking agent known for petrol
was tetraethyl lead, (C2H5) 4 Pb. At that time, lead was used to obtain a higher octane
and to serve as a lubricant for the valves.

However a major problem gradually came


to light: enormous quantities of lead oxide,
a very toxic metal, were being discharged
into the atmosphere! Petroleum company
research scientists and refiners have been
able to adapt to the new environmental
requirements, producing lead-free petrol by
using other anti-knocking molecules without
danger for the environment and compatible
with modern engines.

The figures 95 and 98 stand for two octane


indices, which measure the anti-knocking
capacities of a fuel. The closer the octane
index to 100, the better it is.

Figure 92: Cutaway view of a petrol engine.

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Fuels adapted to the engines

Today the majority of cars use petrol, but diesel cars are becoming more and more
common: the fuel is less expensive, consumption is lower, and performance is very close
to that of petrol engines. 43% of the total fleet of light private vehicles in France use diesel
engines (compared to 33% in 1999, and 60% forecast in 2010). For all vehicles taken
together, the diesel engine market will be four times that for petrol by 2010. Other
automobile fuels exist but for the moment are little used.

Enormous progress has been made from the point of view of consumption and thus of
energy savings. A small car uses approximately 5 l for every 100 km and a big car 10 l for
the same distance, that is almost half that of 40 years ago. Formula 1 cars on the other
hand have remained very greedy: almost 100 l for 100km! That is the price to be paid for
this extraordinary test bed, which enables savings at the end of the day in production
series of vehicles.

Heavy goods vehicles and diesel locomotives both work on diesel fuel.

Fuel for planes is of two types: kerosene (very close to diesel) for large turbine and
turbo jet commercial aircraft and aviation petrol (avgas) for light planes with piston
engines. Dont forget that also our helicopters work on this type of fuel. Aviation petrol
necessitates a very high-octane index (maximum index 100). It is leaded petrol, one of the
last to be still in use.

2.10.2. Quality of service

The best place to form a judgement about the quality of service of a petroleum products
supplier is the filling station (often indeed called a service station). All car users go there
regularly.

On the roads in France, we can see:

Stations operating under the names of the oil companies (about 15 000 in France in
2002),

Supermarket hypermarket stations (around 4500 in 2002),

Motorway stations (343 in 2002), where petrol is more expensive, but which are
open 24 hours a day, and which often provide special services (toilets, baby-
changing facilities, games areas, picnic spots, tyre inflation, a small supermarket
with regional products, communications corner ).

In 2001, the supermarket chains made their appearance on motorways: some will soon go
as far as opening premises the size of a classic supermarket. Do your shopping on the
motorway on your way home from a weekend away!

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In service stations off the motorway,


the oil companies devote a lot of
attention to their users in terms of
quality of service. There you can find:
accessories for the car, washing and
vacuuming units and a small shop for
food and drinks and for the purchase
of regional products.

Figure 93: Shot of an employee at the


Total service station at La-
Chapelle-sur-Erdre (France).

In their service stations, safety remains an absolute priority for the companies. For
example, the pump nozzle that dives into the tank of your car to fill it with petrol is
equipped with a system, which extracts the petrol or diesel fumes and returns them to the
fuel storage tanks.

That is a way of reducing fire risks! The underground storage tank consists of a double-
walled construction and is equipped with a leak detector.

Figure 94: Schma d'une station-service.


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For many years, the service stations belonging to oil companies have had to meet
competition from the supermarket filling stations. Unfair competition? Anyway its not
illegal. But for supermarkets, the sale of petrol is not a major factor in their turnover. They
can allow themselves to make very little profit, even none at all, on fuel: they will make up
for it inside the supermarket. Its the opposite for a stand-alone filling station, where the
sale of fuel represents in most cases the major part of the activity. The petrol companies
cannot lower their prices below a minimum at which the filling station is no longer
profitable, that is to say that it becomes impossible to finance the installations of the station
and the salaries of its employees.

The companies therefore put all their efforts into another aspect: that of fuel quality, with
additives, products, which improve fuel performance. Each company has its own and their
secrets are well kept. These additives ensure better engine cleanliness, an improved yield,
a longer life, less fumes and petrol odours that are more pleasant.

Figure 95: Petrol and diesel additives.


The lubrifiers prevent the seizing of the injection pumps
The cold-weather additive prevents the crystallization of the paraffins and permits the use of gas oil during
a very cold season
The corrosion inhibitor serves to protect the motor parts from eventual rust or corrosion
The foam inhibitor permits a quick and complete filling of the reservoirs without overflowing
The anti-oxydizers guarantee the storage stability and prevent the formation of sediments in the vessels
and reservoirs
The anti-emulsifier eliminates the eventual risks linked to the accidental introduction of water in the fuels
The detergents and co-detergents serve to maintain or restore the cleanliness of the injection systems
The pro-cetane facilitates the spontaneous combustion of the gas oil
The odour enhancer brings a nice, immediate and durable smell

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One French oil company has completely revised its commercial policy. It has opened filling
stations under a discount brand where service is reduced to a minimum aimed at
competing directly with supermarkets. And the company is aiming specifically at certain
users (road haulage companies, users in rural areas) by setting up service stations
meeting their specific requirements.

And the result: for the first time, in


2004, the market share of the
supermarkets in fuel distribution fell,
reaching 55% as against 57% earlier.

Figure 96: Filling the fuel tank of a car


in a Total service station near
Lanon de Provence.

2.10.3. Prices of crude oil fuels and the rate of the oil barrel

The price of crude oil is very variable. Why? Political disturbances and more
recently the globalisation of petroleum commerce have made prices very sensitive to all
news, good or bad, and sometimes without any discrimination. This sensitivity of crude
prices is even more important for the finished products coming out of the refineries, such
as petrol and diesel. But the price that you pay at the pump is a lot higher than the cost
price of the products.

Why this difference?

It results from the fiscal policy in the consumer country. For the three major European
countries (Germany, France, Great Britain), the average level of taxes levied on petroleum
products represents three quarters of the selling price of the product.

More exactly, one euro worth of petrol represents today in 2005 on average:

23.5 cents of crude production cost and taxation in the producer country,

1.5 cents of crude transport cost,

3 cents of crude refining cost,

2 cents of distribution cost for the petrol,

70 cents of petroleum taxation levied by the state.

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In the United States, the tax on petroleum products is only one quarter of the selling price.
That is why petrol is a lot less expensive there than in Europe.

Unfortunately, cheap petrol does not incite consumers to make energy savings!

The taxes on petroleum products represent between 10 and 20% of the budgets of
the three major European countries.

Table 9: Cost elements for motor vehicle fuels in Europe, from the oilfield to the pump
(order of magnitude in 2002-2003, France/Germany/Great Britain)

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2.11. The major actors in the hydrocarbon world

There are numerous actors in the world of oil and gas. The best-known are, of course,
the major oil companies and OPEC. But they are not the only ones. A myriad of
companies, organisations and consultants all play a part in the hydrocarbon universe:

National companies, which, in many countries, manage oil production and defend
national interests in the hydrocarbon sector;

Companies specialising in gas distribution, such as Gaz de France;

National agencies & government departments with responsibility for energy


matters (in France the DGEMP, the Department of Energy and Raw Materials; in
the United States the DOE, the Department of Energy);

International organisations, such as OPEC (the Organisation of Petroleum


Exporting Countries), OAPEC (the Organisation of Arab Petroleum Exporting
Countries) or the IEA (the International Energy Agency);

Small independent oil companies, which take over oil fields near the end of their
useful lives, or develop fields that have been abandoned by the major companies.
Examples are Maurel et Prom in France, and many small independent companies
in the United States;

Companies operating in the oil sector as suppliers of services to oil companies,


mainly for exploration and production. Among the best known: Schlumberger
(logging), Halliburton, Geophysique, Geoservices (mud logging), Transocean,
Sedco, Forex These companies are involved in specific technical areas
(geophysical surveying and analysis, drilling, depth imaging, production equipment
), supplying oil companies with personnel and equipment that the latter do not own
or employ themselves (for cost control reasons). The world of the petroleum
services industry is vast and linked closely to exploration and production activities
throughout the world;

Research institutes, which are often training centres too. The best known in
France is the IFP (Institut Franais du Ptrole, or the French Oil Institute);

Independent consultants and other organisations or individuals who offer


consultancy & design services and technical audits to the oil companies.

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2.11.1. The institutions and other organisations

OPEC

OPEC (the Organisation of Petroleum Exporting Countries) was founded in 1960 by Iraq,
Venezuela, Saudi Arabia, Kuwait and Iran. At the beginning, the main objective of this
organisation was to redress the split of income between the oil producing countries and
the oil companies, in favour of the former. Conscious of the interests of its members, the
organisation has become an important stabilising element for petroleum prices since the
1990s and continues to play this role today. It is also, without any doubt, the first
organisation to have demonstrated wisdom in the management of the petroleum
resources of the planet.

OPEC works on the principle of limiting oil production by means of the allocation of
quotas (authorised maximum quantities) to each of its members according to their
reserves. These quotas are adjusted, at regular or extraordinary conferences, to take
account of the state of the world economy and its requirements. Up until today, at least
when the quotas are respected by its members, this system has allowed OPEC to fix a
range for oil prices and thus to maintain price stability. This stability is, of course, beneficial
for the whole world.

But since 2004, OPEC production has been working at almost full capacity and the
possibilities of increasing production further, (what is called excess capacity), have
become very limited. As a result, OPEC has virtually lost its ability to control prices,
which have tended to soar since 2004.

In 2005, OPEC consisted of 11 members:

7 Arab states: Saudi Arabia, Iraq, the United Arab Emirates (UAE), Kuwait,
Libya, Qatar and Algeria;

1 non-Arab, Middle-Eastern country: Iran;

1 South-American country: Venezuela;

1 African country from south of the Sahara: Nigeria;

1 Asian country: Indonesia.

The International Energy Agency (IEA)

OPEC is an organisation of producer countries. The IEA, on the other hand, is an


association of consumer countries. In 2005, it has 26 members, all of which are
industrialised countries and major hydrocarbon consumers. It is an intergovernmental
organisation for the co-ordination of energy polices.

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The IEA works towards security of energy supplies, economic growth and
environmental protection. In addition, governments of the member countries have
undertaken to implement joint measures to deal with emergency situations concerning
petroleum supplies. They have also undertaken to pool information.

The IEA keeps a sharp eye on the evolution of oil markets, and also plays a more and
more important role in the protection of the environment. In a completely new and
unexpected step, the IEA made a report public on the 28th of April 2005, in which it
recommended consumer countries to take preparatory steps to limit their oil consumption.

It even gave examples of measures that could be introduced in this direction:

Reduction of the maximum speed on motorways to 90 km/h;

Creation of special lanes on roads to encourage car sharing schemes;

Reduction of prices, or free travel, on public transport;

Vehicles to be used on alternate days during certain periods;

Reduction of the working week;

Incentives to work from home (telecommuting) in order to limit travel for


professional purposes.

The IEA is an autonomous unit within the Organisation for Economic Co-operation and
Development (the OECD). It was created in 1974, at the initiative of the United States,
as a reaction, both to the OPEC offensive when petroleum prices rocketed at the end of
1973, and to the use of oil as an economic arm by Arab countries. With regards to the
Kyoto protocol, the IEA seeks to establish common ground and compromise solutions
between signatories and non-signatories (the United States and Australia) of the protocol.

2.11.2. World oil companies

The best-known oil companies are powerful groups, with a very high turnover, placing
them among the leading world companies. They are the majors, large international
public companies, and the national companies, over 50%, and very often 100%,
state-controlled.

There are also many independent companies of average or small size. The most important
among them are permanently at the mercy of being taken over by one of the majors as
part of the tendency towards mergers that has been prevalent in the petroleum sector for
the last 20 years.

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2.11.2.1. Major oil companies

Today, the principal international oil companies, those known as the majors, are five in
number:

Exxon/Mobil: American, formed by the merger of Exxon and Mobil;

BP: British, the result of a merger between BP and Amoco;

Shell: Anglo-Dutch;

Total: French, the result of a merger between Elf, Fina and Total;

Chevron/Texaco: American, resulting from the merger of Chevron and Texaco.

The following table gives an idea of their size (2003 figures):

Sales Profit after Investments in


Company
figure tax exploration /production
SHELL 269 8,1 12,5
EXXON /MOBIL 247 21,5 12
BP 233 6 9,7
CHEVRON / TEXACO 120 7,2 5,7
TOTAL 118 7,9 6

Table 10: The principal international oil companies in billions of US $ (figures 2003)

History of the majors.

The two oldest of the major oil companies were created at the end of the 19th century:
the American, Standard Oil belonging to Rockefeller, and the Anglo-Dutch, Royal Dutch
Shell. In 1911, the power of Standard Oil was such that the American congress voted the
famous antitrust law aimed at breaking it up into three bits: Standard Oil of New Jersey
(the future Exxon), Standard Oil of New York (the future Mobil), and Standard Oil of
California (Socal).

All three would become part of a group later called the 7 sisters: Exxon, Socal (later to
become Chevron), Mobil, Texaco, Gulf, BP (the heir of AIOC, the Anglo-Iranian Oil
Company), and Shell. To these 7 sisters, is traditionally added the French CFP
(Compagnie Franaise des Ptroles, the future Total) to designate the original 8 majors of
the petroleum industry.

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Very rapidly, the American majors invested abroad, attracted by the enormous profits
generated by low-cost oil (Middle East), sold at the same price as Venezuelan or Texan
crude that was more expensive to produce.

In July 1928, BP, Shell, Exxon, Mobil and the CFP signed the Red Line Agreements.
This was an agreement to pool their prospecting facilities and to share by mutual
agreement the oil resources discovered or to be discovered in the old provinces of the
defunct Ottoman empire, that is to say from Palestine to the North of Iraq, including the
whole of the Arabian Peninsula. In this way, powerful consortiums were formed, which
would later be nationalised: IPC (Iraq oil Company), ADPC (Abu Dhabi oil Company), QPC
(Qatar oil Company), KOC (Kuwait Oil Company) and ARAMCO (Arabian American Oil
Company of Saudi Arabia).

In the 1950s, the producer countries share of petroleum revenues increased significantly,
but the profits of the majors were almost unaffected, thanks to fiscal advantages granted
by their governments.

Between 1958 and 1972, the profits of the 7 sisters progressed steadily from US$ 1.6 to
US$ 4.5 billion, whereas the price per barrel dropped gradually.

In 1973, those profits jumped to US$ 8 billion. Just after the petrol crisis, thanks to the
vertiginous increase in prices, the 7 sisters made some US$ 17.5 billion in profits in 1974,
from their production in the OPEC countries! The two decades following the turning point
of the first petrol crisis are marked for the oil companies by income levels forced upwards
by price increases and, at the same time, downwards by the continued increase in the
producer states share of petroleum revenues.

The progressive abandonment of the system of concessions resulted in large losses of


money for the majors, compensated for, overall, by the increase in the barrel price and the
development of trading activities (trading of crude and petroleum products).

Thus, in 1985, the five American majors accounted for 1/7 of the total profits of the Fortune
500 (a classification by Fortune, the economic magazine, of the leading 500 American
companies in terms of income), that is to say about as much as before the 1974 petrol
crisis.

The 1980s and 1990s saw the introduction of a significant new parameter: the major rise
in exploration and production costs, compensated to some extent by the size of the fields
discovered. This rise was reflected in a significant increase in cost of new barrels of oil.
As zones potentially very rich in oil became rarer: competition for them was exacerbated
and the states involved took advantage of the situation (alls fair in love and war!) to obtain
bonuses of several hundreds of millions of dollars at the time of the allocation of permits.

Consequently, a lot of the small and medium sized oil companies were taken over, since
they lacked sufficient available capital to finance the renewal of their reserves by
exploration that had become very costly.

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As for the largest companies, the majors, a wave of mega mergers initiated in 1984 (the
merger of Gulf and Chevron) and culminating at the end of the 1990s, caused an
upheaval in the petroleum sector, giving birth to 5 giants: Exxon/Mobil (Standard Oil came
back!), Royal Dutch Shell (the only one that did not merge with another company),
BP/Amoco (today BP), Chevron/Texaco and TotalFinaElf (today Total).

The oil companies continue to earn large profits. This money could be used in part to
finance energy re-conversion in developed countries.

The European companies have received the message:

BP with solar energy, the new world leader in photovoltaic production;

Shell with the biomass, solar and wind energy, whose declared objective was to
hold a 10% market share in renewable energies in 2005;

Total with the design and marketing of photovoltaic systems and investments in
other renewable energies (wind, wave energy ).

2.11.2.2. National oil and gas companies

Many of the major oil and gas producing countries possess their own national company,
charged with the responsibility of defending the petroleum interests of the country. In many
cases, in particular in the OPEC countries, the national company has the exclusivity, or
virtually so, of petroleum production in the country:

Country OPEP Society The states share of the society


Algeria Sonatrach 100%

Saudi Arabia Aramco 100%


United Arab
ADCO/DPC 60 % / 100 %
Emirates
Indonesia Pertamina 100%

Iran NIOC 100%

Iraq INOC 100%

Kuwait KPC 100%

Libya NOC 100%

Nigeria NNPC 100%

Qatar QGPC 100%

Venezuela PDVSA 100%

Table 11: National oil and gas companies

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In the non-OPEC countries, all types of arrangements exist in the oil sector, from the
national state company, which is the sole owner and operator of oil resources (for example
PEMEX in Mexico), to countries where the main production activities are delegated to the
major foreign companies within the framework of production sharing contracts or, more
rarely today, of concessions (Gabon, Cameroon ).

In most of the rich countries, oil production is entirely in the hands of the private sector (for
example the United States).

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2.12. Production and consumption statistics of oil and gas


2.12.1. Oil

The major oil consumer countries in 2003 were the following:

Consumption 2004 Variation of the Consumption per


Country
103 b/d consumption / 10 years inhabitant (barrels/year)
United States 20 731 17% 25,4
Canada 2 294 30% 25,9
Mexico 1 970 2% 6,7
Brazil 2 140 28% 4,2
Venezuela 560 27% 7,7
Germany 2 650 8% 11,7
France 1 977 6% 11,9
Italy 1 881 1% 11,8
England 1 827 0% 11,2
Spain 1 573 41% 13,3
Holland 947 24% 21,2
Turkey 683 26% 3,4
Belgium 641 26% 22,5
Russia 2 770 13 % 7,1
Saudi Arabia 1 845 43% 27,4
Iran 1 510 34% 7,9
Egypt 590 32% 2,9
South Africa 502 22% 3,9
Japan 5 353 4% 15,3
China 6 400 102% 1,8
India 2 450 73% 0,8
South Korea 2 149 17% 16,4
Indonesia 1 200 54% 2
Taiwan 965 46% 14,9
Australia 877 12% 15,8
Malaysia 515 36% 7,4

Table 12: The major oil consumer countries in 2004

It comes as no surprise, that the principal consumer countries are the developed countries
in North America, Europe and Asia. The champions of oil consumption: the United States.
With a little less than 5% of total world population, they consume a quarter of all the oil
produced each year. And their consumption is not slowing down: +16 % in the 10 years
from 1993 to 2003, approximately the world average.

Among the developed countries, we have, on the one hand, the high-consumption-per-
inhabitant countries (the United States, Canada, the Netherlands and Belgium) and on the
other hand the countries with more reasonable consumption habits, like the major

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European countries, where each inhabitant consumes on average half as much oil as in
the high per inhabitant consumption countries. In Asia, consumption is rocketing. China
has almost doubled its consumption in the last 10 years and will certainly not stop there.
During the same period, the total consumption of the Asia/Pacific zone has overtaken that
of the North American zone, with an increase of 39% on average over the 10-year period.
Asia has become the new oil giant. But who can blame these developing countries for
wanting to offer their populations the same comforts as those experienced by the
populations of the rich countries? Even more so, because on average, a Chinese person
consumes 15 times less oil than an American and an Indian 30 times less!

The major oil producing countries in 2004 were the following:

Production Variation of the Maxi. Year of


Country
2004** 103 b/d production / 10 years production
United States 7 228 -19% 1970
Mexico 3 825 26% On the increase
Canada 3 056 37% On the increase
Venezuela* 2 737 -1% 1997
Brazil 1 539 220% 2003
Argentina 797 13% 1998
Columbia 533 18% On the increase
Ecuador 530 45% On the increase
Norway 3 189 15% 2000
England 2 017 -22% 1999
Russia 9 261 44% On the increase
Kazakstan 1 221 288% On the increase
Saudi Arabia* 10 411 12% On the increase
Iran* 4 106 11% On the increase
United Arab Emirates* 2 757 13% On the increase
Iraq* 2 027 -31% 1989
Kuwait* 2 506 17% On the increase
Oman 757 -7% 2000
Qatar* 1 033 87% 2003
Nigeria* 2 329 21% On the increase
Libya* 1 583 10% On the increase
Algeria* 1 969 39% On the increase
Angola 1 052 77% On the increase
Egypt 708 -34% 1996
China 3 485 19% On the increase
Indonesia* 1 169 -27% 1996
Malaysia 835 17% On the increase
India 811 16% On the increase

Table 13: The major oil producing countries in 2004


* Member countries of OPEC (Organisation of Petroleum Exporting Countries)
** y compris les condensats extraits du gaz naturel

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Until now, it has been possible for the increase in oil consumption to be compensated by
an equivalent increase in production, even if certain tensions are starting to appear, as
indicated by the increase in crude prices in 2004/2005.

The countries which have made the biggest efforts in terms of production over the last 10
years have not been those belonging to OPEC (the Organisation of Petroleum Exporting
Countries), which, with 80% of world reserves, produced only 37% of the oil extracted
world-wide in 2003.

Overall, OPEC production has even slightly decreased. There are two main reasons for
this:

In 1982, following a very violent reaction to the oil crisis, crude prices decreased
substantially. That same year, OPEC decided to introduce its quota policy: that is to
say, to allocate to each of its members crude production volumes that could not be
exceeded; the aim being to control extraction and hence prices and thus to
preserve reserves for future generations.

Overall, this policy has worked efficiently. It has allowed OPEC to dig less into its
reserves than the non-OPEC countries, whilst ensuring relative price stability.

Some OPEC countries possess very large reserves, in particular those on the
Arabian Peninsula together with Iraq, but their production capacities have changed
very little over the last 20 years. Increasing capacity would require very heavy
investment, which, for the moment, has not been undertaken. As a result, for most
of these countries, their maximum production year was at the end of the 1990s.

Conversely, exploration and development of new fields has significantly progressed in


several non-OPEC zones (around the Caspian Sea, in the Atlantic deeps of Brazil and
Angola, ).

Other countries, whether members of OPEC (Indonesia) or not (the United States,
Norway, United Kingdom, Egypt), have seen their production levels drop over the last 10
years or even since the end of the 1990s. For them, it is a case of declining reserves:
these countries have probably already attained their production peak (1970 in the United
States, 1996 in Indonesia and in Egypt, 1999 in the United Kingdom and 2000 in Norway)
and will never be able to exceed it in the future.

Their production levels will gradually decrease in the coming years. These countries have
without any doubt attained their local Hubbert Peak.

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2.12.2. Gas

The major gas consumers in 2004 were the following:

Country Consumption 2004 (Gm3)


United States 635

Canada 96

Mexico 50

Argentina 38

England 98

Germany 101

Italy 81

Holland 51

France 45

Russia 454

Ukraine 86

Uzbekistan 50

Iran 86

Saudi Arabia 66

United Arab Emirates 40

Egypt 31

Japan 84

Indonesia 37

China 38

Malaysia 33

Thailand 30

Table 14: The major gas consumers in 2004

As for oil, the major gas consumers are the developed countries, as well as a number of
developing countries that possess a significant production capacity and a large population
(Iran, Egypt, Uzbekistan ).

Gas consumption is increasing steadily each year, even more rapidly than oil since it
progressed by 24% over the 10 years from 1993 to 2003.

The main gas producing countries in 2004 were the following:


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Production (billions
Country
of m3/year)
United States 531

Canada 184

Mexico 41

Argentina 45

Trinidad-and-Tobago 28

Venezuela 27

England 96

Holland 86

Norway 83

Russia 634

Turkmenistan 59

Uzbekistan 60

Iran 84

Saudi Arabia 66

United Arab Emirates 46

Qatar 39

Algeria 80

Egypt 33

China 41

Indonesia 75

Malaysia 62

Australia 37

India 28

Pakistan 27

Table 15: The main gas producing countries in 2004

As is the case for oil, the Middle East possesses major gas reserves (41% of world
reserves). On the other hand, its production remains limited (10% of world production).

The major consuming countries of North America and Europe are drawing on their own
reserves, partly because the transport of gas is proportionally more expensive than that of
oil. It is therefore less interesting to bring gas from distant locations.

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2.13. The future of oil and gas

The future scenario for oil and gas can be developed from the statistics of world reserves.
2.13.1. Oil

Let us first take a look at the figures for oil reserves by country and by region as at the 1st
of January 2005. The figure for reserves, expressed in number of years equivalent, is
calculated by dividing total reserves by the 2004 production level. Throughout we are
talking of proven reserves only.

Country Reserves (billions of barrels) Years of reserves


United States 21,4 11

Mexico 14,6 12

Canada 5 6

Venezuela* 77,2 82

Brazil 10,6 20

Ecuador 4,6 24

Norway 8,5 8

England 4,5 7

Russia 60 19

Kazakstan 9 24

Azerbaijan 7 62

Saudi Arabia* 261,9 79

Iran* 125,8 86

Iraq* 115 157

Kuwait* 102 118

United Arab Emirates* 97,8 108

Qatar* 15,2 53

Oman 5,5 20

Libya* 39 71

Nigeria* 35 41

Algeria* 11,8 19

Angola 5,4 14

China 18,3 14

India 5,4 22

Indonesia* 4,7 12

Table 16: Oil reserves by country and by region as at the 1st of January 2005
* Member countries of OPEC (Organisation of Petroleum Exporting Countries)

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Thus it can be seen that several Middle Eastern countries, all members of OPEC, together
hold 2/3 of worldwide oil reserves, with a special mention for Saudi Arabia which alone
possesses of these world reserves. OPEC in total holds 80% of world reserves,
whereas, at the moment, it only produces a little less than 40% of the oil consumed
throughout the world.

Naturally this translates into a very high number of years equivalent, often exceeding 100
years. Logical conclusion: the Middle East, already a strategic zone for oil production, is
going to become more and more so as years go by.

Total oil reserves today represent 40 years or so of consumption. But this has been the
case for several decades. That means that, until now, the oil consumed has been replaced
by new reserves (exploration discoveries, improvements in recovery from existing fields,
increases in oil prices making development of expensive oil fields more economic).

At the beginning of the 21 st century, we are at a turning point. Exploration and discovery
of new fields is not capable by itself of renewing reserves. Even if we can still count on
improvement in recovery rates, oil will be exhausted several decades from now.

But before this point of total exhaustion, the threat of shortages in the immediate future
hangs over us, that is to say in the next 5 years for the pessimists and the next 25 years
for the more optimistic: supply will no longer be capable of responding to an ever-
increasing demand: we will have attained the Hubbert Peak for oil. The post-oil era,
therefore, should be of concern to us, even today. Of immediate importance is the rapid
development of replacement sources of energy allowing the oil that remains to be reserved
for noble uses (the manufacture of plastics, synthetic fibres ) and above all the
achievement of very significant energy savings, particularly in the major consumer
countries.

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2.13.2. Gas

Gas reserves as at the 1st of January 2004:

Country Reserves (billions of m3) N of years of reserves


United States 5 452 10

Canada 1 603 9

Argentina 605 13

Bolivia 680 68

Trinidad and Tobago 733 26

Venezuela 4 276 158

Holland 1 756 20

Norway 2 085 25

England 589 6

Russia 47 578 75

Ukraine 1 121 59

Azerbaijan 850 170

Kazakstan 1 841 88

Turkmenistan 2 011 34

Uzbekistan 1 875 31

Iran 26 621 317

Iraq 3 115 > 1000

Kuwait 1 572 157

Oman 829 49

Qatar 25 771 661

Saudi Arabia 6 655 101


United Arab
6 007 131
Emirates
Algeria 4 545 57

Egypt 1 657 50

Libya 1 473 184

Nigeria 4 984 227

Australia 821 22

China 1 510 37

India 854 31

Indonesia 2 557 34

Malaysia 2 124 34

Pakistan 760 28

Table 17: Gas reserves as of the 1st of January 2004

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Gas is a little more evenly spread throughout the world than oil. However, the Middle East
and the CIE group of countries (Community of Independent States, set up following the
dismemberment of the USSR) together hold almost three quarters of world reserves. At
the same time, the domestic reserves of the United States and China have been reduced
to several years of production. As for oil, a major bout of geostrategic fisticuffs is in
preparation for access to gas reserves!

There are 65 years of world reserves, based on 2003 demand the same thing as saying
that the problem of the future of gas is the same as that of oil, but with a lag of twenty
years of so.

This lag applies not only to the exhaustion of reserves, but also to the Hubbert Peak for
gas that is expected to arrive 15 - 20 years after that of oil. Gas therefore provides us with
breathing space that must be used in the best way possible to prepare for the post-
hydrocarbon era.

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3. TOTAL
Presentation

Total is a multinational energy company committed to leveraging innovation and initiative


to provide a sustainable response to humankinds energy requirements.

The fourth largest publicly-traded integrated oil and gas company* and a world-class
chemicals manufacturer, Total operates in more than 130 countries and has over 95,
000 employees.

In addition to conducting our business according to the highest standards of professional


behavior, we maintain an ongoing commitment to transparency, dialogue and respect for
others.

We are strategically dedicated to meeting the challenges faced by all our businesses when
developing natural resources, protecting the environment, integrating our operations into
host country cultures, and dialoguing with civil society.

3.1. Total at a Glance (2005 figures)

A global multi-energy provider

Worlds fourth-largest integrated listed oil and gas company

Largest market capitalization on the Paris Bourse and the eurozone: 130.5 billion
at December 31, 2004

95, 000 employees (1)

Operations in more than 130 countries

Exploration and production operations in 41 countries

Producer in 29 countries

More than 500,000 shareholders

2005 sales: 143.2 billion

Totals operations span the entire oil and gas chain, from exploration, development and
production to midstream gas, refining and marketing, and crude oil and petroleum product
trading and shipping. Total is also a world-class chemicals producer, as well as having
interests in coal mines, cogeneration and power generation. In addition, Total is helping to
secure the future of energy through its commitment to developing renewable energies,
such as wind, solar and photovoltaic power.

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A leader in each of the core businesses: 2005 key indicators

Exploration & Production:

Production: 2.49 million barrels of oil equivalent per day

Reserves: 11.1 billion barrels of oil equivalent as of December 31, 2005***

Refining & Marketing: No. 1 European Refiner-Marketer and No. 1 in Africa

Refining capacity: approximately 2.7 million barrels per day

Retail network: nearly 17,000 service stations

Sales: approximately 3.9 million barrels per day

Brands: TOTAL, Elf, Elan, AS 24

Chemicals: Total is one of the worlds largest integrated producers and a European
or global leader in each of our markets - Petrochemicals and Fertilizers, Specialties.

Predominantly European (75%), held in particular by investors from France (33%), the
United Kingdom, Germany, Switzerland and Belgium.

Strong shareholder base in North America.

Institutional shareholders (87%), employees (4%) and other individual shareholders (9%).

Total S.A. is a French socit anonyme (limited company) created in March 1924.

Total is listed on the CAC 40, Dow Jones Stoxx 50, Dow Jones Euro Stoxx 50 and Dow
Jones Global Titans 50 indices and the FTSE4Good, DJSI World, DJ STOXX SI, FTSE
ISS CGI and ASPI Sustainable Development and Governance indices.

Senior Management, as of February 14, 2007:

Chairman of the Board: Thierry Desmarest

Chief Executive Officer: Christophe de Margerie


.

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3.2. Promoting Progress and the Future of Energy

The technical skills and expertise of our 95, 000 employees are our most important
competitive advantage.

United by a shared culture, these exploration, production, refining, marketing and


chemicals specialists have made Total a sound, resilient enterprise, focused on our core
businesses and enjoying unmatched growth opportunities.

Growing Production to Keep Pace with Energy Demand

Total is the worlds fourth-largest oil and gas producer, with production of 2.49 million
barrels of oil equivalent a day and proved reserves of 11.1 billion barrels of oil equivalent
in 2005. Our portfolio of assets is evenly distributed among the worlds leading petroleum
provinces.

We are also a world leader in gas production and marketing and in power generation.

Moreover, we are actively preparing for the future by investigating renewable energies
such as wind power and photovoltaics (solar power).

3.3. Customer-Focused Brands

With almost 17,000 service stations worldwide, Total is the market leader in western
Europe and in Africa. We also have a strong presence in the Mediterranean Basin and are
moving into growth markets in Southeast Asia.

Our marketing operations leverage not only TOTAL our flagship brand, whose solid
reputation is based on quality service and local presence, but also our strategically
positioned Elf and Elan brands.

Total is dedicated to setting the benchmark not only for business and financial
performance, but also for compliance with the most demanding standards of corporate
social responsibility.

Accordingly, we are continuing to develop a proactive ethical process to support the ability
of all internal and external stakeholders to express our values.

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3.4. Totals values

Total is home to widely diverse identities and cultures that share our core values:

Professionalism.

Respect for employees.

Ongoing concern with safety and environmental protection.

Contributing to the development of host communities.

Our values and principles are set out in the Code of Conduct, which underpins our ethical
process. The Code formally recognizes our commitment to uphold the principles of the
1948 Universal Declaration of Human Rights, the fundamental conventions of the
International Labour Organization, the OECD Guidelines for Multinational Enterprises and
the principles of the United Nations Global Compact.

3.5. Implementing a Proactive Ethical Process

Within the Group, the Ethics Committee is actively implementing a proactive ethical
process built around employee awareness and assessment of our ethical performance.

Awareness: Publicizing and promoting the Code of Conducts values and principles
inside and outside the Group and ensuring they are understood and applied.

The Ethics Seminar initiative was launched in early February 2003 to familiarize
employees worldwide with our values and our ethical vision of business. Convened
in France and abroad, the seminars gather several hundreds of Group employees
every year.

In addition, to highlight our values and principles outside the Group, we routinely
require our business partners, subcontractors and suppliers to establish their own
codes of conduct, if they have not already done so, and to respect ours.

Assessing ethical performance.

In close cooperation with UK-based GoodCorporation, we developed a grid of


84 evidence points to monitor and assess the application of our Code of Conduct in
all our units, plants and subsidiaries. The resultant "ethical profile" of audited units
is based on input from stakeholders, including employees, shareholders,
customers, suppliers and subcontractors, industrial partners and host communities,
who can also consult it. Profiling is performed by GoodCorporation consultants in
partnership with leading audit firms, which is a guarantee of independence and
efficiency.

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The Ethics Committee also acts in an advisory capacity, assisting employees in


resolving ethical problems encountered in the course of their work. All requests are
confidential and can be made outside the normal chain of management.

3.6. Corporate Social Responsibility

As a global leader in the energy and chemicals industries, Total is fully aware of its
corporate social responsibility, which is assumed through an assertive sustainable
development process, based on constructive dialogue, discussion and direct application of
our ethical values.

Proactive policies are in place in the areas of safety, environmental stewardship, preparing
for the future of energy, human resources management, and open dialogue with civil
society stakeholders.

The fourth Corporate Social Responsibility Report, Sharing our Energies, published at the
same time as the 2005 Annual Report, discusses our corporate social responsibility
initiatives. The CSR Report will be updated annually.

3.7. Strategy

Our goal is to continue to pursue our strategy of profitable growth, under which our
business continues to expand while respecting the environment and taking into account
the interests of present and future generations.

The Companys strategy is:

grow its hydrocarbon exploration and production activities throughout the world, and
reinforce its position as one of the global leaders in the natural gas and LNG
markets;

develop and adapt its refining system and consolidate its position in the marketing
segment in Europe, while expanding its positions in the Mediterranean basin,
African and Asian markets;

rationalize and develop its chemicals portfolio by giving priority to improving


profitability and to creating a new decentralized entity encompassing the Vinyl
Products, Industrial Chemicals and Performance Products activities. This entity,
named Arkema, was officially created on October 1, 2004 and became a stand-
alone entity on May 18, 2006 following the Companys shareholders vote on the
proposed spin-off on May 12, 2006, thereby allowing the Group to focus its
Chemicals activities on petrochemicals (base chemicals and polymers) and
specialty chemicals.

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3.7.1. Upstream Strategy

The Upstream business encompasses oil and natural gas


exploration, development and production, along with our coal,
gas and power operations.

Exploration and Production has activities in 41 countries with


production in 29 of these countries. Our main production
regions are the North Sea, Africa and the Middle East,
followed by Southeast Asia and North and South America.

Figure 97 : Liquids and gas production by region (kboe/d)

Total has been active in the


downstream segment of the gas
chain for 60 years (mainly in production). We are also a leader in
the gas market, with strong positions in liquefied natural gas
(LNG) and fast-growing operations in gas distribution and power
generation from combined cycle gas plants and renewable
energies in Europe, the Middle East and Latin America.

Figure 98 : Liquid and gas reserves (Mboe)

3.7.2. Downstream Strategy

The Downstream segment


conducts Total's refining,
marketing, trading and shipping
activities.

Figure 99 : Refined product


sales (kb/d) including Trading

Figure 100 : Refining capacity (kb/d))

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3.7.3. Chemical segment

The Chemicals segment is organized into the Base


Chemicals sector, regrouping petrochemicals and fertilizers
and the Specialties sector, which includes the Group's
rubber processing, resins, adhesives and electroplating
activities.
Figure 101 : 2005 Sales by sector

The business is a preferred partner to a broad array of


industries, with products covering markets as diverse as
automobiles and transportation, packaging, construction,
sports and leisure, health and beauty care, water treatment,
paper, electronics and agriculture.

Figure 102 : Rsultat oprationnel net ajust 2005

3.7.4. Shareholder Base

The Group has approximately 520,000 shareholders, of


whom 75% are European, primarily from France (33%),
the United Kingdom and Belgium. There is also a
growing number of German, Dutch, Swiss and Irish
shareholders.

Figure 103 : Shareholder base by region

In addition, the Group


has a strong shareholder
base in North America.

Figure 104 : Shareholder base

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3.7.5. A global group with European roots

At end-2005, Total had 112,877 employees across its


consolidated companies *.
Historically, Total is a European company -at end 2005,
about 79,000 employees worked in Europe- but our
geographic expansion has stepped up significantly in the
last 15 years in Latin America, Africa, The Middle East and
Asia. We now operate in more than 130 countries.

Figure 105 : Headcount by region

Figure 106 : Rpartition des effectifs par zone


gographique

3.8. Focusing on broader employee diversity

In 2003, a global diversity process was launched to provide a corporate framework for
actions already being implemented in the businesses. The process is primarily designed to
increase the percentage of non-French nationals and women hired and their numbers in
the ranks of senior management. Its other aim is to promote greater mobility of women and
local managers between jobs and countries.

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3.9. Group Organization

3.9.1. The Executive Committee and the Management Committee

The Executive Committee (COMEX) is the primary decision-making body, implementing


the Company's strategy defined by the Board of Directors and authorizing related
investments. This committee is made up of:

Christophe de Margerie, Chairman (Chief Executive Officer of Total)

Franois Cornlis, Vice-Chairman (President of Chemicals)

Michel Bnzit, President of Refining & Marketing

Robert Castaigne, Chief Financial Officer

Yves-Louis Darricarrre, President of Exploration & Production

Jean-Jacques Guilbaud, President of Human Resources and Corporate


Communications

Bruno Weymuller, President of Strategy & Risk Assessment

The Management Committee (CODIR) facilitates coordination between the various units of
the Company, monitors the results of the operational Divisions and reviews the activity
reports of the functional Divisions.The committee includes, in addition to the members of
the COMEX, 22 Executive Officers from the different functional and operational Divisions.

Holding - Patrick de la Chevardire, Jean-Pierre Cordier, Yves-Marie Dalibard,


Peter Herbel, Jean-Marc Jaubert, Jean-Michel Gires, Ian Howat, Jean-Franois
Minster.

Upstream - Philippe Boisseau, Jean-Marie Masset, Charles Mattenet, Patrick


Pouyann, Jean Privey.

Downstream - Alain Champeaux, Alain Grmillet, Franois Groh, Jean-Jacques


Mosconi, Eric de Menten, Andr Tricoire.

Chemicals - Pierre-Christian Clout, Franoise Leroy, Hugues Woestelandt.

** COMEX and CODIR composition at February 20, 2007

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Figure 107 : Organization Chart

3.9.2. Mission of the Board of Directors

The mission of the Board of Directors is to determine the strategic vision for the Group
and supervise the implementation of this vision. With the exception of the powers and
authority expressly reserved for shareholders and within the limits of the companys stated
purpose, the Board may address any issue related to the operation of the Company and
make any decision concerning the matters falling within its purview.

Within this framework, the Board:

appoints the corporate officers responsible for managing the Company and
supervises their management;

defines Totals strategy;


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discusses and debates major transactions under consideration by the Group,


according to the criteria determined by the Board;

receives information on any significant event pertaining to the operations of the


Company;

oversees the quality of the information supplied to shareholders and the financial
markets through the financial statements that it approves and the Registration
Document, or when major transactions are conducted;

calls and sets the agenda of Shareholders' Meetings;

prepares a list each year of the Directors it deems to be independent under


generally accepted corporate governance criteria; and

performs audits and inspections as it may deem appropriate.

Specifically, with the assistance of its specialized committees, it ensures the following:

proper delegation of powers and authority within the Company as well as proper
exercise of the respective powers and responsibilities of the Companys governing
bodies;

that no person has the power to bind the Company without proper supervision and
control;

the proper functioning of the organizations responsible for internal control and the
satisfactory execution by the external auditors of their missions; and

the proper functioning of the committees that it has created.

The Board of Directors meets at least four times a year and whenever circumstances so
require.

3.10. Total, A Multicultural, Richly Diverse Group

Todays Total was created by two successive mergers - first of Total and Belgiums
PetroFina to create TotalFina, then of TotalFina and Elf Aquitaine to create TotalFinaElf.

As such, the Group, renamed Total in May 2003, is the proud heir to a prestigious oil and
gas legacy dating back to the 1920s.

The new Total is a vibrant blend of the cultures and expertise of all three companies,
whose vast technological and human capital is being leveraged to maintain its position as
a top-tier global energy supplier.

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3.11. Total history

1920-1939: promising beginnings...

1923: Raymond Poincarr, President of the Counsel of the Third Republic,


charges Ernest Mercier with the task of creating the CFP.

Figure 108 : Raymond Poincarr, President of the


Counsel of the Third Republic

1924: The French Oil Company is created (CFP: Compagnie franaise


des Petroleums)

Figure 109 : Ernest Mercier: 1st President of the CFP from 1924 to 1940

1927: First discovery of a producing reservoir close to Kirkuk in Iraq


by the Iraq Petroleum Company (IPC).

The CFP is one of the first shareholders.

Figure 110 : The first eruption at Baba Gurgur

1929: First quotation of CFP shares on the Paris stock exchange.

The French Refining Company (CFR: Compagnie franaise de raffinage) is created by the
CFP with the participation of the State and several independent French distribution
societies; amongst them Desmarais Frres , Lille Bonnires-Colombes and the
Socit franaise des Carburants .

The CFR is authorized by the State to refine 25 % of the distribution societies demands.

1930: Second convention between the French State and the CFP.

1933: Inauguration of the first CFP refinery at Gonfreville, close to Le Havre.

Starting with 900 000 tons of crude oil per year, the production capacity of the refinery in
Normandy reaches 15, 9 millions of tons.

Today, this refinery is one of the most important in the Group.

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1935: Inauguration of the refinery in Provence.

This second refinery of the Group, at Mede close to Martigues, has grown at the pace of
the oil market. Its annual production capacity has, since then, evolved from 400 000 tons
of crude oil at start-up, to 6, 20 millions of tons today.

1936: Exploration begins in Abu Dhabi.

1937: The Emile Miguet is commissioned.

This tanker, weighing 21 500 tons, the largest tanker


in the world at the time, was exploited by the Naval
Petroleum Company, a subsidiary of the CFP.

Figure 111 : The Emile Miguet tanker

1939: The Iraq Petroleum Company (IPC) develops its activities in Abu Dhabi.

Today, its in this country that the presence of Total in the Middle East is the strongest and
the most diverse.

1940-1959: A brand is born

1947: The French oil distribution Company in Africa (CFDPA:


Compagnie franaise de distribution des ptroles en Afrique)
is created. This society was the first distribution subsidiary of
the Group.

In 1991 this society becomes Total Overseas.

Figure 112 : A CFDPA pump in the 1950s

14 July 1954: The Total brand is launched.

With this brand, the CFP starts its conquest of new distribution
markets in other countries such as Europe, English speaking,
African countries and Australia.

The French Petroleum Company of Canada is created; later


called Total Oil (North America) in 1970.

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1954: First logo

Figure 113 : 1st Total logo

Figure 114 : Sully Relay, at


Nogent le Rotrou, in 1955

Figure 115 : General de Gaulle visiting Hassi Messaoud

1960-1979: exploration, discoveries and production...

1960: First TOTAL stations in Great Britain.

The network corporation gives birth to Total Oil Great Britain (TOGB).

1962: Umm Shaf is put into production in Abu Dhabi.

This start-up constitutes the Groups first offshore field start-up.

Birth of the TOTALGAS brand. This subsidiary, specialized in the distribution of liquefied
petroleum gas (LPG), is today represented in 30 countries across the world.

1968: The first production-sharing contract is signed in Indonesia (in Borneo).

The research efforts bring forth the permit of the Mahakam and the discoveries at Bekapa
(1972) and Handil (1974). Numerous others will follow.

Total Chemicals is created in view of broadening CFP activities, particularly in the


petrochemical sector.

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1970: Total Petroleum is created, North America, TOP(NA).

The trade centre of this subsidiary is found in Denver, Colorado. TOP(NA) will exploit 4
refineries and a network of over 2 200 gas stations in the United States.

1971: The Frigg gas reservoir, in the North Sea, is discovered.

This reservoir was put into production in 1977. Total Oil Marine is the operator of the
transport system and of the Saint-Fergus terminal.

ATO Chemicals, ATO Plastics and ATO Packing are created.

ATO (Aquitaine Total Organico) extends the CFPs chemical activities to plastics,
polystyrenes, PVC and Rilsan.

1973: Quotation of CFP shares on the London Stock Exchange.

1974: Abu Al Bukoosh (ABK) is put into


production.

Total (75 %) is the field operator, the first in the


Gulf to be entrusted to a French society. ABK
is a display of the expertise of the Group in the
region.

Figure 116 : ABK

The refining capacities are reinforced.

The start-up of the refineries at Flanders in France, and of the refineries in Vlissingen in
Holland brings Totals world refining capacity to 69 millions of tons.

Hutchinson-Mapa joins the Group:

The major share in the Hutchinson-Mapa


capital constitutes the most important stage of
the Groups diversification. The subsidiary will
be 100 % fused with Total in 1991.

Figure 117 : Hutchinson Research Centre at


Montargis

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1975: The Alwyn field, in the North Sea (British part), is discovered.

More than 20 years after the discovery, and 10 years after the field was put into
production, new methods have permitted to raise and equivalent of 300 millions of barrels
of oil, the first reserves of the zone.

1977: The Frigg gas reservoir is put into production.

1978: Exploration of the offshore basin at Tierra del Fuego, in Argentina, begins.

Twenty years later the exploration continues in this zone, with, in particular, offset drilling.

The AS3 well, with a horizontal displacement close to 8 000 meters is one of the longest
ever made in the world.

1980-1999: the expansion

1980: Chlo Chemicals is created.

The acquisition by ATO Chemicals of the petrochemical assets from Rhne-Poulenc,


especially in the production of chlorine, gives birth to Chlo Chemicals.

1982: Drilling in the deep Mediterranean through 1 714 m of water: the record at the time.
Pioneers in drilling at great depths, with the "dynamic positioning" vessels, Total will drill
several exploration wells in the deep offshore of Gabon (at a water level comprised
between 1 000 and 3 000 meters) in 2000 and 2001.

1983: Participation in ATOs and Chlo Chemicals activities is discontinued.

The restructuration brought on by public powers drives the CFP to disengage from
chemicals and to cease their activities with ATO Chemicals and Chlo.

1987: The development of the Hidra field is launched; the first to have been developed by
Total in Argentina.

Today, the Group is the first foreign producer of oil and gas in this country.

1988: Acquisition of CSX Oil & Gas, in the United States.

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1989: Spontex takeover.

Hutchinsons share, of 34 %, in the Spontex group permits the Group to expand the
diversification that had already been formed with Hutchinson Mapa.

1990: Acquisition of the chemical assets from the Orkem specialties.

The ink, adhesive, resin and paint subsidiaries at Orkem join the industrial rubber industry
and the consumer products from Hutchinson to form a large "Specialty Chemicals at the
heart of Total.

1991: Capital rises and Total shares are introduced to the New York Stock Exchange. The
Cusiana oil field in Columbia is discovered.

This field is one of the most important ones discovered in the world in the last few years.
Its production, added to that of the neighbouring field in Cupiagua, reaches close to 460
000 b/y towards the end of 1998. The Peciko oil field, Indonesia is discovered.

The "Premier" stations concept is


launched.

Figure 118 : Premier stations concept

This concept modernizes and equalizes


the design of the Total gas stations
everywhere in the world. This strengthens
Totals position on the market.

1992: Division of the nominal by 4 (split)


of the Total shares.

The French government reduces its direct share in Total from 31, 7 % to 5, and 4 %.

1993: The capital reserved for Cogema, the Socit gnrale and the Lyonnaise des
eaux rises.

10, 8 % acquisition of interests in the capital of Cogema. Sale of uranium assets in


Cogema.

The Bongkot gas field in Thailand is put into production.

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Beginning with the third development phase, the capacity of the installations has been
brought to 3, 5 to 5, 5 billions of m3 per year. In 1998, Bongkot produced about a third of
the gas needs in Thailand

1994: Total capital opened to the Groups employees.

The Dunbar (England) and Cusiana (Columbia) fields are


put into production.

Figure 119 : Dunbar Field, North Sea (British part)

1995: Total leads the gas liquefaction project in Yemen.

Development contract for the offshore tanker fields in Sirri A and E in Iran.

Paint activities are increased.

The fusion with Euridep, a subsidiary specialized in paints, belonging to the British Kalon
society of which Total becomes the major shareholder, is formed. Kalon occupies the
second position on the decorative paints market in Europe.

1996: The State sells 4 % of their Total shares; bringing their acquisition of interests to 0,
97 %.

Production-sharing contract for the Tin Fouye Tabankort (Algeria) field development.

Start-up of the refinery at Dalia in China. This refinery, with a capacity of 100 000 b/y is the
first in China to associate a foreign partner.

Several important acquisitions for Hutchinson.

The acquisitions of Fayette Tubular Products, National Stillman in the United States,
Vincke in Spain and Cesari in Brazil permit Hutchinson to develop their markets and to join
the globalization of their clients production fields.

1997: The South Pars field (Iran) development contract is signed.


Total (40 %) is the operator of this gas field, one of the largest in the world.

TOP(NA) assets are discontinued

The discontinuance of the TOP(NA) assets in the Ultramar Diamonds Shamrock society
marks Totals retreat from refining and distribution activities in the United States.

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1998: The Sincor project, Venezuela, is launched (Total 47 %)

The project focused on the exploitation of the extra-heavy oils in Venezuela.

1999: Total and PetroFina are fused.

The Group takes the name TotalFina .

2000-2003: the beginning of a new era

2000: TotalFina and Elf Aquitaine are fused

Birth of TotalFinaElf, 4th oil traders in the world.

Goal: create a world leader in oil trade, a more expanded, solid,


competitive Group, capable of competing with the giants of the sector.

Figure 120 : Thierry Desmarest, President and general Manager of the


Group since 1995

2003: TotalFinaElf becomes Total.

With these two fusions accomplished, the Group proves their willingness to
respond effectively by their innovation and their actions for the energy
needs of man.

Figure 121 : TOTAL logo

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3.12. Logo history

Total is the name of the Group. It pertains to a global approach and engagement. It has
the same meaning and an identical pronunciation in numerous languages around the
world.

Total is also the name of our major brand. Created in 1954, it has become a well-known
name which inspires trust amongst our public and clientele.

The network modernization has been achieved. Total has evolved towards a more
modern, powerful and dynamic brand.

The evolution of the logo:

1953: The superiors from the French Refining Company (Compagnie Franaise de
Raffinage) lodge a new brand, called "Total", with the clerk of the commercial court in
Paris.

1954: The 14th of July is chosen to launch the Super Carburant


Total brand: the first Total logos underline its national vocation.

Figure 122 : TOTAL logo 1954

The name, inscribed in red on white, is inserted between two blue


triangles.

Commercial activities develop: products sponsored by the Total brand are launched on
various markets.

1955: On the dispensing units, a logotype represents this tricoloured


symbolism: This is the famous red flame in a blue circle on a white
background.

Figure 123 : TOTAL logo 1955

1963: The blue / white / red logo adopts a less hostile form,
baptized the soap bar".

Figure 124 : TOTAL logo 1963

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1970: Still tricoloured, the logotype is redrawn, with more emphasis


on stability and solidity (larger characters, horizontal position) and
reference to recent conquests (diagonals are abandoned).

Figure 125 : TOTAL logo 1970

1982: New block-brand, enlarging the old connotation which is very


patriotic: it symbolizes a synthesis between power - red vigorous
and powerful typography, dynamics - diagonal bands and
sympathy - warm orange.

Figure 126 : TOTAL logo 1982

1991: In June the name of the commercial brand becomes the Groups name which is
known in the more than 80 countries where they operate.

1992: Without a change of spirit, the block-brand is rejuvenated by more nervous letters.
The inside of the lettering is simple rand more dynamic: no more roundings.

The horizontals are lighter and the space between the letters has
been reduced. The bands are thinner: the logo is less closed and
more legible.

The colours are clearer.

Figure 127 : TOTAL logo 1992

2003: In May of 2003, the Group adopts a new visual identity and a
new logo, due to the two successive fusions with PetroFina and Elf
Aquitaine.

Figure 128 : TOTAL logo 2003

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4. YOUR SUBSIDIARY

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5. GLOSSAIRE

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6. FIGURES
Figure 1 : Energy through the ages .....................................................................................5
Figure 2 : Nuclear energy ....................................................................................................7
Figure 3: View of the Eurostar. ............................................................................................9
Figure 4: Changes in world consumption (in % Mtoe) .......................................................10
Figure 5: World oil consumption 2004 ...............................................................................12
Figure 6: World oil production 2004 ...................................................................................12
Figure 7: World gas reserves in 2004 (Gm / year)............................................................14
Figure 8: Gas consumption in 2004 (Gm /year)................................................................15
Figure 9: Gas production in 2004 (Gm /year) ...................................................................15
Figure 10 : Coal .................................................................................................................17
Figure 11: World oil reserves on 01.01.2005 .....................................................................18
Figure 12: Electricity production from hydroelectric sources in 2004 (billions of kWh).......22
Figure 13 : Renewable energy sources .............................................................................25
Figure 14: The Hubbert peak .............................................................................................35
Figure 15 : Genesis of the Universe ..................................................................................46
Figure 16 : Plate tectonics .................................................................................................47
Figure 17: Scale of geological time....................................................................................48
Figure 18: Derrick in the setting sun (Italy). .......................................................................50
Figure 19 : The formation of a deposit ...............................................................................51
Figure 20 : Molecular structures of saturated hydrocarbons - CnHn+2 ................................53
Figure 21 : Molecular structure of branched saturated hydrocarbons................................53
Figure 22 : Molecular structure of an aromatic hydrocarbon CnHn .....................................54
Figure 23: The extra-heavy oil of Athabasca .....................................................................57
Figure 24 : The oil and gas chain.......................................................................................58
Figure 25: An anticlinal trap ...............................................................................................59
Figure 26: Salt dome trap.. ................................................................................................59
Figure 27: Fault trap. .........................................................................................................59
Figure 28: A view of the installations and petroleum equipment at Prudhoe Bay, in the
National petroleum reserve of Alaska. ........................................................................61
Figure 29: Map showing sedimentary basins worldwide. ...................................................61
Figure 30: Map of the continental shelf ..............................................................................62
Figure 31: Map showing oil and gas regions worldwide.....................................................62
Figure 32: Map showing exploration and extraction in the North Sea................................63
Figure 33 : Seismic analysis on land and at sea................................................................64
Figure 34: View of the vibrator trucks at the time of a seismic operation, in the Kharyaga
field in Arctic Russia. ..................................................................................................65
Figure 35: View of a geophone and a collection box at the time of a seismic operation. ...65
Figure 36: Workers in the marshes during a seismic data acquisition campaign (Gabon). 66
Figure 37 : Computerised 3D model of a natural gas reservoir..........................................66
Figure 38: Seismic acquisition at sea, in the Palanca oilfield (Angola). .............................66
Figure 39: view of the geovision (in 3d) room in the CSTJF ..............................................67
Figure 40: Meeting concerning the logs (geological sections) of the Peciko p13 oil at
Balikpapan (Indonesia). ..............................................................................................68
Figure 41: A senior gelologist and the head of the geosciences department for activities on
the oil field of al Khalij, at Doha, in Qatar....................................................................68

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Figure 42 : Drilling..............................................................................................................69
Figure 43 : Proven reserves...............................................................................................70
Figure 44: Drilling site at Yariapo (Bolivia). .......................................................................71
Figure 45: Drilling site at Yariapo (Bolivia), after end of drilling..........................................72
Figure 46: The drill bit has very hard steel teeth or inserts. ...............................................72
Figure 47: Operators working on a drilling derrick on the Raissa, in the Mahakam delta
(Indonesia)..................................................................................................................73
Figure 48: View of the scanner in the core-sample library at the Centre Scientifique et
Technique Jean Feger in Pau (France). .....................................................................74
Figure 49: Geologist working in the core-sample library of the Centre Scientifique et
Technique Jean Feger in Pau (France) ......................................................................75
Figure 50: Overview of the PUQ (Production Utilities and Quarters) platform and of the
Elgin-Franklin offshore platform during a storm (Scotland).........................................76
Figure 51: Principle of oil extraction in ocean deeps..........................................................78
Figure 52 : The various recovery mechanisms ..................................................................79
Figure 53: Dismantling the North East Frigg platform (Norway).........................................81
Figure 54: Drilling site at Yariapo (Bolivia). ........................................................................81
Figure 55: Drilling site at Yariapo (Bolivia), after end of drilling..........................................82
Figure 56: The Iranian tanker Iran Dena ............................................................................83
Figure 57: Map showing principal movements of oil worldwide in 2003 ( in millions of
tonnes)........................................................................................................................83
Figure 58: Pipeline on land. ...............................................................................................85
Figure 59 : Oil pipelines and projects (1) ...........................................................................86
Figure 60: Gas pipelines and projects (2) ..........................................................................86
Figure 61: Map showing principal movements of gas worldwide in 2003 (in millions of cubic
meters). ......................................................................................................................87
Figure 62 : The LNG chain.................................................................................................88
Figure 63: View of the Gasandes gas pipeline, a 460 km-long pipeline linking the
Argentinian network to Santiago in Chili across the Andean mountain range.............89
Figure 64: An aerial view of the LNG plant of Bontang, with its storage tanks and loading
quays for methane tankers. ........................................................................................89
Figure 65: Crude oil trading floor in Geneva (Switzerland). ...............................................90
Figure 66: Traders responsible for essence and naphtha operations on the trading floor in
Geneva (Switzerland). ................................................................................................90
Figure 67: The refinery at Anvers (Belgium). .....................................................................91
Figure 68: Extra-heavy oil. .................................................................................................92
Figure 69: The crude oil refinery at Feyzin (France). .........................................................92
Figure 70: Column of an atmospheric distillation plant in the Provence refinery at La Mde
(France). .....................................................................................................................93
Figure 71: Catalytic cracking plant with fluidised catalyst in the Donges refinery (France).
...................................................................................................................................94
Figure 72: The desulphurisation plant in the Anvers refinery. ............................................94
Figure 73: Alkylation plant at the La Mde refinery (France). ............................................95
Figure 74: Refining ............................................................................................................96
Figure 75: The refining process, from crude oil to the final product. ..................................97
Figure 76: CD-ROM case in polyethylene..........................................................................99
Figure 77: Example of derived products from the petrochemical industry: soles of sports
shoes. .........................................................................................................................99

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Figure 78: Usine Arkma de Balan (France) qui fabrique les grands plastiques de notre
quotidien. ..................................................................................................................100
Figure 79 : Petrochimistry ................................................................................................100
Figure 80: The polymerization reaction............................................................................101
Figure 81: Schematic representation of steam cracking. .................................................102
Figure 82: View of a steam cracker at the refinery at Feyzin (France).............................103
Figure 83: View of the aromatic essence extraction plant (Feyzin, France).....................103
Figure 84: Diagram of the petroleum logistics chain. .......................................................104
Figure 85: Aerial view of the Gennevilliers depot (France). .............................................104
Figure 86: Simplified cross section of an oil tank. ............................................................105
Figure 87: A hydrocarbon storage tank at the petroleum depot in le mans, with fire
extinguishing system in the foreground ....................................................................106
Figure 88: Shot of the loading of a Total road tanker at the sprl petroleum depot at
Hauconcourt (France)...............................................................................................106
Figure 89: The different types of installation in the petroleum depot................................107
Figure 90: Loading of fuel in a depot and recovery of fumes in a storage tank................108
Figure 91: A night view of the relais de Chanterennes on the a10 motorway at Brie-Saint-
Forge (France)..........................................................................................................109
Figure 92: Cutaway view of a petrol engine. ....................................................................110
Figure 93: Shot of an employee at the Total service station at La-Chapelle-sur-Erdre
(France). ...................................................................................................................112
Figure 94: Schma d'une station-service.........................................................................112
Figure 95: Petrol and diesel additives. .............................................................................113
Figure 96: Filling the fuel tank of a car in a Total service station near Lanon de Provence.
.................................................................................................................................114
Figure 97 : Liquids and gas production by region (kboe/d) ..............................................137
Figure 98 : Liquid and gas reserves (Mboe) ....................................................................137
Figure 99 : Refined product sales (kb/d) including Trading..............................................137
Figure 100 : Refining capacity (kb/d)) ..............................................................................137
Figure 101 : 2005 Sales by sector ...................................................................................138
Figure 102 : Rsultat oprationnel net ajust 2005 .........................................................138
Figure 103 : Shareholder base by region.........................................................................138
Figure 104 : Shareholder base ........................................................................................138
Figure 105 : Headcount by region....................................................................................139
Figure 106 : Rpartition des effectifs par zone gographique..........................................139
Figure 107 : Organization Chart.......................................................................................141
Figure 108 : Raymond Poincarr, President of the Counsel of the Third Republic ..........143
Figure 109 : Ernest Mercier: 1st President of the CFP from 1924 to 1940 ......................143
Figure 110 : The first eruption at Baba Gurgur ................................................................143
Figure 111 : The Emile Miguet tanker ..............................................................................144
Figure 112 : A CFDPA pump in the 1950s.......................................................................144
Figure 113 : 1st Total logo ...............................................................................................145
Figure 114 : Sully Relay, at Nogent le Rotrou, in 1955 ....................................................145
Figure 115 : General de Gaulle visiting Hassi Messaoud ................................................145
Figure 116 : ABK .............................................................................................................146
Figure 117 : Hutchinson Research Centre at Montargis ..................................................146
Figure 118 : Premier stations concept ..........................................................................148
Figure 119 : Dunbar Field, North Sea (British part)..........................................................149

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Figure 120 : Thierry Desmarest, President and general Manager of the Group since 1995
.................................................................................................................................150
Figure 121 : TOTAL logo .................................................................................................150
Figure 122 : TOTAL logo 1954 ........................................................................................151
Figure 123 : TOTAL logo 1955 ........................................................................................151
Figure 124 : TOTAL logo 1963 ........................................................................................151
Figure 125 : TOTAL logo 1970 ........................................................................................152
Figure 126 : TOTAL logo 1982 ........................................................................................152
Figure 127 : TOTAL logo 1992 ........................................................................................152
Figure 128 : TOTAL logo 2003 ........................................................................................152

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7. TABLES
Table 1: World fossil energy consumption in the world Oil..............................................11
Table 2: World fossil energy consumption in the world Natural gas................................14
Table 3: Consumption of coal (high-carbon coals + lignite) in millions of tons 2004 ..........16
Table 4: Proven reserves...................................................................................................19
Table 5: Electricity production from geothermal, solar, wind, wood and biomass sources in
2004 (milliards de kWh) ..............................................................................................22
Table 6: Production of electricity from renewable energy sources excluding hydroelectricity
2004............................................................................................................................23
Table 7: Electricity production from nuclear sources in 2003 (billions of kWh). .................26
Table 8: Energy forecasts for the world as a whole, taken from the WETO report (World
Energy, Technology and Climate Policy Outlook) established by the European
Commission in 2003 ...................................................................................................31
Table 9: Cost elements for motor vehicle fuels in Europe, from the oilfield to the pump
(order of magnitude in 2002-2003, France/Germany/Great Britain) .........................115
Table 10: The principal international oil companies in billions of US $ (figures 2003) .....119
Table 11: National oil and gas companies .......................................................................121
Table 12: The major oil consumer countries in 2004 .......................................................123
Table 13: The major oil producing countries in 2004 .......................................................124
Table 14: The major gas consumers in 2004...................................................................126
Table 15: The main gas producing countries in 2004 ......................................................127
Table 16: Oil reserves by country and by region as at the 1st of January 2005...............128
Table 17: Gas reserves as of the 1st of January 2004 ....................................................130

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