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From Wikipedia, the free encyclopedia

The distribution of oil and natural gas reserves among the world's 50 largest oil companies. The oil produced by the "supermajor" companies accounts for less than 15% of the total world supply. Over 80% of the world's reserves of oil and natural gas are controlled by national oil companies. Of the world's 20 largest companies, 15 are state-owned.[1]

The petroleum industry includes the global processes of exploration, extraction, refining, transporting (often by oil tankers and pipelines), and marketing petroleum products. The largest volume products of the industry are fuel oil and gasoline (petrol). Petroleum is also the raw material for many chemical products, including pharmaceuticals, solvents, fertilizers, pesticides, and plastics. The industry is usually divided into three major components: upstream, midstream and downstream. Midstream operations are usually included in the downstream category.

Petroleum is vital to many industries, and is of importance to the maintenance of industrialized civilization itself, and thus is a critical concern for many nations. Oil accounts for a large percentage of the world’s energy consumption, ranging from a low of 32% for Europe and Asia, up to a high of 53% for the Middle East. Other geographic regions’ consumption patterns are as follows: South and Central America (44%), Africa (41%), and North America (40%). The world consumes 30 billion barrels (4.8 km³) of oil per year, with developed nations being the largest consumers. The United States consumed 25% of the oil produced in 2007.[2] The production, distribution, refining, and retailing of petroleum taken as a whole represents the world's largest industry in terms of dollar value.




Natural history

Petroleum is a naturally occurring liquid found in rock formations. It consists of a complex mixture of hydrocarbons of various molecular weights, plus other organic compounds. It is generally accepted that oil, like other fossil fuels, formed from the fossilized remains of dead plants and animals by exposure to heat and pressure in the Earth's crust over hundreds of millions of years. Over time, the decayed residue was covered by layers of mud and silt, sinking further down into the Earth’s crust and preserved there between hot and pressured layers, gradually transforming into oil reservoirs.

Early history

Petroleum in an unrefined state has been utilized by humans for over 5000 years. Oil in general has been used since early human history to keep fires ablaze, and also for warfare. Ancient Persian language tablets indicate the medicinal and lighting uses of petroleum in the upper echelons of their society. Ancient China was also known to burn skimmed oil for light.[citation needed]

An early petroleum industry was established in the 8th century, when the streets of Baghdad were paved with tar, derived from petroleum through destructive distillation.[3] In the 9th century, oil fields were exploited in the area around modern Baku, Azerbaijan, to produce naphtha. These fields were described by al-Masudi in the 10th century, and by Marco Polo in the 13th century, who described the output of those oil wells as hundreds of shiploads.[3] Petroleum was distilled by al-Razi in the 9th century, producing chemicals such as kerosene in the alembic, which he used to invent kerosene lamps for use in the oil lamp industry.[4]

Its importance in the world economy evolved slowly, with wood and coal used for heating and cooking, and whale oil used for lighting well into the 19th Century. A petroleum industry emerged in North America in Canada and the United States, fueling the industrial revolution. The Industrial Revolution generated an increasing need for energy which was fuelled mainly by coal, with other sources including whale oil. However, it was discovered that kerosene could be extracted from crude oil and used as a light and heating fuel. Petroleum was in great demand, and by the twentieth century had become the most valuable commodity traded on the world market.[5]

Modern history

Galician oil wells

Imperial Russia produced 3,500 tons of oil in 1825 and doubled its output by mid-century.[6] After oil drilling began in what is now Azerbaijan in 1848, two large pipelines were built in the Russian Empire: the 833 km long pipeline to transport oil from the Caspian to the Black Sea port of Batumi (Baku-Batumi pipeline), completed in 1906, and the 162 km long pipeline to carry oil from Chechnya to the Caspian.

At the turn of the 20th century, Imperial Russia's output of oil, almost entirely from the Apsheron Peninsula, accounted for half of the world's production and dominated international markets.[7] Nearly 200 small refineries operated in the suburbs of Baku by 1884.[8] As a side effect of these early developments, the Apsheron Peninsula emerged as the world's "oldest legacy of oil pollution and environmental negligence."[9] In 1878, Ludvig Nobel and his Branobel company "revolutionized oil transport" by commissioning the first oil tanker and launching it on the Caspian Sea.[7]

The first modern oil refineries were built by Ignacy Łukasiewicz near Jasło (then in the dependent Kingdom of Galicia and Lodomeria in Central European Galicia), Poland from 1854–56.[10] These were initially small as demand for refined fuel was limited. The refined products were used in artificial asphalt, machine oil and lubricants, in addition to Łukasiewicz's kerosene lamp. As kerosene lamps gained popularity, the refining industry grew in the area.

The first large oil refinery opened at Ploieşti, Romania in 1856.[citation needed]

The first oil drilling in the United States began in 1859, when oil was successfully drilled in Titusville, Pennsylvania. In the first quarter of the 20th century, the United States overtook Russia as the world's largest oil producer.

By the 1920s, oil fields had been established in many countries including Canada, Poland, Sweden, the Ukraine, the United States, and Venezuela.

In 1947, the Superior Oil Company constructed the first offshore oil platform off the Gulf Coast of Louisiana.

After World War II ended, the countries of the Middle East took the lead in oil production from the United States.

Industry structure

The American Petroleum Institute divides the petroleum industry into five sectors:

Oil companies used to be classified by sales as "supermajors" (BP, Chevron, ExxonMobil, ConocoPhillips, Shell, Eni and Total S.A.), "majors," and "independents" or "jobbers." In recent years however, National Oil Companies (NOC, as opposed to IOC, International Oil Companies) have come to control the rights over the largest oil reserves; by this measure the top ten companies all are NOC. The following table shows the ten largest oil companies ranked by reserves[12] and by production.[13]

Top 10 largest world oil companies by reserves and production
Rank Company Worldwide Liquids Reserves (109 bbl) Worldwide Natural Gas Reserves (109 ft3) Total Reserves in Oil Equivalent Barrels (106 bbl) Company Production (106 bbl/d)
1 Saudi Aramco 260 254 303 Saudi Aramco 11.0
2 National Iranian Oil Company 138 948 300 Iraq National Oil Company 4.0
3 Qatar Petroleum 15 905 170 Kuwait Petroleum Corporation 3.7
4 Iraq National Oil Company 116 120 134 National Iranian Oil Company 2.7
5 Petróleos de Venezuela 99 171 129 Petróleos de Venezuela 2.6
6 Abu Dhabi National Oil Company 92 199 126 Abu Dhabi National Oil Company 2.6
7 Kuwait Petroleum Corporation 102 56 111 Petróleos Mexicanos 2.5
8 Nigerian National Petroleum Corporation 36 184 68 Libya NOC 2.3
9 Libya NOC 41 50 50 Nigerian National Petroleum Corporation 2.1
10 Sonatrach 12 159 39 Lukoil 1.9

Most upstream work in the oil field or on an oil well is contracted out to drilling contractors and oil field service companies.[citation needed]

Environmental impact and future shortages

Some petroleum industry operations have been responsible for water pollution, through by-products of refining, and oil spills.

The combustion of fossil fuels produces greenhouse gases and other air pollutants as by-products. Pollutants include nitrogen oxides, sulphur dioxide, volatile organic compounds and heavy metals.

As petroleum is a non-renewable natural resource the industry is faced with an inevitable eventual depletion of the world's oil supply. The BP Statistical Review of World Energy 2007 predicted the reserve/production ratio for proven resources worldwide. The study placed the prospective life span of reserves in the Middle East at 79.5 years, Latin America at 41.2 years and North America at only 12 years. The global reserve/production ratio estimates that at current production levels, the world's oil reserves will be depleted in 40.5 years.[citation needed]

The Hubbert peak theory, which introduced the concept of peak oil, questions the sustainability of oil production. It suggests that after a peak in oil production rates, a period of oil depletion will ensue.

According to research by IBISWorld, biofuels (primarily ethanol, but also biodiesel) will continue to supplement petroleum. However output levels are low, and these fuels will not displace local oil production. Ethanol is viewed as offering a lower environmental impact, and will play a small role in reducing dependence on imported crude oil. More than 90% of the ethanol used in the US is blended with gasoline to produce a 10% ethanol mix, lifting the oxygen content of the fuel.[14]

See also

Environmental issues
Financial and political
Oil geology
Oil-producing areas


  1. ^ Yergin, The Prize, p. 770, 2009
  2. ^ "The World Factbook". Country Comparison - Oil Consumption. Found at
  3. ^ a b K. Ajram (1992), Miracle of Islamic Science, Appendix B, Knowledge House Publishers, ISBN 0911119434
  4. ^ Zayn Bilkadi (University of California, Berkeley), "The Oil Weapons", Saudi Aramco World, January-February 1995, p. 20-27.
  5. ^ Halliday, Fred. The Middle East in International Relations: Power and Ideology. Cambridge University Pres: USA, 270
  6. ^ N.Y. Krylov, A.A. Bokserman, E.R.Stavrovsky. The Oil Industry of the Former Soviet Union. CRC Press, 1998. Page 187.
  7. ^ a b Shirin Akiner, Anne Aldis. The Caspian: Politics, Energy and Security. Routledge, 2004. Page 5.
  8. ^ United States Congress, Joint Economic Committee. The Former Soviet Union in Transition. M.E. Sharpe, 1993. Page 463.
  9. ^ Quoted from: Tatyana Saiko. Environmental Crises. Pearson Education, 2000. Page 223.
  10. ^ Frank, Alison Fleig (2005). Oil Empire: Visions of Prosperity in Austrian Galicia (Harvard Historical Studies). Harvard University Press. ISBN 0-674-01887-7. 
  11. ^ American Petroleum Institute. "Industry Sectors." Retrieved 12 May 2008
  12. ^ Ranked in order of 2007 worldwide oil equivalent reserves as reported in "OGJ 200/100", Oil & Gas Journal, September 15, 2008. Url=
  13. ^ "The Market Position of National Oil Companies" (PDF). The Role of National Oil Companies in the International Oil Market. Congressional Research Service. August 2007. Retrieved 2009-09-17.  Ranking by oil reserves and production, 2006 values
  14. ^ IBISWorld. "US Oil Drilling Industry Market Research Report." Retrieved 14 May 2008

Further reading

  • Robert Sobel The Money Manias: The Eras of Great Speculation in America, 1770-1970 (1973) reprinted (2000).
  • Daniel Yergin, The Prize: The Epic Quest for Oil, Money, and Power, (Simon and Schuster 1991; paperback, 1993), ISBN 0-671-79932-0.
  • Matthew R. Simmons, Twilight in the Desert The Coming Saudi Oil Shock and the World Economy, John Wiley & Sons, 2005, ISBN 0-471-73876-X.
  • Matthew Yeomans, Oil: Anatomy of an Industry (New Press, 2004), ISBN 1-56584-885-3.
  • Smith, GO (1920): Where the World Gets Its Oil: National Geographic, February 1920, pp 181–202

Simple English

The petroleum industry includes the global processes of exploration, extraction, refining, transporting (often by oil tankers and pipelines), and marketing petroleum products. The largest volume products of the industry are fuel oil and gasoline (petrol).


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