GENERAL OVERVIEW OF THE OIL SECTOR VARYING FROM EXPLORATION, PRODUCTION AND SUPPLY/DISTRIBUTION
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Crude oil (Petroleum) technically called is an organic liquid found bellow the earth crust. It is made up of thousands of molecules composed of different Hydrogen and Carbon atoms called: ‘Hydrocarbons’. Those Hydrocarbons contains different proportion of impurities like Oxygen, Sulphur, Nitrogen and heavy metal atoms. The word Petroleum is derived from two Latin words namely: PETRA (Rock) and OLEUM (Oil). Petrol is mainly used to refer to crude oil but, other Hydrocarbons are also related to it. Methane is the most common example of this liquid. A by-product of Methane when Cracked is the LNG liquefied Natural Gas commonly used in the Kitchen’s gas Cooker.
Crude oil is called non-renewable because it cannot be replenished that is: it burns-off completely during its usage and as such highly inflammable and a good source of energy.
A country located within the Sub-Sahara African region with a total land area of 923,768.64 sq.km, sharing borders with the Republic of Benin in the West, Cameroon in the East, Niger and Chad in the north and the Gulf of Guinea to the south. With a massive population of 160million people; a country blessed with divers mineral resources of which a greater percentage of its GDP until lately has been from the production of oil. Nigeria is the largest producer of oil in the whole of Africa ranked among the top ten oil producers in the world at large. Nigeria is richly endowed with oil and natural gas. At the end of 2011, Nigeria was estimated to have proven oil reserves of 37.2billion barrels and a proven natural reserve of 180trillion cubic feet (TCF)
Recently, Nigeria produced 2.53 million barrels per day (BBL/D) of crude oil and 1 trillion cubic feet (TCF) of dry gas, out of which approximately 2.3BBL/D of crude oil was exported and 17.97 million metric tons (875 BCF) of liquefied natural gas (LNG) in 2011, this made Nigeria the 5th largest exporter of LNG in the world. An estimated note of 33% (769,000 BBL/D) of Nigeria’s oil was exported.
1.0 INTRODUCTION
The Nigerian economy is largely dependent on the oil and gas sector, which accounts for about 95% of its foreign exchange earnings. 40% or more of its GDP and 75% of Federal Government total revenue. That becomes a driving force for the Government to establish policies and some regulatory frame works to attract more investments. To ensure that it has a guaranteed increase in her production capacity and endeavour to have a sustainable environment.
Upon the availability of both renewable and non-renewable mineral resources, Nigeria has not been able to meet the energy requirements for its people. As at 2010, the total energy consumption of Nigeria was estimated 4.4 quadrillion BTU (111,000 Kilotons of oil equivalence), with 82% from traditional Biomass and waste, 1% from Hydropower, 4% from natural gas and 13% from oil as was recorded. The rate of electrification in Nigeria is 50%, which means: about 80million people have no access to electricity. The country has a total number of 6gigawatts (6000 MW) installed capacity, but has an annotation from the Federal Government to install 40gigawatts (40000 MW) capacity by 2020
The study comprises of four sections. Of which section one is the introduction, section two focuses on the history of the oil sector while the third section focuses on the exploration, production; and of course the fourth section being the last focuses on the supply/distribution, summary and conclusions.
2.0 BACKGROUND TO THE STUDY
History of the oil sector in Nigeria
It all began in the year 1908 with the first discovery being made in the Niger Delta in 1956. The first Nigerian refinery began operation in 1965 with a capacity of 38,000bbl/d, enough to meet requirements at the time. Tremendously, there has been a demand on the production of oil in Nigeria, such that: her daily production was estimated at about 2.5bbl/d, with a consumption level of about 279,000bbl/d. at the end of 2010, Nigeria’s proved oil reserves were estimated to 37.2billion barrels, which amounted to 2.68% of the world’s reserves. Key participants in the Nigerian upstream sector include Shell, Exxon, Chevron, Eni and Total. The crude oil produced in Nigerian is ‘’Sweet’’ as it is largely Sulphur free. 80% of production wells are located in the Niger Delta region in the Southern part of the country, with notable projects including the AFAM integrated oil and gas project operated by Shell and the Bonga Water project.
3.0. EXPLORATION AND PRODUCTION
DEFINITION OF TERMS
Facilities and processes in the oil and gas industrial systems are broadly defined according to their use in the oil and gas industry production stream.
Exploration: Includes prospecting, seismic and drilling activities that take place before the development of a field is finally decided.
Upstream: typically refers to all facilities for production and stabilization of oil and gas. The reservoir and drilling community often uses upstream for the wellhead, well, completion and reservoir only, and downstream of the wellhead as production or processing. Exploration and upstream/production together is referred to as E&P Examples of the upstream in Nigerian upstream sector include Shell, Exxon, Chevron, Eni and Total.
Midstream: Broadly defined as gas treatment, LNG production and regasification plants, and oil and gas pipeline systems.
Refining
Refining aims to provide a defined range of products according to agreed specifications. Simple refineries use a distillation column to separate crude into fractions, and the relative quantities are directly dependent on the crude used. Therefore, it is necessary to obtain a range of crudes that can be 19 blended to a suitable feedstock to produce the required quantity and quality of end products. The economic success of a modern refinery depends on its ability to accept almost any available crude. With a variety of processes such as cracking, reforming, additives and blending, it can provide product in quantity and quality to meet market demand at premium prices. The refinery operations often include product distribution terminals for dispensing product to bulk customers such as airports, gasoline stations, ports and industries.
The refinery is where oil and condensates are processed into marketable products with defined specifications such as gasoline, diesel or feedstock for the petrochemical industry. Refinery off-sites such as tank storage and distribution terminals are included in this segment, or may be part of a separate distributions operation.
Petrochemicals
Chemicals derived from petroleum or natural gas petrochemicals, are an essential part of today’s chemical industry. Petrochemical plants produce thousands of chemical compounds. The main feedstock is natural gas, condensates (NGL) and other refinery by-products such as naphtha, gasoil, and benzene. Petrochemical plants are divided into three main primary product groups according to their feedstock and primary petrochemical product: Olefins include ethylene, propylene, and butadiene. These are the main sources of plastics (polyethylene, polyester, PVC), industrial chemicals and synthetic rubber. Aromatics include benzene, toluene, and xylenes, which also are a source of plastics (polyurethane, polystyrene, acrylates, nylon), as well as synthetic detergents and dyes. Synthesis gas (syngas) is formed by Steam reforming between methane and steam to create a mixture of carbon monoxide and hydrogen. It is used to make ammonia, e.g., for fertilizer urea, and methanol as a solvent and chemical intermediary. Syngas is also feedstock for other processes such as the Fischer–Tropsch process that produces synthetic diesel.
These products are chemical products where the main feedstock is hydrocarbons. Examples are plastics, fertilizer and a wide range of industrial chemicals.
3.1. EXPLORATION
Petroleum deposits are found underwater at the place called ‘’oil fields’’ and are extracted by DRILLING AND PUMPING. Oil is formed when Hydrocarbons are accumulated naturally; thousands feet below the earth crust. Organic matters like plants and marine animals believed to have died during the Palaeozoic Era 245-544 million years ago are being compressed under intense temperature and pressure, which are letter transformed to crude oil. There are mainly three conditions to be met before accumulations are formed:
Presence of a source rock rich in Hydrocarbons buried deep enough so that the heat from the earth-crust can cook them into oil.
Presence of porous rock nearby where oil can accumulate (often Sand stone). If the holes in the rocks are interconnected; then the oil can flow out of the rock, this condition is called ‘’permeability’’.
There is usually a cap rock or seal to trap the oil in the underground reservoirs from sleeping to the surface. Within this reservoirs. Hydrocarbons are typically arranged or organised in a layer in the form where gas is at the top, with oil under and water at the bedrock. Mush oil that escape usually escape to the top and surface evaporates into the air, but they leave behind deposits of Hydrocarbons called ‘’BITUMEN’’
In the past, surface features such as tar seeps or gas pockmarks provided initial clues to the location of shallow hydrocarbon deposits. Today, a series of surveys, starting with broad geological mapping through increasingly advanced methods such as passive seismic, reflective seismic, magnetic and gravity surveys give data to sophisticated analysis tools that identify potential hydrocarbon bearing rock as “prospects.
Oil companies spend much time on analysis models of good exploration data, and will only drill when models give a good indication of source rock and probability of finding oil or gas. The first wells in a region are called wildcats because little may be known about potential dangers, such as the downhole pressures that will be encountered, and therefore require particular care and attention to safety equipment.
3.2. PRODUCTION
Refining’s Basic Steps
Most refineries, regardless of complexity, perform a few basic steps in the refining process:
DISTILLATION
CRACKING
TREATING and
REFORMING
These processes occur in our main operating areas – Crude/Aromatics, Cracking, RDS/Coker, Cracking II, and at the Sulfur Recovery Unit.
3.2.1. Distillation
Modern distillation involves pumping oil through pipes in hot furnaces and separating light hydrocarbon molecules from heavy ones in downstream distillation towers – the tall, narrow columns that give refineries their distinctive skylines.
The Pascagoula Refinery’s refining process begins when crude oil is distilled in two large Crude Units that have three distillation columns, one that operates at near atmospheric pressure, and two others that operate at less than atmospheric pressure, i.e., a vacuum. During this process, the lightest materials, like propane and butane, vaporize and rise to the top of the first atmospheric column. Medium weight materials, including gasoline, jet and diesel fuels, condense in the middle. Heavy materials, called gas oils, condense in the lower portion of the atmospheric column. The heaviest tar-like material, called residuum, is referred to as the “bottom of the barrel” because it never really rises.
This distillation process is repeated in many other plants as the oil is further refined to make various products.
In some cases, distillation columns are operated at less than atmospheric pressure (vacuum) to lower the temperature at which a hydrocarbon mixture boils. This “vacuum distillation” (VDU) reduces the chance of thermal decomposition (cracking) due to over heating the mixture.
As part of the 2003 Clean Fuels Project, the Pascagoula Refinery added a new low-pressure vacuum column to the Crude I Unit and converted the RDS/Coker’s VDU into a second vacuum column for the Crude II Unit. These and other distillation upgrades improved gas oil recovery and decreased residuum volume.
Using the most up-to-date computer control systems, refinery operators precisely control the temperatures in the distillation columns which are designed with pipes to withdraw the various types of products where they condense. Products from the top, middle and bottom of the column travel through these pipes to different plants for further refining.
3.2.2 Cracking
Since the marketplace establishes product value, our competitive edge depends on how efficiently we can convert middle distillate, gas oil and residuum into the highest value products.
At the Pascagoula Refinery, we convert middle distillate, gas oil and residuum into primarily gasoline, jet and diesel fuels by using a series of processing plants that literally “crack” large, heavy molecules into smaller, lighter ones.
Heat and catalysts are used to convert the heavier oils to lighter products using three “cracking” methods: fluid catalytic cracking (FCC), hydrocracking (Isomax), and coking (or thermal-cracking).
The Fluid Catalytic Cracker (FCC) uses high temperature and catalyst to crack 86,000 barrels (3.6 million gallons) each day of heavy gas oil mostly into gasoline. Hydrocracking uses catalysts to react gas oil and hydrogen under high pressure and high temperature to make both jet fuel and gasoline.
Also, about 58,000 barrels (2.4 million gallons) of lighter gas oil is converted daily in two Isomax Units, using this hydrocracking process.
We blend most of the products from the FCC and the Isomaxes directly into transportation fuels, i.e., gasoline, diesel and jet fuel. We burn the lightest molecules as fuel for the refinery’s furnaces, thus conserving natural gas and minimizing waste.
In the Delayed Coking Unit (Coker), 98,000 barrels a day of low-value residuum is converted (using the cooking or thermal-cracking process) to high-value light products, producing petroleum coke as a by-product. The large residuum molecules are cracked into smaller molecules when the residuum is held in a coke drum at a high temperature for a period of time. Only solid coke remains and must be drilled from the coke drums.
Modifications to the refinery during its 2003 Clean Fuels Project increased residuum volume going to the Coker Unit. The project increased coke handling capacity and replaced the 150 metric-ton coke drums with new 300 metric-ton drums to handle the increased residuum volume.
The Coker typically produces more than 6,000 tons a day of petroleum coke, which is sold for use as fuel or in cement manufacturing. While the cracking processes break most of the gas oil into gasoline and jet fuel, they also break off some pieces that are lighter than gasoline. Since Pascagoula Refinery’s primary focus is on making transportation fuels, we recombine 14,800 barrels (622,000 gallons) each day of lighter components in two Alkylation Units. This process takes the small molecules and recombines them in the presence of sulfuric acid catalyst to convert them into high octane gasoline.
3.2.3 Treating (Removing Impurities)
The products from the Crude Units and the feeds to other units contain some natural impurities, such as sulfur and nitrogen. Using a process called hydrotreating (a milder version of hydro-cracking); these impurities are removed to reduce air pollution when our fuels are used.
Because about 80% of the crude oil processed by the Pascagoula Refinery is heavier oils that are high in sulfur and nitrogen, various treating units throughout the refinery work to remove these impurities.
In the RDS Unit’s six 1,000-ton reactors, sulfur and nitrogen are removed from FCC feed stream. The sulfur is converted to hydrogen sulfide and sent to the Sulfur Unit where it is converted into elemental sulfur. Nitrogen is transformed into ammonia which is removed from the process by water-washing. Later, the water is treated to recover the ammonia as a pure product for use in the production of fertilizer.
The RDS’s Unit main product, low sulfur vacuum gas oil, is fed to the FCC (fluid catalytic cracker) Unit which then cracks it into high value products such as gasoline and diesel.
3.2.4 Reforming
Octane rating is a key measurement of how well a gasoline performs in an automobile engine. Much of the gasoline that comes from the Crude Units or from the Cracking Units does not have enough octane, to burn well in cars.
The gasoline process streams in the refinery that have a fairly low Octane rating are sent to a Reforming Unit where their octane levels are boosted. These reforming units employ precious-metal catalysts – platinum and rhenium – and thereby get the name “rheniformers.” In the reforming process, hydrocarbon molecules are “reformed” into high octane gasoline components. For example, methyl cyclohexane is reformed into toluene.
The reforming process actually removes hydrogen from low-octane gasoline. The hydrogen is used throughout the refinery in various cracking (hydrocracking) and treating (hydrotreating) units.
Our refinery operates three catalytic reformers, where we rearrange and change 71,000 barrels (about 3 million gallons) of gasoline per day to give it the high octane cars need.
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Product testing:
Blending
A final and critical step is the blending of our products. Gasoline, for example, is blended from treated components made in several processing units. Blending and Shipping Area operators precisely combine these to ensure that the blend has the right octane level, vapor pressure rating and other important specifications. All products are blended in a similar fashion.
Quality Control
In the refinery’s modernly-equipped Laboratory, chemists and technicians conduct quality assurance tests on all finished products, including checking gasoline for proper octane rating. Chevron’s patented performance booster is added to gasoline at the company’s marketing terminals, one of which is located at the Pascagoula Refinery.
4.0. SUPPLY/DISTRIBUTION
The Nigerian gas sector is made up of the upstream sector, comprising exploration, drilling and production of natural gas, a midstream sector comprising transportation, and refining of gas, as well as a downstream sector comprising the importation, storage and distribution of gas products – an aspect still highly regulated by the federal Government of Nigeria. The 1999 Constitution of the Federal Republic of Nigeria vests all petroleum in situ in the federal Government of Nigeria.
Nigeria is blessed with massive proven reserves of associated and non-associated gas, estimated in excess of 160 trillion cubic feet. It is ranked amongst the 10 largest in terms of proven natural gas reserves in the world, and its natural gas reserves/production is estimated at 109 years. Geologists insist that there is a lot more gas still to be found, if companies deliberately explore for gas, as opposed to finding it by chance whilst in search of oil.
For a long time now, the demand for gas has exceeded the supply available in the domestic market; a marked departure from the previous situation where gas utilisation within Nigeria was limited because of an unattractive fiscal, commercial, legal, and regulatory environment for the investments necessary for the development of a viable domestic gas market. The improved situation is due largely to, firstly, the existing Government policy where holders of gas assets are obliged to reserve specified quantity for sale in the domestic gas market and secondly, the ongoing pricing reform in the natural gas subsector.
The federal Government of Nigeria (the FGN), through its agencies, is involved in the whole value chain; as policy maker, regulator and commercial participant. The Nigerian Liquefied Natural Gas Company (NLNG), a joint-venture company established by the NNPC, Shell Petroleum Development Company (SPDC), Total and Eni, presently produces and stores the LNG produced. The company currently operates six trains which produces about 22 million tonnes per annum of LNG and about another 4 million tonnes per annum of LPG. The plans for the construction of the seventh train are at a more advanced stage. Other LNG projects include Brass LNG and the OKLNG (yet to reach Final Investment Decision-FID) which are currently facing a lot of challenges for reasons including the discovery of shale gas in North America and Europe and may not go ahead as planned. There is a Chevron-operated Escravos Gas Plant which is currently being expanded and the Chevron Gas to Liquids (GTL) project, a joint venture with Nigerian National Petroleum Corporation (NNPC) and South Africa’s Sasol, which was expected to be operational in 2013. Further, there is the Oso condensate field, jointly owned in undivided interests by NNPC and Mobil Producing Nigeria (MPN), a project for the export of condensates.
The main pipeline transmission system in Nigeria is owned and maintained by the Nigerian Gas Company (NGC), which is a subsidiary of the NNPC; it also acts as a gas merchant. Its role as gas merchant is expected to end upon the passage into law, of the Petroleum Industry Bill (PIB) which has been on the floor of the Nigerian legislature since the year 2008. Other gas transmission pipelines are individually owned by the NLNG and the NNPC/SPDC/Total joint venture and dedicated to their respective operations. The NGC’s pipeline infrastructure comprises two un-integrated pipeline networks totalling approximately 1,100km: the Alakiri-Obigbo–Ikot Abasi Pipeline, otherwise known as the eastern network; and the Escravos–Lagos Pipeline System (ELPS), also known as the western network. The ELPS is a strategic 560km pipeline that transports gas from fields in the Niger Delta to Lagos, Nigeria’s commercial centre, and then spurs at Lagos on to the West African Gas Pipeline (WAGP), which was developed by the NNPC, Chevron, Shell and the Governments of Nigeria, Ghana, Togo and Benin. Currently, there are ongoing expansion programmes and projects which would integrate the ELPS and the eastern network. It is expected that these projects would be completed soon.
The NGC has entered into several gas sale and purchase agreements (GSPAs) with gas producers in respect of the lean gas (methane) produced in their gas projects. There are several gas distribution companies in Nigeria, including Shell Nigeria Gas, a subsidiary of SPDC, and Gas link Limited. These companies distribute gas principally in the industrial areas in and around Lagos and in some parts of eastern Nigeria. LNG export forms the bulk of the natural gas trade in the international market. The WAGP has begun to export natural gas to countries in the West Africa sub-region. Local markets include power-generating plants, local industries (gas-to-liquids plants, fertiliser plants) and domestic gas consumers. A Trans-Saharan Pipeline Project (also known as the ‘’Nigel Project’’) which is intended to stretch across the Sahara desert and connect Nigeria’s gas reserves to Europe via Algeria’s Mediterranean coast has been under consideration by the Governments of Nigeria and Algeria.
4.1. SUMMARY/CONCLUSIONS
The Nigerian oil sector is made up of the upstream sector, comprising exploration, drilling and production of crude oil including the premium bonny light crude, a midstream sector comprising transportation, and refining of crude oil, as well as a downstream sector comprising of the importation, storage and distribution of petroleum products such as premium motor spirit, Automotive gas oil and dual purpose kerosene – an aspect still highly regulated by the federal Government of Nigeria. The 1999 Constitution of the Federal Republic of Nigeria vests all petroleum in situ in the federal Government of Nigeria.
The Nigerian Petroleum industry can be classified by two ways, one is by types of actors, while the other is by sectors. The actors are both private and public organisations. The public sectors include all the government agents, functionaries in the likes of Nigerian National Petroleum Corporation (NNPC) and its subsidiaries, the Department of Petroleum Resources (DPR), the Petroleum Product Pricing Regulatory Agency (PPPRA), among others. The private sector consists of both indigenous and foreign actors.
3.0. EXPLORATION AND PRODUCTION
DEFINITION OF TERMS
Facilities and processes in the oil and gas industrial systems are broadly defined according to their use in the oil and gas industry production stream.
Exploration: Includes prospecting, seismic and drilling activities that take place before the development of a field is finally decided.
Upstream: typically refers to all facilities for production and stabilization of oil and gas. The reservoir and drilling community often uses upstream for the wellhead, well, completion and reservoir only, and downstream of the wellhead as production or processing. Exploration and upstream/production together is referred to as E&P Examples of the upstream in Nigerian upstream sector include Shell, Exxon, Chevron, Eni and Total.
Midstream: Broadly defined as gas treatment, LNG production and regasification plants, and oil and gas pipeline systems.
Refining
Refining aims to provide a defined range of products according to agreed specifications. Simple refineries use a distillation column to separate crude into fractions, and the relative quantities are directly dependent on the crude used. Therefore, it is necessary to obtain a range of crudes that can be 19 blended to a suitable feedstock to produce the required quantity and quality of end products. The economic success of a modern refinery depends on its ability to accept almost any available crude. With a variety of processes such as cracking, reforming, additives and blending, it can provide product in quantity and quality to meet market demand at premium prices. The refinery operations often include product distribution terminals for dispensing product to bulk customers such as airports, gasoline stations, ports and industries.
The refinery is where oil and condensates are processed into marketable products with defined specifications such as gasoline, diesel or feedstock for the petrochemical industry. Refinery off-sites such as tank storage and distribution terminals are included in this segment, or may be part of a separate distributions operation.
Petrochemicals
Chemicals derived from petroleum or natural gas petrochemicals, are an essential part of today’s chemical industry. Petrochemical plants produce thousands of chemical compounds. The main feedstock is natural gas, condensates (NGL) and other refinery by-products such as naphtha, gasoil, and benzene. Petrochemical plants are divided into three main primary product groups according to their feedstock and primary petrochemical product: Olefins include ethylene, propylene, and butadiene. These are the main sources of plastics (polyethylene, polyester, PVC), industrial chemicals and synthetic rubber. Aromatics include benzene, toluene, and xylenes, which also are a source of plastics (polyurethane, polystyrene, acrylates, nylon), as well as synthetic detergents and dyes. Synthesis gas (syngas) is formed by Steam reforming between methane and steam to create a mixture of carbon monoxide and hydrogen. It is used to make ammonia, e.g., for fertilizer urea, and methanol as a solvent and chemical intermediary. Syngas is also feedstock for other processes such as the Fischer–Tropsch process that produces synthetic diesel.
These products are chemical products where the main feedstock is hydrocarbons. Examples are plastics, fertilizer and a wide range of industrial chemicals.
3.1. EXPLORATION
Petroleum deposits are found underwater at the place called ‘’oil fields’’ and are extracted by DRILLING AND PUMPING. Oil is formed when Hydrocarbons are accumulated naturally; thousands feet below the earth crust. Organic matters like plants and marine animals believed to have died during the Palaeozoic Era 245-544 million years ago are being compressed under intense temperature and pressure, which are letter transformed to crude oil. There are mainly three conditions to be met before accumulations are formed:
Presence of a source rock rich in Hydrocarbons buried deep enough so that the heat from the earth-crust can cook them into oil.
Presence of porous rock nearby where oil can accumulate (often Sand stone). If the holes in the rocks are interconnected; then the oil can flow out of the rock, this condition is called ‘’permeability’’.
There is usually a cap rock or seal to trap the oil in the underground reservoirs from sleeping to the surface. Within this reservoirs. Hydrocarbons are typically arranged or organised in a layer in the form where gas is at the top, with oil under and water at the bedrock. Mush oil that escape usually escape to the top and surface evaporates into the air, but they leave behind deposits of Hydrocarbons called ‘’BITUMEN’’
In the past, surface features such as tar seeps or gas pockmarks provided initial clues to the location of shallow hydrocarbon deposits. Today, a series of surveys, starting with broad geological mapping through increasingly advanced methods such as passive seismic, reflective seismic, magnetic and gravity surveys give data to sophisticated analysis tools that identify potential hydrocarbon bearing rock as “prospects.
Oil companies spend much time on analysis models of good exploration data, and will only drill when models give a good indication of source rock and probability of finding oil or gas. The first wells in a region are called wildcats because little may be known about potential dangers, such as the downhole pressures that will be encountered, and therefore require particular care and attention to safety equipment.
3.2. PRODUCTION
Refining’s Basic Steps
Most refineries, regardless of complexity, perform a few basic steps in the refining process:
DISTILLATION
CRACKING
TREATING and
REFORMING
These processes occur in our main operating areas – Crude/Aromatics, Cracking, RDS/Coker, Cracking II, and at the Sulfur Recovery Unit.
3.2.1. Distillation
Modern distillation involves pumping oil through pipes in hot furnaces and separating light hydrocarbon molecules from heavy ones in downstream distillation towers – the tall, narrow columns that give refineries their distinctive skylines.
The Pascagoula Refinery’s refining process begins when crude oil is distilled in two large Crude Units that have three distillation columns, one that operates at near atmospheric pressure, and two others that operate at less than atmospheric pressure, i.e., a vacuum. During this process, the lightest materials, like propane and butane, vaporize and rise to the top of the first atmospheric column. Medium weight materials, including gasoline, jet and diesel fuels, condense in the middle. Heavy materials, called gas oils, condense in the lower portion of the atmospheric column. The heaviest tar-like material, called residuum, is referred to as the “bottom of the barrel” because it never really rises.
This distillation process is repeated in many other plants as the oil is further refined to make various products.
In some cases, distillation columns are operated at less than atmospheric pressure (vacuum) to lower the temperature at which a hydrocarbon mixture boils. This “vacuum distillation” (VDU) reduces the chance of thermal decomposition (cracking) due to over heating the mixture.
As part of the 2003 Clean Fuels Project, the Pascagoula Refinery added a new low-pressure vacuum column to the Crude I Unit and converted the RDS/Coker’s VDU into a second vacuum column for the Crude II Unit. These and other distillation upgrades improved gas oil recovery and decreased residuum volume.
Using the most up-to-date computer control systems, refinery operators precisely control the temperatures in the distillation columns which are designed with pipes to withdraw the various types of products where they condense. Products from the top, middle and bottom of the column travel through these pipes to different plants for further refining.
3.2.2 Cracking
Since the marketplace establishes product value, our competitive edge depends on how efficiently we can convert middle distillate, gas oil and residuum into the highest value products.
At the Pascagoula Refinery, we convert middle distillate, gas oil and residuum into primarily gasoline, jet and diesel fuels by using a series of processing plants that literally “crack” large, heavy molecules into smaller, lighter ones.
Heat and catalysts are used to convert the heavier oils to lighter products using three “cracking” methods: fluid catalytic cracking (FCC), hydrocracking (Isomax), and coking (or thermal-cracking).
The Fluid Catalytic Cracker (FCC) uses high temperature and catalyst to crack 86,000 barrels (3.6 million gallons) each day of heavy gas oil mostly into gasoline. Hydrocracking uses catalysts to react gas oil and hydrogen under high pressure and high temperature to make both jet fuel and gasoline.
Also, about 58,000 barrels (2.4 million gallons) of lighter gas oil is converted daily in two Isomax Units, using this hydrocracking process.
We blend most of the products from the FCC and the Isomaxes directly into transportation fuels, i.e., gasoline, diesel and jet fuel. We burn the lightest molecules as fuel for the refinery’s furnaces, thus conserving natural gas and minimizing waste.
In the Delayed Coking Unit (Coker), 98,000 barrels a day of low-value residuum is converted (using the cooking or thermal-cracking process) to high-value light products, producing petroleum coke as a by-product. The large residuum molecules are cracked into smaller molecules when the residuum is held in a coke drum at a high temperature for a period of time. Only solid coke remains and must be drilled from the coke drums.
Modifications to the refinery during its 2003 Clean Fuels Project increased residuum volume going to the Coker Unit. The project increased coke handling capacity and replaced the 150 metric-ton coke drums with new 300 metric-ton drums to handle the increased residuum volume.
The Coker typically produces more than 6,000 tons a day of petroleum coke, which is sold for use as fuel or in cement manufacturing. While the cracking processes break most of the gas oil into gasoline and jet fuel, they also break off some pieces that are lighter than gasoline. Since Pascagoula Refinery’s primary focus is on making transportation fuels, we recombine 14,800 barrels (622,000 gallons) each day of lighter components in two Alkylation Units. This process takes the small molecules and recombines them in the presence of sulfuric acid catalyst to convert them into high octane gasoline.
3.2.3 Treating (Removing Impurities)
The products from the Crude Units and the feeds to other units contain some natural impurities, such as sulfur and nitrogen. Using a process called hydrotreating (a milder version of hydro-cracking); these impurities are removed to reduce air pollution when our fuels are used.
Because about 80% of the crude oil processed by the Pascagoula Refinery is heavier oils that are high in sulfur and nitrogen, various treating units throughout the refinery work to remove these impurities.
In the RDS Unit’s six 1,000-ton reactors, sulfur and nitrogen are removed from FCC feed stream. The sulfur is converted to hydrogen sulfide and sent to the Sulfur Unit where it is converted into elemental sulfur. Nitrogen is transformed into ammonia which is removed from the process by water-washing. Later, the water is treated to recover the ammonia as a pure product for use in the production of fertilizer.
The RDS’s Unit main product, low sulfur vacuum gas oil, is fed to the FCC (fluid catalytic cracker) Unit which then cracks it into high value products such as gasoline and diesel.
3.2.4 Reforming
Octane rating is a key measurement of how well a gasoline performs in an automobile engine. Much of the gasoline that comes from the Crude Units or from the Cracking Units does not have enough octane, to burn well in cars.
The gasoline process streams in the refinery that have a fairly low Octane rating are sent to a Reforming Unit where their octane levels are boosted. These reforming units employ precious-metal catalysts – platinum and rhenium – and thereby get the name “rheniformers.” In the reforming process, hydrocarbon molecules are “reformed” into high octane gasoline components. For example, methyl cyclohexane is reformed into toluene.
The reforming process actually removes hydrogen from low-octane gasoline. The hydrogen is used throughout the refinery in various cracking (hydrocracking) and treating (hydrotreating) units.
Our refinery operates three catalytic reformers, where we rearrange and change 71,000 barrels (about 3 million gallons) of gasoline per day to give it the high octane cars need.
Product testing:
Blending
A final and critical step is the blending of our products. Gasoline, for example, is blended from treated components made in several processing units. Blending and Shipping Area operators precisely combine these to ensure that the blend has the right octane level, vapor pressure rating and other important specifications. All products are blended in a similar fashion.
Quality Control
In the refinery’s modernly-equipped Laboratory, chemists and technicians conduct quality assurance tests on all finished products, including checking gasoline for proper octane rating. Chevron’s patented performance booster is added to gasoline at the company’s marketing terminals, one of which is located at the Pascagoula Refinery.
4.0. SUPPLY/DISTRIBUTION
The Nigerian gas sector is made up of the upstream sector, comprising exploration, drilling and production of natural gas, a midstream sector comprising transportation, and refining of gas, as well as a downstream sector comprising the importation, storage and distribution of gas products – an aspect still highly regulated by the federal Government of Nigeria. The 1999 Constitution of the Federal Republic of Nigeria vests all petroleum in situ in the federal Government of Nigeria.
Nigeria is blessed with massive proven reserves of associated and non-associated gas, estimated in excess of 160 trillion cubic feet. It is ranked amongst the 10 largest in terms of proven natural gas reserves in the world, and its natural gas reserves/production is estimated at 109 years. Geologists insist that there is a lot more gas still to be found, if companies deliberately explore for gas, as opposed to finding it by chance whilst in search of oil.
For a long time now, the demand for gas has exceeded the supply available in the domestic market; a marked departure from the previous situation where gas utilisation within Nigeria was limited because of an unattractive fiscal, commercial, legal, and regulatory environment for the investments necessary for the development of a viable domestic gas market. The improved situation is due largely to, firstly, the existing Government policy where holders of gas assets are obliged to reserve specified quantity for sale in the domestic gas market and secondly, the ongoing pricing reform in the natural gas subsector.
The federal Government of Nigeria (the FGN), through its agencies, is involved in the whole value chain; as policy maker, regulator and commercial participant. The Nigerian Liquefied Natural Gas Company (NLNG), a joint-venture company established by the NNPC, Shell Petroleum Development Company (SPDC), Total and Eni, presently produces and stores the LNG produced. The company currently operates six trains which produces about 22 million tonnes per annum of LNG and about another 4 million tonnes per annum of LPG. The plans for the construction of the seventh train are at a more advanced stage. Other LNG projects include Brass LNG and the OKLNG (yet to reach Final Investment Decision-FID) which are currently facing a lot of challenges for reasons including the discovery of shale gas in North America and Europe and may not go ahead as planned. There is a Chevron-operated Escravos Gas Plant which is currently being expanded and the Chevron Gas to Liquids (GTL) project, a joint venture with Nigerian National Petroleum Corporation (NNPC) and South Africa’s Sasol, which was expected to be operational in 2013. Further, there is the Oso condensate field, jointly owned in undivided interests by NNPC and Mobil Producing Nigeria (MPN), a project for the export of condensates.
The main pipeline transmission system in Nigeria is owned and maintained by the Nigerian Gas Company (NGC), which is a subsidiary of the NNPC; it also acts as a gas merchant. Its role as gas merchant is expected to end upon the passage into law, of the Petroleum Industry Bill (PIB) which has been on the floor of the Nigerian legislature since the year 2008. Other gas transmission pipelines are individually owned by the NLNG and the NNPC/SPDC/Total joint venture and dedicated to their respective operations. The NGC’s pipeline infrastructure comprises two un-integrated pipeline networks totalling approximately 1,100km: the Alakiri-Obigbo–Ikot Abasi Pipeline, otherwise known as the eastern network; and the Escravos–Lagos Pipeline System (ELPS), also known as the western network. The ELPS is a strategic 560km pipeline that transports gas from fields in the Niger Delta to Lagos, Nigeria’s commercial centre, and then spurs at Lagos on to the West African Gas Pipeline (WAGP), which was developed by the NNPC, Chevron, Shell and the Governments of Nigeria, Ghana, Togo and Benin. Currently, there are ongoing expansion programmes and projects which would integrate the ELPS and the eastern network. It is expected that these projects would be completed soon.
The NGC has entered into several gas sale and purchase agreements (GSPAs) with gas producers in respect of the lean gas (methane) produced in their gas projects. There are several gas distribution companies in Nigeria, including Shell Nigeria Gas, a subsidiary of SPDC, and Gas link Limited. These companies distribute gas principally in the industrial areas in and around Lagos and in some parts of eastern Nigeria. LNG export forms the bulk of the natural gas trade in the international market. The WAGP has begun to export natural gas to countries in the West Africa sub-region. Local markets include power-generating plants, local industries (gas-to-liquids plants, fertiliser plants) and domestic gas consumers. A Trans-Saharan Pipeline Project (also known as the ‘’Nigel Project’’) which is intended to stretch across the Sahara desert and connect Nigeria’s gas reserves to Europe via Algeria’s Mediterranean coast has been under consideration by the Governments of Nigeria and Algeria.
4.1. SUMMARY/CONCLUSIONS
The Nigerian oil sector is made up of the upstream sector, comprising exploration, drilling and production of crude oil including the premium bonny light crude, a midstream sector comprising transportation, and refining of crude oil, as well as a downstream sector comprising of the importation, storage and distribution of petroleum products such as premium motor spirit, Automotive gas oil and dual purpose kerosene – an aspect still highly regulated by the federal Government of Nigeria. The 1999 Constitution of the Federal Republic of Nigeria vests all petroleum in situ in the federal Government of Nigeria.
The Nigerian Petroleum industry can be classified by two ways, one is by types of actors, while the other is by sectors. The actors are both private and public organisations. The public sectors include all the government agents, functionaries in the likes of Nigerian National Petroleum Corporation (NNPC) and its subsidiaries, the Department of Petroleum Resources (DPR), the Petroleum Product Pricing Regulatory Agency (PPPRA), among others. The private sector consists of both indigenous and foreign actors.
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