Thomas Kivisto Discusses The Three Sectors of The Oil and Gas Industry
The Oil and Gas Industry is one of the most important industries in the world. According to Entrepreneur, Thomas Kivisto of San Clemente, CA, it supplies more than 90% of humans’ energy to heat their homes, transport goods, and power their factories. And it has fueled our economic growth for centuries.
Oil was first pumped out of the ground near Titusville, Pennsylvania, in 1859, when Edwin Drake drilled his famous well. The oil industry had grown exponentially since then — especially during World War II when oil became a strategic resource that had to be controlled by American companies rather than foreign ones like Royal Dutch Shell or British Petroleum (BP).
Today there are three main sectors within the industry: upstream production (drilling), midstream transportation (pipelines), and downstream refining (refineries).
History of the Oil and Gas Industry
The first American oil well, the Drake Well (1859), was drilled with cable tools in Titusville, Pennsylvania. Oil and gas production is the initial stage of the oil and natural gas industry. At this stage, raw crude oil or raw natural gas is extracted from beneath the earth’s surface by drilling wells through rock and soil. The process extracts pockets of oil or natural gas between layers of rock strata bound together by various chemical cement-like water or ice.
This process is called “primary recovery.” The petroleum industry uses sophisticated technologies like seismic surveys to pinpoint potential sites for extraction. However, according to Thomas Kivisto, not all sites are suitable for commercial-scale extraction due to various circumstances associated with geography, geology, economics, politics, etc., culture.
New technology for extraction has improved efficiency, but secondary recovery methods still play a key role in producing about one-third of U.S. oil. This method involves the injection of gas or water into an oil well to force out more crude oil — it is most often used onshore in established fields with little petroleum left to recover. Re-injection can also be done by pumping carbon dioxide (CO2) into aging-producing wells to maximize extraction before the field is abandoned.
So far, primary production techniques have helped us get around 1 trillion barrels (~170 km3 ) of conventional crude oil out of the ground. In contrast, secondary recovery methods have drawn another 400 billion barrels (~69 km ) out of the ground.
The upstream sector begins with the exploration of new sources of oil & gas. Oil & gas drills are used to drill through the ground or ocean floor to access pockets of underground fossil fuels. This process is expensive and very complex, as not only does it have a high risk for failure, but it can also cause environmental problems if done improperly.
Once an area has been deemed viable for drilling by both investors and engineers, plans are made to extract these fossil fuels from beneath the earth’s surface. If possible, says Thomas Kivisto, natural cracks within rocks will be targeted by oil rig workers to limit the amount of work necessary to extract fossil fuels.
Once a natural crack has been discovered, special pipes are inserted into the ground, and oil & gas is pumped out horizontally from underground deposits. This process is called fracking. It was first used in 1947 but only became widely used as a technique in the early 2000s. In recent years it has become very controversial as environmentalists worry that fracking can contaminate drinking water due to chemical leaks from wells.
The midstream sector involves transporting oil from where it is drilled to where it will be refined or converted into petroleum products for consumption by humans or machines.
Pipelines are the most common method used since they reduce environmental impact compared with rail or truck transport and are less expensive than transporting oil by ship.
Oil pipelines are extremely common in North America due to their large supply of oil & gas reserves. The United States has over 300,000 miles of pipelines crisscrossing the country, says Thomas Kivisto, more than enough to circle Earth 40 times.
However, these pipelines are not all used for transporting fossil fuels. Natural gas is also often transported via pipeline since it can be converted into a liquid form for easier storage & transports.
The downstream sector refines oil & natural gas into petroleum products such as gasoline or diesel fuel. Other products include asphalt and lubricants like those necessary for machinery (such as those used in farming). The downstream sector also includes the manufacturing of plastics and other petroleum products.
The refining process is also very complex, as many different steps must be completed to produce usable fuel or another product. First, refineries have to extract oil from the ground. Then they have to turn it into a usable liquid after mixing it with various chemicals.
This process separates the crude oil into several types: Petroleum gas (which becomes natural gas), Liquified petroleum gases (LPG), Naphtha or straight-run gasoline, Kerosene/jet fuel, Diesel fuel, Still gas, And asphalt. Finally, all of these are mixed depending on their properties to create products that humans can use for various purposes.
Since oil & gas is a non-renewable resource, the three sectors of the oil & gas industry must constantly adapt to new techniques to continue producing these products at a constant rate.
All three sectors of the oil & gas industry are involved in creating petroleum products, which are used for transportation, heating, and countless other purposes. Without these three sectors operating at full capacity, everyday life as we know it would be impossible to continue living.