57
Lord of the Admiralty in 1911 (at the time, the civilian director of the British Navy),
he realized that a secure source of oil was critical for future naval operations. In
1914, Churchill worked out a deal with the Anglo-Persian Oil Company to provide
40 million barrels of oil to the Royal Navy over a period of 20 years in return for a
payment of £2 million and 51% British government ownership of the company. The
ink was barely dry on the agreement when World War One broke out 6 weeks later.
With the government holding majority ownership interest in the company, the
Anglo-Persian Oil Company became British Petroleum. Interestingly, the British
Petroleum brand had originally been created by a German oil firm to market its
products in England. During the war, the British government seized the German
company’s assets, and the Public Trustee sold them to Anglo-Persian Oil in 1917.
The new British Petroleum obtained an instant distribution network in the U.K. that
included 520 depots, 535 railway tank wagons, 1102 road vehicles, four barges, and
650 horses. These days, British Petroleum is known simply as BP.
Along with ExxonMobil, Royal Dutch Shell and BP, two additional corporations
round out the top five investor-owned global oil companies (The Economist 2019).
These are Chevron USA, a 1977 re-branding of Standard Oil of California, and
Total S.A., a French multinational oil and gas company founded in 1924. The Italian
multinational company Eni S.p.A., and ConocoPhillips, created in 2002 by the
merger of two midsize American oil companies (Conoco Inc. and Phillips Petroleum
Co.) are often included in the group for a total of seven “major” oil companies.
Some national oil companies, such as PEMEX, PetroBras, Rosneft and others are
mostly or wholly-owned by governments and nearly as large in terms of assets and
incomes, but are not considered “majors.”
The midsize oil companies, some of which can still be pretty big, are called
“independents.” These include corporations like Marathon, Sinclair, and others.
Many of the independents focus on only one aspect of the oil business, such as production, transport, or distribution, known in the O&G industry as “upstream, midstream, and downstream,” respectively.
3.3 The Decline of Domestic Production
Oil and gas wells produce the maximum flow of hydrocarbons during the period
known as Initial Production or IP. This occurs right after completion of the well, and
represents the highest rate of flow the well will ever see. As ongoing production
removes hydrocarbons from the ground, downhole pressures drop, stresses on the
flowpaths through the rock are increased, and other fluids are able to migrate into
the porous reservoir. These factors and others act to reduce the amount of oil and gas
flowing into the well over time, and this flow rate drop is called the decline. The
behavior of this decline over time in terms of flow rate and drop-off rate can be plotted as a shape known as the “decline curve.”
Decline curve analysis (DCA) is a specialized field in petroleum engineering that
seeks to determine the return on investment (ROI) from production by using decline
3.3 The Decline of Domestic Production
Lord of the Admiralty in 1911 (at the time, the civilian director of the British Navy),
he realized that a secure source of oil was critical for future naval operations. In
1914, Churchill worked out a deal with the Anglo-Persian Oil Company to provide
40 million barrels of oil to the Royal Navy over a period of 20 years in return for a
payment of £2 million and 51% British government ownership of the company. The
ink was barely dry on the agreement when World War One broke out 6 weeks later.
With the government holding majority ownership interest in the company, the
Anglo-Persian Oil Company became British Petroleum. Interestingly, the British
Petroleum brand had originally been created by a German oil firm to market its
products in England. During the war, the British government seized the German
company’s assets, and the Public Trustee sold them to Anglo-Persian Oil in 1917.
The new British Petroleum obtained an instant distribution network in the U.K. that
included 520 depots, 535 railway tank wagons, 1102 road vehicles, four barges, and
650 horses. These days, British Petroleum is known simply as BP.
Along with ExxonMobil, Royal Dutch Shell and BP, two additional corporations
round out the top five investor-owned global oil companies (The Economist 2019).
These are Chevron USA, a 1977 re-branding of Standard Oil of California, and
Total S.A., a French multinational oil and gas company founded in 1924. The Italian
multinational company Eni S.p.A., and ConocoPhillips, created in 2002 by the
merger of two midsize American oil companies (Conoco Inc. and Phillips Petroleum
Co.) are often included in the group for a total of seven “major” oil companies.
Some national oil companies, such as PEMEX, PetroBras, Rosneft and others are
mostly or wholly-owned by governments and nearly as large in terms of assets and
incomes, but are not considered “majors.”
The midsize oil companies, some of which can still be pretty big, are called
“independents.” These include corporations like Marathon, Sinclair, and others.
Many of the independents focus on only one aspect of the oil business, such as production, transport, or distribution, known in the O&G industry as “upstream, midstream, and downstream,” respectively.
3.3 The Decline of Domestic Production
Oil and gas wells produce the maximum flow of hydrocarbons during the period
known as Initial Production or IP. This occurs right after completion of the well, and
represents the highest rate of flow the well will ever see. As ongoing production
removes hydrocarbons from the ground, downhole pressures drop, stresses on the
flowpaths through the rock are increased, and other fluids are able to migrate into
the porous reservoir. These factors and others act to reduce the amount of oil and gas
flowing into the well over time, and this flow rate drop is called the decline. The
behavior of this decline over time in terms of flow rate and drop-off rate can be plotted as a shape known as the “decline curve.”
Decline curve analysis (DCA) is a specialized field in petroleum engineering that
seeks to determine the return on investment (ROI) from production by using decline
3.3 The Decline of Domestic Production