The petroleum industry is divided into five deferent sectors that Include all steps Involved In finding, producing, processing, transporting and marketing OLL and natural gas. The first segment is exploration and production also referred to as the upstream segment.
This segment involves the exploration and production of oil and natural gas, from cutting-edge geology to high-tech offshore drilling platforms. The U. S. Is the world’s third-largest petroleum producer, with more than 500,000 producing wells and approximately 4,000 OLL and natural gas platforms operating In U. S. Waters (http://pal-sec. pal. Org/boatloads/sectors/). Second, is the downstream segment also referred to as marketing and refining. This segment includes the nation’s 144 oil refineries that process more than 17 million barrels of crude oil every day.
Additionally, the downstream segment includes the transporting of petroleum products by oil tankers from thousands of local terminals to approximately 1 67,500 service stations across the U. S. (http://API- sec. pal. Org/absolutists/sectors/). Next, pipeline Is the segment that encompass the nation’s 165,000 miles of pipelines that move crude oil from wells on land and platforms in the oceans to refineries, and then to terminals where fuels are released to retail outlets (http://API- sec. API. Rig/absolutists/sectors/). Marine is the segment that involves all aspects of transporting petroleum and throttle products by water, Including port operations, maritime firefighting and oil The final sector of the petroleum industry is service and supply. This segment is an integral part of the oil and natural gas industry. There are more than 10,000 U. S companies that provide equipment, services, supplies, and design and engineering support for exploration, drilling, refining and other operations.
This emerging trend resulted in some of the largest global corporations as defined by the Forbes Global 2000 ranking, and as of 2007 all are within the top 25. As of December 1, 2006, Complexion ranks first among the supervisors in terms of market capitalization, cash flow, revenue, and profit. As a group, the supervisors control about 5 percent of global oil and gas reserves. Conversely, 95 percent of global oil and gas reserves are controlled by state-owned oil companies, primarily located in the Middle East (http://en. Wisped. Org/wick/ Superman).
OBSTACLES Long-Term US Demand Flat The United States gas consumption has been essentially flat in recent years, rising less than 1 percent per year. The demand for heating oil has declined significantly as homeowners switch over to natural gas. Additionally, there are concerns about the U. S. Dependency on foreign fuel and environmental issues that have prompted actions to increase fuel efficiency in automobiles. Crude Oil Prices, Availability is Uncertain The average refinery cost of crude oil in the U. S. Is unpredictable since prices can change 50 percent within a year.
Imports provide over 60 percent of the U. S. Crude oil consumption and are vulnerable to political disruptions and transportation delays. To ensure continuous operations, refiners may have to hold larger raw material Industry Profitability Refining operations with low gross margins (often less than 5 percent), combined with the high debt levels, often produce losses for refiners. Typically, refiners are more profitable when gas prices are on the rise. Gasoline Customer Concentration Consolidation among gas retailers has left a larger percentage of gas stations in the hands of a few large companies.
Some of the largest retailers have refining capacity of their own, leaving a smaller market available to independent refiners. High Required Capital Investment Expanding refinery capacity to meet expected demand and comply with new environmental regulations will require large investments by refineries in the next 10 years. However, due to the low rate of return in refining, refiners have trouble attracting capital (http://o-Indies. Firecrackers-learn. Mom. Oak. Indies. Due/ industry. Asps? Paid=1 55=1). II.