Exam 1 Study Questions 2

Question 1

What are the three largest shale oil plays in the US?

Answer 1

Eagle Ford, Bakken, and Permian Basin

Question 2

What are oil sands

Answer 2

Deposits of sand, clay, water, and bitumen

Question 3

Natural gas can be cooled to -260 degrees F to form a liquid, which enables it to be shipped via tanker. This form of natural gas is known as:

Answer 3

LNG

Question 4

A light sweet crude will have a ____ API and ____ percent of sulfur

Answer 4

higher; lower

Question 5

In 1985/86, Saudi Arabia’s jettisoning of the swing producer role and adoption of netback pricing triggered ____ in oil prices

Answer 5

a sharp decrease

Question 6

The EIA estimates that ___ % of total energy needs will be met by oil, gas and coal in 2040 as compared to ___ actually used in 2011. Renewable energy is forecast to increase from about ___ in 201 to ___ % of total demand in 2040.

Answer 6

87, 77. Renewables: 9, 13

Question 7

Which renewable fuel is expected to provide the greatest percentage of our energy needs in 2040 in the US?

Answer 7

Biomass; corn based ethanol is largest one currently in use

Question 8

___ is the cleanest, quickest, and most cost-efficient way to extend today’s energy supply in the future.

Answer 8

Energy efficiency

Question 9

The least and most expensive oil transportation methods are: ____ is least expensive and ____ is most expensive.

Answer 9

Tanker, semi-truck

Question 10

the two main NGL markets in the US are in ____ and ____

Answer 10

Mont Belvieu, TX and Conway, KS

Question 11

3 processing categories of primary refining units

Answer 11

Distillation, Conversion Process (cracking and non-cracking), and Treatment and Blending

Question 12

a physical separation process that does not alter the molecular structure of hydrocarbons

Answer 12

Distillation

Question 13

Involves cracking and non-cracking of hydrocarbon molecules, and may involve heat, pressure, and catalysts

Answer 13

Conversion processes

Question 14

Final stage and may involve adding MTBE to gasoline to increase the octane level

Answer 14

Treatment and blending

Question 15

“sweet” or “sour” refers to the amount of ____ in the crude oil

Answer 15

Sulfur

Question 16

What are the largest investor owned companies for providing natural gas based on reserves and production

Answer 16

Exxon Mobil and ExxonMobil based on proven reserves and production, respectively.

Question 17

What are the 3 prices associated with marketing petroleum products

Answer 17

Spot, wholesale, and retail

Question 18

Which is not a major finished petroleum product from refining?

Answer 18

Methane

Question 19

What are the 3 specific petrochemicals from Stage 1 that form the foundation of the industry?

Answer 19

Ethylene, propylene, and benzene

Question 20

Commodity chemical prices are more cyclical than specialty chemical prices. T or F?

Answer 20

TRUE

Question 21

In recent years, petroleum dropped from 97% of the total energy use in the transportation sector to 92.8%. This was due to an increase in the use of what?

Answer 21

Biofuels and natural gas

Question 22

Why has propane usage remained strong in the residential sector while heating oil usage has declined?

Answer 22

Propane is more versatile, has more uses in homes, and is more ideal for rural residences than heating oil

Question 23

Sharply higher oil prices can be a major contributor to what?

Answer 23

Recessions

Question 24

Name the 7 basic finished products from refining in order of LIGHTER to HEAVIER

Answer 24

LPG, Gasoline, Kerosene, Distallate fuel oil, Residual Fuel Oil, Petroleum coke, Asphalt/bitumens and road oil

Question 25

Which type of accounting method is considered more conservative

Answer 25

Successful efforts

Question 26

Generally, a ___ % of PUD's on a company's financial statements is considered ___ conservative

Answer 26

lower/ more

Question 27

When determining the amount of PUD's a company has, the study considers the use of an ___ engineer to be ___ conservative

Answer 27

outside/ more

Question 28

Under SE method, all exploratory dry holes are

Answer 28

expensed

Question 29

Which 3 of the 11 accounting concepts are of prime importance in understanding financial reporting in the oil and gas industry?

Answer 29

Realization, matching, cost

Question 30

The ceiling test limitation is of greater concern for companies using which of the accounting methods?

Answer 30

Full cost

Question 31

What are the 3 principal feedstocks for the chemical industry?

Answer 31

Naptha, natural gas, and natural gas liquids

Question 32

Which of the following are required to be disclosed for public companies in the 10-K reports?

Answer 32

Proven oil and gas reserves

Question 33

Over the last decade, if the US would have reduced CO2 emissions to 0, global CO2 emissions would have done what over the same decade?

Answer 33

Increased by 7%

Question 34

What are the two basic laws of thermodynamics?

Answer 34

1. Energy is neither created nor destroyed, 2. In a closed system, heat energy tends toward randomness

Question 35

Which of the following questions can be answered by one of the reserve ratios in Chapter 9?

Answer 35

How long will reserve last?

Question 36

The Finding Cost Ratio measures a company's ability to continue to operate in the future by measuring the extent to which a company is replacing the reserves it is producing. T or F?

Answer 36

FALSE

Question 37

3 facts about Current ratio

Answer 37

1. Calculated by dividing current assets by current liabilities,2. Shows how well the company is able to meet short-term financial obligations, 3. Higher ratio is better and indicates greater liquidity

Question 38

When and where was the first commercial oil well drilled in the US?

Answer 38

1859; Titusville, Pennsylvania

Question 39

Who are the Seven Sisters?

Answer 39

Anglo-Persian, Gulf Oil, Exxon, Texaco, Royal Dutch Shell, Chevron, Mobil

Question 40

Who are the new Seven Sisters

Answer 40

China, Russia, Iran, Brazil, Benequela, Malaysia, Saudia Arabia

Question 41

What does "petroleum" mean

Answer 41

from the Latin words petra, or rock, and oleum, oil

Question 42

3 elements a trap requires

Answer 42

1. A porous reservoir rock to accumulate the oil and gas, 2. An overlying impermeable rock to prevent the oil and gas from escaping, 3. A source for the oil and gas, typically black waxy shales

Question 43

Two main types of traps

Answer 43

1. Structural: formed by earth's movement's that fold the rock into suitable shapes, 2. Stratigraphic: combo of rock types deposited

Question 44

3 general properties of reservoirs

Answer 44

Porosity, Permeability, and Reservoir homogeneity

Question 45

Proved reserves (P90 or 1P)

Answer 45

90% probability that at least the proved reserves will be recovered; required to disclose

Question 46

Probable reserves (P50 or 2P)

Answer 46

50% probability that at least the proved + probable reserves will be recovered

Question 47

Possible reserves (P10 or 3P)

Answer 47

10% probability that at least proved + probable+ possible reserves will be recovered; largest volume

Question 48

How is crude oil classified?

Answer 48

According to Weight (Density) and Sulphur Content

Question 49

US benchmark for natural gas

Answer 49

Henry Hub index in Louisiana

Question 50

First true gusher

Answer 50

Spindletop (Texas) in 1901 known as the Lucas Well

Question 51

holds the tools and measuring devices while the blow-out preventer controls fluid pressure

Answer 51

bottom hole assembly

Question 52

speed at which pressure forces the oil upwards into the borehole

Answer 52

flow rate

Question 53

heavy, viscous oil that combined with water, clay, and sand produces oil sands

Answer 53

bitumen

Question 54

The second oil price shock

Answer 54

1979/1980- The Iranian Revolution followed by the Iran/ Iraq war. Triggered tripling in prices.

Question 55

The third oil price shock

Answer 55

1985/1986- Saudi Arabia's adoption of netback pricing. Triggered drop in prices.

Question 56

Oil chokepoint that is 4 miles wide and connects the Persian gulf with the Gulf of Oman and the Arabian Sea

Answer 56

Strait of Hormuz

Question 57

Oil checkpoint that connects the Red Sea to the Mediterranean Sea

Answer 57

Suez Canal, Egypt

Question 58

Oil checkpoint that connects the Red Sea to the Mediterranean Sea and separates Europe and Asia

Answer 58

Bosporus Straits, Turkey

Question 59

found in separate accumulations from crude oil

Answer 59

Non associated gas

Question 60

found in combination with or in solution in crude oil

Answer 60

associated gas

Question 61

hydrocarbons other than methane are present; rich in natural gas

Answer 61

wet gas

Question 62

gas that is almost pure methane; minimal liquids

Answer 62

dry gas

Question 63

gas that contains significant amounts of hydrogen sulphide

Answer 63

sour gas

Question 64

Oklahoma's natural gas producing rank in 2012

Answer 64

4

Question 65

What are the primary 2 NGLs that make up LPG?

Answer 65

Propane and Butane

Question 66

Method of converting natural gas into liquids for ease of transportation

Answer 66

Gas to Liquids (GTL)

Question 67

What is the cleanest fossil fuel and why

Answer 67

Natural Gas because it has a low carbon content

Question 68

Largest importer of LNG

Answer 68

Japan (33%)

Question 69

Largest exporter of LNG

Answer 69

Qatar (31%)

Question 70

High level physical trade types

Answer 70

Arbitrage

Question 71

opportunity for Location/Arb trade (transportation agreements)

Answer 71

Improve margin by moving product to another market

Question 72

opportunity for Quality trade (storage & blending capabilities)

Answer 72

Improve margin by blending products to create a higher valued product

Question 73

opportunity for Timing trade (storage capabilities)

Answer 73

Improve margin by holding product until prices increase

Question 74

Newer refining technique that uses chemical processes on some of the fractions

Answer 74

Conversion

Question 75

Distribution and sale of refined products

Answer 75

Marketing

Question 76

World's largest refiner

Answer 76

ExxonMobil Corp.

Question 77

3 major classes of hydrocarbons

Answer 77

1. Paraffins- saturated chains, 2. Naphthenes- saturated rings, 3. Aromatics- unsaturated rings

Question 78

What hydrocarbons make up crude oil

Answer 78

83-87% Carbonm 11-15% Hydrogen, 1-6% Sulfur

Question 79

Light crude

Answer 79

greater than 30 API

Question 80

Intermediate crude

Answer 80

22 to 30 API

Question 81

Heavy crude

Answer 81

less than 22 API

Question 82

Refineries are categorized by ___ and ___

Answer 82

size (measured by crude distillation capacity) , configuration (level of sophistication and complexity)

Question 83

How is complexity measured

Answer 83

The Nelson Complexity Index assigns a complexity factor to each piece of equipment based on complexity and cost. Ex: complex refinery will have an index of 13

Question 84

3 categories of petroleum products

Answer 84

1. Light distillates (LPG, naphtha, gasoline), 2. Middle distillates (kerosene, diesel), 3. Heavy distillates (heavy fuel oil, lubricants, asphalt, petroleum coke)

Question 85

Refinery profit drivers

Answer 85

-Raw material & input costs-Refinery configuration-Reliability & efficiency-Product value

Question 86

Linear programming (LP)

Answer 86

computer simulation to optimize refinery operation

Question 87

How to find the refining margin

Answer 87

Value of products - cost of crude - costs of refining = refining margin

Question 88

Used by refineries and industry stock analysts to assess the general profitability of a given market

Answer 88

crack spreads

Question 89

Most important component of downstream profitability

Answer 89

Marketing

Question 90

Spot price

Answer 90

aka refinery gate pricing or bulk pricing; lowest price paid for refined products

Question 91

Wholesale price

Answer 91

majority of refined products sold pass through wholesale distribution network; wholesale margins and prices vary directly with spot prices

Question 92

Retail price

Answer 92

oil companies distribute fuel to wholly owned and operated company sites or to independent dealers.

Question 93

The Realization concept

Answer 93

Revenue should be recognized only at the time a transaction is completed

Question 94

The matching concept

Answer 94

revenues should be matched with the corresponding costs of producing such revenues

Question 95

The cost concept

Answer 95

Cost is the basis for all accounting for an asset, so the accounting entry has little to do with the actual value of the asset

Question 96

Energy Ratios

Answer 96

1. Production Ratio 2. Reserve Life Index 3. Production Replacement Ratio 4. Finding&Development Reserve Ratio 5. Reserve Replacement Cost Ratio 6. Finding Costs Ratio 7. Lifting Costs 8. Value of Proved Reserves Additions 9. Value Added Ratio

Question 97

he 9 Energy Ratios can be broken up into 3 Separate Categories which are:

Answer 97

Reserve Ratios, Reserve Cost Ratios, Reserve Value Rations

Question 98

Production Ratio

Answer 98

Production/Reserves

Question 99

Reserve Life Index

Answer 99

Reserves/Production

Question 100

Production Replacement

Answer 100

(Change in reserves + Production)/Production

Question 101

Finding And Development Reserve Ration

Answer 101

(Extensions & Discoveries + Improved Recovery + Reserve Revisions)/production

Question 102

Reserve Replacement Cost

Answer 102

Costs Incurred/(Revisions+Improved Recovery + Extensions& Discoveries+Purchases)

Question 103

Finding Cost Ration

Answer 103

exploration cost/(extensions & Discoveries)

Question 104

Lifting Costs Ratio

Answer 104

Total Lifting Costs/Annual Production