First and foremost, there are two types of oil, organic and mineral. We are going to concentrate on the mineral oil and is also known as petroleum. Crude oil has its origin million years back from fossilised organic material, which converts to oil through a geochemical process.
According to history it was around 4,000 years ago that oil pits were found in Babylon and Ionian islands. The first known oil wells drilled, was around 300 to 350 AD in China and they had depths of 200 metres to 240 metres, using bits attached to bamboo poles.
Today and according to Popular Science Report, oil well depth have reached 7.7 miles in Sakhalin, Russia and may extend to a whopping 9 miles in pursuit for oil.
In reality oil is non-polar and does not adhere to other substances easily. Depending on the sulfur content, crude oil can be sour or sweet. On the density side, oil can be light or heavy. Commercially, the world oil consumers prefer sweet and light crude because it requires less refinement and production time before going to the market.
On the production front and according to International Energy Agency (IEA), Saudi Arabia, Russian Federation, and United States are the three top producers. Collectively they represent around 37 per cent-39 per cent. The biggest importers are United States, People’s Republic of China, India and Japan.
According to Opec, 2018 world daily average production demand is forecasted at 98.85 mb/d and this is up from 2017 figure of 97.20 mb/d. IEA forecasts the 2018 average at 99.2mb/d. Oman’s oil production in April 2018 was more than 967,000 barrels per day and oil price reaching $70/b. This was a major milestone after a 3-year low price syndrome.
Interesting and importantly, Oman PDO plans to spend $20 billion to maintain its oil production up to 2021.
The role oil plays
Oil is like a double edge sword depending whether you are a producer or a consumer. In the 1950s crude oil became a major primary source of energy, representing a key component in the energy mix. It is also a major trading commodity in different oil exchanges around the world with oil contracts and futures. These exchanges being New York Mercantile Exchange (NYMEX), Intercontinental Exchange (ICE), Dubai Mercantile Exchange (DME), India National Commodity & Derivatives Exchange (NCDEX) and Tokyo Commodity Exchange (TOCOM). Therefore, depending if you a producer or consumer you are at the mercy of oil prices, depending on the market dynamics.
Geopolitics and oil seem to go hand in hand. Market sentiment drives prices up and down like a see-saw.
At times we have to buckle our seats tight and not fall off. It seems we are at this cross roads. According to ExxonMobil by 2030 the world’s middle class will increase from 3 billion people to 5 billion and in turn pushing higher energy use. Oil will be an integral part of the economic fabric.
Benefits of oil
Oil is widely used in our daily lives and some of their benefits / uses are summarised as follows: Heating, Cooking, and Fuelling vehicles and airplanes. Petroleum products are used to manufacture: Plastics, Synthetics, Chemical products, Fertilizers, Medicine, Detergents, Paints, and various household items.
According to Wintershall, 40 per cent of all textiles contains oil and also interesting to note a single sofa contains 60 litres of oil.
Can we live without oil?
Oil has been a major factor in our economy and especially in Oman. However, we see the trend is focused on diversification as seen recently in the country’s efforts with the Tanfeedh initiative.
Indeed, for the foreseeable future oil will still pour the economy with coffers and use for oil for the time being is still prevalent. Its importance and contribution will start to slowly decline over the years to come given the aggressive efforts worldwide seeking alternative renewable energies to replace fossil fuels.
(Mohammed al Riyami has more than 20 years of hands-on experience in the oil and gas industry, having worked for Shell in the downstream and midstream value chain covering marketing, distribution, operations, supply chain and business planning.
Also in the Middle East, he has worked for Oman LNG and Qalhat LNG holding key positions in Marketing, Business Development and Investments. On a wider inter-government perspective, Al Riyami has held senior positions in the Gas Exporting Countries Forum.)