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Oil and Gas Resources and Their Uses

Composition of oil and natural gas, how they are used, and how they are sent to users.

Oil and gas production facilities extract crude oil and natural gas from oil and gas fields. Gas (coal bed methane) can also be produced from coal seams. A number of products can be produced from crude oil and natural gas for various energy and product uses.

What Are Oil and Gas?

Crude oil and natural gas are nonrenewable sources of energy (fossil fuels). Crude oil is a mixture of various hydrocarbon compounds and other materials; usually containing about 84% carbon; 14% hydrogen; 1 to 3% sulfur; and nitrogen, oxygen, heavy metals, and salts that total less than 1%. Crude oil can range from light, volatile oils that are highly fluid to nonfluid oils (e.g., residual oils, heavy crude oils, and some high paraffin oils). When it is brought to the surface, crude oil may also contain natural gas and product fluids such as salt water (i.e., produced water) and both dissolved and suspended solids. The natural gas is either separated at the well site if natural gas pipelines are nearby or flared as a waste. The produced water and other materials also are typically separated from the crude oil at the well site. Petroleum products are produced from the processing of crude oil at petroleum refineries and the extraction of liquid hydrocarbons at natural gas processing plants. Petroleum is a broad category term that includes both crude oil and petroleum products, and is sometimes used interchangeably with the term oil. Crude oil is measured in barrels (one barrel equals 42 gallons).

About 85% of natural gas produced from conventional wells is methane, a compound comprised of one carbon atom and four hydrogen atoms. Ethane, propane, and butane also occur in natural gas and are often separated and processed as natural gas liquids. Natural gas exists as:

  1. Associated gas in crude oil wells where natural gas exists separate from the crude oil in the underground formation or is dissolved in the crude;
  2. Non-associated gas in dry gas wells that generally produce only natural gas that does not contain any hydrocarbon liquids;
  3. Wet gas (a type of non-associated gas) in condensate wells where natural gas occurs along with natural gas liquid; and as
  4. Coal bed methane in coal seams.

About 35% of natural gas recovered in the United States is associated with oil recovery. Non-associated gas generally occurs at great depths where heat has split all of the hydrocarbons into smaller, lighter gas molecules or at shallower areas where the natural gas migrates away from oil deposits until it is trapped by a layer of impermeable rock. One type of non-associated gas known as "gas shale" will likely become more an important part of the proved reserves in the U.S in the future.

Sour gas is an undesirable type of natural gas that contains a high concentration of hydrogen sulfide, which is potentially fatal. Hydrogen sulfide can also dissolve in water and form a mild acid that can corrode pipes, valves, meters, and other gas-handling equipment. Natural gas is measured in cubic feet (volume) or in British thermal units (Btu) (heat content). One Btu is the heat required to raise the temperature of one pound of water one degree Fahrenheit. One cubic foot of natural gas is equivalent to 1,031 Btu. Natural gas is priced and sold in units of a thousand cubic feet (Mcf, using the Roman numeral for one thousand). The reserves available for production or the annual usage of natural gas is typically described in units of a trillion cubic feet (TCF).

Coal bed gas and shale gas is primarily made up of methane (typically 95% or more), with varying amounts of heavier hydrocarbon fractions (e.g., ethane) and, in some cases, traces of nitrogen, carbon dioxide and a few other gases. Coal bed methane (CBM) rarely has more than 2% of the more complex hydrocarbons. In eastern coal fields, CBM is generally 98 to 99% pure methane and requires little dehydration of the gas to remove moisture to achieve pipeline quality. In the western coal fields, CBM sometimes requires either carbon dioxide or nitrogen to be stripped out. CBM accounts for about 8% of natural gas production in the U.S.

How Are Oil and Gas Used?

Oil supplies about 40% of the nation's energy needs. The most common use of crude oil is:

  • Production of gasoline (47%);
  • Heating oil and diesel fuel (23%);
  • Petrochemical feedstock (products derived from petroleum) for the manufacturing of chemicals, synthetic rubber, and plastics (18%);
  • Jet fuel (10%);
  • Propane (4%); and
  • Asphalt (3%).
The total is over 100% because there is more than a 5% processing gain from refining.

Natural gas supplies about 22% of the nation's energy needs. End uses for natural gas (in 2005) included:

  • Electric power generation (26.4%),
  • Industrial use (30.3%),
  • Residential use (21.6%),
  • Commercial use (13.9%),
  • Lease and plant fuel consumption (5%),
  • Pipeline and distribution (2.6%), and
  • Vehicle use (0.1%).

Most of the above are self-explanatory except for: (1) lease fuel (natural gas used in well, field, and lease operations, such as gas used in drilling operations, heaters, dehydrators, and field compressors); (2) plant fuel (natural gas used as a fuel in natural gas processing plants); and (3) pipeline fuel (gas consumed as a fuel in the operation of pipelines, primarily in compressors). Natural gas is considered the cleanest burning fossil fuel, producing mainly carbon dioxide, water vapor, and small amounts of nitrogen oxides.

Oil pipeline in arid setting
Oil Pipeline
Source: Argonne
Oil Pipeline
Source: Argonne
Click to enlarge
Natural gas compressor station building
Compressor Station Building
Source: Argonne
Compressor Station Building
Source: Argonne
Click to enlarge

How Is Oil and Gas Sent to Users?

Crude oil is nearly always sent to a refinery for processing. It is conveyed by pipelines, trucks, tankers, or barges. Natural gas may be processed to remove impurities at the gas field or at a natural gas processing plant. After processing, natural gas is usually transported by pipelines from producing fields to consumers. However, if natural gas is chilled to about –260 degrees Fahrenheit, it changes into a liquid and can be stored in this form. Known as liquefied natural gas (LNG), it can be loaded onto tankers and shipped overseas.

If existing pipeline systems are not available for a proposed oil or gas production facility, new pipelines and associated facilities (e.g., pump stations or compressor stations) must be constructed. In some cases, existing pipeline systems might require upgrading (e.g., adding additional gathering lines). The costs associated with the construction or upgrading of ancillary facilities may determine whether or not a project is economically feasible. Pipeline systems are discussed separately in the Energy Transmission section. In some areas, the volume of water produced from coal bed methane and the cost of handling the produced water may prohibit development of the coal bed methane resource.