Introduction to Oil Gas MIDSTREAM OPERATIONS Patrick Ruharuza

Introduction to Oil & Gas MIDSTREAM OPERATIONS Patrick Ruharuza

This Midstream overview includes: • Midstream Business Characteristics • Refining • The assignment • Transportation

What’s Midstream

Midstream Business Characteristics A Low Risk Business Contains Regulated Components Midstream Business Market Prices Affect Demand Depends on Health of Upstream

Low risk The business of moving oil and gas around is considered very low capital risk. Historically in most integrated oil companies, the midstream segment was considered a small part of upstream and downstream operations

Highly Regulated In June 2016, government issued a statutory instrument for the Petroleum Refining, Conversion, Transmission and Midstream Storage industry. Under these regulations, the private companies were supposed to calculate the tariff based on the following: • International market product price • Prevailing market price in Uganda • Freight Arab Gulf costs to port of reference • Applicable trader premiums • Insurance • Import-related port handling and clearance costs • Net transportation supply cost to deliver products to target market.

Depends on Health of Upstream & Strong Demand Without a steady supply of oil and gas, there is nothing to process, transport and store. On the other hand, without demand from downstream commercial, industrial and retail consumers, the need to bring these supplies to market is diminished.

Crude Oil Refining The process used to refine crude oil is fractional distillation. Crude oil consists of different mixture of compounds and they have different levels of boiling points, Fractional distillation simply boils the mixture.

Refining Economics

Refinery Value drivers

Crude Transportation • After field processing, treated oil and natural gas is delivered via a huge and complex transportation, pipelinetransmission and distribution infrastructure. • Natural gas, which flows at much higher pressure than crude oil, is most often transported in large diameter regulated pipelines. • LNG is natural gas that has been converted to a liquid for easier transport and storage. This occurs when the gas is cooled to approximately 162 degrees Celsius, or -260 degrees Fahrenheit. Large LNG vessels are used to transport natural gas for international shipments.

Crude Carriers

Assignment The Ugandan government has pushed strongly for the establishment of a refinery in the country despite spirited counter arguments against the idea from the IOC’s at the fore front of developing the Oil sector in the country (Tullow Oil, Total E&P and CNOOC) Concerns of commercial viability, financial challenges and perhaps an obvious divergence of interests between the governments and the IOC’s are often cited as the main challenges to the progress of the refinery project. That said, Africa remains a Net importer of refined products inspite of its abundant oil reserves yet many non Oil producing countries are heavily investing in refining capacity in other parts of the world. All Economic indicators also show African economies growing at a relatively high pace and with that, the demand for refined products. Yet the refining capacity remains low and the appetite for investing in refineries by IOC’s remains very tame.

The assignment Your Assignment Discuss in detail the key factors limiting refining capacity in Africa and what could be done to close the gap between the interests of the government and those of IOC’s in order to successfully build and operate a refinery.

The assignment • Please note that: • It is COMPULSORY that Assignments MUST be submitted together with a Plagiarism Checker X report. Assignments that do not include a checkforplagiarism. net report will not be accepted or marked; • • All your work should be referenced properly, preferably using the Harvard System of Citation; • • The Accord policy on over-submission of work will be adhered to. The Assignment limit is 3, 000 words; • • The main body of the Assignment should cover around 6 or 7 pages of A 4 paper, using Times New Roman, font size 12, with 1. 5 line spacing; • Before final submission, use your word processor’s spell-checker and grammar checker, set to English (UK) if present on your PC!