Marathon Gas & Oil Production Operations



The marathon gas and oil exploration company focused on the production of liquid hydrocarbons and natural gas worldwide. Some of the existing core production areas consist of the North Sea, US and Equatorial Guinea. Other areas of interest are being pursued in Indonesia and the Iraqi Kurdistan region.

Marathon’s oil and gas operations are integrated into a variety of downstream processes which lead to the production of products, such as, natural gas LNG, fuels, home heating oil, petrochemical feed stocks and methanol (Marathon Petroleum, 2011). The company’s main production interests lie in the Athabasca oil Sands project (ASOP) which is located in Alberta, Canada consisting of 50,000 acres of potentially mineable land near the Muskeg River, Jack Pine mines Scotford Upgrade (Marathon Petroleum, 2011).


Imported Crude oil starts in the port of Fourchon, also known as LOOP (Louisiana Offshore Oil Port) Marathon owns 50.7% of the LOOP. Duplicate ports capable of handling oil imports arriving into the US by a supertanker 3 million barrels a day. VLCC (very large crude carrier) takes 38 to 48 hours to unload (Marathon Petroleum, 2011). There is no storage capability at LOOP and all crude is delivered by undersea pipeline into one of eight underground salt caverns. The crude oil then piped into refineries on the Gulf coast and Midwest.

The Capline pipeline at St. James, Louisiana transports crude refineries in the Midwest at Robinson, Illinois, 769 miles away (Marathon Petroleum, 2011). Once the crude reaches the Midwestern at Patoka, Illinois after traveling from St. James at 4 miles an hour for about 14 days, it is been separated by types of crude, identified by density and sulfur content (Marathon Petroleum, 2011).

For example, light crude has a higher concentration of hydrocarbons and consequently can produce higher quality products with relatively simple refining installation processes (Marathon Petroleum, 2011). Heavy crude oil requires additional processing to produce a similar range of desired products. The mix of products running to the refineries pipelines would depend on the types of products the refinery is able to produce (Marathon Petroleum, 2011).mo_ship

Refineries can refine anywhere from 2000 barrels of crude oil up to nearly 600,000 barrels a day, depending on the demand of the products desired and the supply of the quality of crude received. Crude oil is then stored from additional 2 to 4 days to allow water to settle out. A typical refinery has only about 1 to 2 days crude supply that is ready to be refined into product. The production process takes about 4 to 8 days to produce a product. Once petroleum-based products are refined from crude oil must be stored separately in large storage tanks for about 2 to 4 days, prior to shipment to the retail and industrial users (Marathon Petroleum, 2011).


Approximately 1.33 to 2 trillion barrels of proven oil reserves, or about 60% of the global oil reserves, are located in Canada, and Middle Eastern countries such as Iran, Iraq, Kuwait, United Arab Emirates and Saudi Arabia (Excerpt, 2011).

Marathon projects that increased worldwide demand for crude oil will exceed 15 mean barrels a day over per action and 2030. OPEC is to pick up the increasing production demand as well as the developing resources of the Canadian oil sands and continued Deep-water exploration efforts (Excerpt, 2011).

Refinery operation has dropped 48.67% percent since 1981 from 300 refineries than operating to 146 refineries currently operating (Marathon Petroleum, 2011). Communities reject building new refineries in their city or township clamor for low gasoline fuel prices. Most of the current US refinery operations have equipment that is dated nearly 20 years old, more and more, become more dangerous to operate as time passes (Marathon Petroleum, 2011). Environmental and regulatory laws also inhibit the production and building of new facilities with a population increasingly concerned with carbon output and climate change.


Due to state laws, environmental regulatory requirements can require that refineries produce petroleum products with a variety of stringent specifications. This becomes an issue which can increase cost required refine crude oil as well as the capital requirements to pay for refinery infrastructure improvements (Marathon Petroleum, 2011).

There also logistics expenses required to handle excess butane produced by higher refining requirements to include storage, transportation and disposition (Marathon Petroleum, 2011). Unfortunately, these higher specific mission requirements produce a production shortage to the retail consumer in certain areas and states. Specialty gasoline also known as reformulated gasoline places great demands on the refinery system in terms of storage and distribution. Theoretically, if a national standard of refined product specifications, that could increase the production throughput many areas of the country, this could increase gas supplies and other petroleum products in shortage areas, ultimately reducing costs to the consumer.

Price/Demand Relationship

   Cutting transportation costs of foreign purchased oil is the single most important factor in bringing gasoline retail costs down. The oil industry has advocated boosting domestic energy production as part of a broader national energy strategy.

“If given access to key shale reserves,  if we can get the oil sands pipeline built that will allow us to import more  crude from Canadian oil sands, and if we can access areas of the US that are  currently off limits, our industry can create over a million new jobs and  generate over $194 billion in revenue,” said Erik Milito, upstream director for the American Petroleum Institute (Superville, 2011).

    Also, the easing of offshore drilling permits in the Gulf of Mexico is a step in the right direction to ease the cost of gasoline at the pump. But offshore drilling still faces opposition in the US government in both the House and Senate which contend the current doing regulations are needed safety reviews in the aftermath of the Gulf oil spill which damaged environmentally sensitive wildlife areas. These new safety measures will have a delaying effect on the opening of drilling in the Alaska wilderness. However, the demand for oil increasing, and interagency task force has been organized to expedite and coordinate necessary approvals in the vast national petroleum reserve on Alaska’s North Slope.

Alabama Rep. Martha Roby said “It’s time for Washington to get serious about the challenges facing the country, including straightening out its finances and tackling the gas price issue.” She praised the House for passing measures to expand domestic energy production “because when we’re talking about energy, we’re talking about jobs (Superville, 2011).

Recent events overseas in the Middle East have temporarily spiked gas prices within the US. North American consumers are looking at their pocketbook issues, even in the middle of broad turmoil in the Middle East. The speculation in oil prices has been also cited as a contributing factor in rising retail gas prices. The current administration will begin annual oil and gas leases in the national petroleum reserve, a move to satisfy the demands of many industry executives as well as Alaska Senators Lisa Murowski (R) and Mark Begich (D) (Broder, 2011).


Price of gasoline is conceived of components consisting of refinery processing costs, marketing and distribution costs, retail distribution costs and state and federal and local taxes as well as profits and losses involved in all stages. Federal and state and local taxes can be as high as $.40-$.50 per gallon (Marathon Petroleum, 2011). These taxes are the root cause of significant varying prices from state to state and area to area.

marathon-petroleum-speedway-gas-stationsThe effect of the price of raw crude consists from about 55% to 70% of the remaining cost. The price range from 1999 to 2008 has been from $12 a barrel to $145 per barrel. Refining costs consist of about 20% of the cost, and slightly higher for reformed gas mixtures (Marathon Petroleum, 2011). 10% to 20% is accounted for by marketing and distribution and storage costs. This leaves about 3% to 5% margin for profit at best the retail gas dealership (Marathon Petroleum, 2011).


    The Impact of importing large amounts of foreign oil as well as constraining the types and quality of petroleum products produced has resulted in excessive speculation in oil futures market. Under questioning from Senator Maria Cantwill (D-WA) Exxon Mobil CEO Mr. Tillerson, (Exxon-Mobil Corporation), testified that the price per barrel of oil increased $12 per barrel immediately after Middle East conflict in Libya. He reiterated that the cost per barrel depends largely on the marginal cost per barrel to extract or have access to the next barrel in the future. When pressed, Mr. Tillerson acknowledged that under normal supply and demand curves, the price per oil would average cost somewhere in the in the range $60-$70 per barrel.


    Clearly we can see through the examination of the petrochemical production process, the heavy reliance of foreign oil imports, the regulatory requirements for a variety of fuel mixes and qualities and finally unchecked speculation in the oil industry combine to breed a condition of low supply and high demand which is often at the advantage of large corporations and to the disadvantage of the retail consumers. A national re-examination of the US energy policy should take into account producing more crude oil domestically, explaining to refinery capacity, reducing the diversification of petroleum products required across state lines and commodity speculation control in the energy sector. Such actions will have the effect of mitigating or light energy spike crisis in the US. A big push will also be required in the development of alternative energies, since as we all know, peak oil has climaxed and is on the downward decline.


Broder, J.M. (2011). Obama
Shifts to Speed Oil and Gas Drilling in U.S.
, New York Times, New York. Retrieved from,
/2011/05/15/us/politics/15address.html ?_r=2&ref=us

Cantrell, M., (2011), Exxon CEO Admits that Oil Should Be $60-70 Dollars a Barrel Based on Supply and Demand, Senate testimony on the effects of oil speculation and high frequency trading. Retrieved from,

Excerpt, (2011). Marathon Oil Financial Operating Report  

Marathon Oil (2011), The time it takes to provide America’s transportation fuels, Retrieved from, Retrieved from,
time_it takes/index.htm

(2011). Obama announces steps to speed US oil production,

Associated Wire Service. Retrieved from,

Hydrocarbon P, (2011).
Marathon Oil subsidiary Speedway named top US retail gasoline brand for third year, Hydrocarbon Processing.


About Tommorrow's News, Today

Began career at the Pentagon as a Communications Specialist. Has been involved with commercial aerospace defense projects since 1984 with firms like TRW, Lockheed Martin, Boeing. Served in Iraq from 2003 to 2005 with Army Corps of Engineers supporting IED/Mine clearing operations and destroying Iraqi weapons stockpiles. Born in Bangkok, Thailand, adopted son of a career U.S. Foreign Service Officer. Current interests include democratic process reform, Nation / State Building, Technology Trends and Environmental Studies.
Aside | This entry was posted in Accounting and Business Policy, Business Issues, Energy and Resources, Marketing. Bookmark the permalink.

One Response to Marathon Gas & Oil Production Operations

  1. Hi, everything is going nicely here and ofcourse every one is sharing information, that’s really good, keep up writing.

    Liked by 1 person

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