If you have an E38, its located on the left hand side of the engine bay. There are two round cannister type objects. From memory the one closest to the front of the car is the Oil filter housing, the other is something to do with the Air Con. You'll notice two braided steel hoses running into the base of the housing (which is metal). You need a large socket or open ended spanner to undo the top cover.
For a detaialed how to on this have a look at Oil Change Instructions | BMW 740 | Magnum