Inside the Upstream Process: How Oil & Gas Is Found

Summary

The oil and gas value chain is divided into Upstream and Downstream, with the former focusing on exploration and production. Oil companies locate reserves through seismic surveys, akin to the method of tapping a watermelon to check ripeness. These surveys use sound waves to scan below the surface and identify potential reservoirs. Exploratory drilling is then conducted to confirm the presence of oil and gas, with tests done to understand the reservoir’s properties. Despite modern technology, exploration remains risky, with less than 20% success in finding commercially viable reserves.

Takeaways

• 😀 The oil and gas value chain is divided into two main segments: Upstream (discovery and production) and Downstream (refinement and sales).
• 😀 Upstream operations are complex, and while most companies focus on one segment, major oil & gas companies are integrated across the entire value chain.
• 😀 Oil companies identify potential oil and gas reserves through exploration, which can be onshore or offshore.
• 😀 Exploration does not directly aim to find oil or gas but instead focuses on narrowing down the search area by identifying potential reservoirs.
• 😀 The exploration process is similar to selecting a watermelon by tapping it, except it is far more expensive.
• 😀 Seismic surveys are used to scan below the earth’s surface, generating sound waves to create images of subsurface rock layers.
• 😀 These sound waves, generated by explosions or air guns, reflect off rock boundaries and are recorded by geophones, which help identify potential oil and gas reservoirs.
• 😀 Regional studies are conducted to explore the geology of neighboring countries, increasing the chances of finding reserves in the current exploration area.
• 😀 After seismic surveys and regional studies, exploratory wells are drilled, typically 5 inches wide and up to 20,000 feet deep, to gather samples for testing.
• 😀 The collected samples are tested to confirm the presence of oil and gas, assess their volume and flow potential, and create 3D models of the reservoir.
• 😀 Accurate identification of water boundaries is crucial to avoid drilling too deep and causing irreversible damage to the reservoir by extracting water instead of oil or gas.
• 😀 Despite modern seismic technologies, exploration remains risky, with a less than 20% chance of finding commercially viable reserves.

Q & A

What are the two main segments of the oil & gas value chain?

The two main segments of the oil & gas value chain are Upstream and Downstream. Upstream involves the discovery and production of crude oil and natural gas, while Downstream covers the refinement and sale of end products.

Why do most oil companies focus on one segment of the value chain?

Most oil companies focus on one segment because each segment of the oil & gas value chain is complex and requires specialized expertise. However, major oil & gas companies are often fully integrated across both Upstream and Downstream.

What is the primary objective of the exploration phase in Upstream oil & gas?

The primary objective of the exploration phase is to narrow down the search area by identifying potential reservoirs that might contain oil and gas, rather than directly finding the oil and gas.

How is the oil & gas exploration process similar to selecting a watermelon?

The oil & gas exploration process is similar to selecting a watermelon by tapping it and listening for a hollow sound. In exploration, seismic surveys use sound waves to create images of subsurface rock layers, much like the 'tapping-and-listening' method for selecting watermelons.

What technology is used in seismic surveys during exploration?

Seismic surveys use sound waves generated by loud bangs, like dynamite explosions or air guns in water, to scan the earth's subsurface. The sound waves are reflected by rock boundaries and recorded by geophones placed on the surface.

How are the results from seismic surveys used in oil & gas exploration?

The data from seismic surveys are analyzed by geophysicists to identify potential rock formations that could lead to oil and gas accumulations, helping companies decide where to drill exploratory wells.

What role do regional studies play in oil & gas exploration?

Regional studies help oil companies assess the geology of neighboring countries to see if there are reserves with similar characteristics. This increases the likelihood of discovering reserves in the basin being explored.

What is the purpose of drilling exploratory wells?

Exploratory wells are drilled to confirm the presence of a reservoir and to gather samples that can be tested to determine the volume, mobility, and overall characteristics of the oil and gas in the reservoir.

Why is it important to avoid drilling into the water layer in an oil & gas reservoir?

It is crucial to avoid drilling into the water layer because hitting water would mean extracting water first, making the oil and gas reservoir unrecoverable and economically unviable.

What are the risks associated with oil & gas exploration, even with modern technologies?

Despite advanced seismic survey technologies, exploration remains risky. Companies can spend millions on drilling, only to find empty wells or wells that are not commercially viable due to technological limitations or unfavorable conditions.