Oil exploration

Oil exploration

Overview

Hydrocarbon exploration (or oil and gas exploration) is the search by petroleum geologist
Petroleum geologist
A petroleum geologist is an occupation that involves all aspects of oil discovery and production in the field of petroleum geology. Petroleum geologists are usually linked to the actual discovery of oil and the identification of possible oil deposits or leads. It can be a very labor intensive task...

s and geophysicists for hydrocarbon
Hydrocarbon
In organic chemistry, a hydrocarbon is an organic compound consisting entirely of hydrogen and carbon. Hydrocarbons from which one hydrogen atom has been removed are functional groups, called hydrocarbyls....

 deposits beneath the Earth's surface, such as oil
Petroleum
Petroleum or crude oil is a naturally occurring, flammable liquid consisting of a complex mixture of hydrocarbons of various molecular weights and other liquid organic compounds, that are found in geologic formations beneath the Earth's surface. Petroleum is recovered mostly through oil drilling...

 and natural gas
Natural gas
Natural gas is a naturally occurring gas mixture consisting primarily of methane, typically with 0–20% higher hydrocarbons . It is found associated with other hydrocarbon fuel, in coal beds, as methane clathrates, and is an important fuel source and a major feedstock for fertilizers.Most natural...

. Oil and gas exploration are grouped under the science of petroleum geology
Petroleum geology
Petroleum geology refers to the specific set of geological disciplines that are applied to the search for hydrocarbons .-Sedimentary basin analysis:...

.

Visible surface features such as oil seeps, natural gas seeps, pockmarks (underwater craters caused by escaping gas) provide basic evidence of hydrocarbon generation (be it shallow or deep in the Earth).
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Encyclopedia

Hydrocarbon exploration (or oil and gas exploration) is the search by petroleum geologist
Petroleum geologist
A petroleum geologist is an occupation that involves all aspects of oil discovery and production in the field of petroleum geology. Petroleum geologists are usually linked to the actual discovery of oil and the identification of possible oil deposits or leads. It can be a very labor intensive task...

s and geophysicists for hydrocarbon
Hydrocarbon
In organic chemistry, a hydrocarbon is an organic compound consisting entirely of hydrogen and carbon. Hydrocarbons from which one hydrogen atom has been removed are functional groups, called hydrocarbyls....

 deposits beneath the Earth's surface, such as oil
Petroleum
Petroleum or crude oil is a naturally occurring, flammable liquid consisting of a complex mixture of hydrocarbons of various molecular weights and other liquid organic compounds, that are found in geologic formations beneath the Earth's surface. Petroleum is recovered mostly through oil drilling...

 and natural gas
Natural gas
Natural gas is a naturally occurring gas mixture consisting primarily of methane, typically with 0–20% higher hydrocarbons . It is found associated with other hydrocarbon fuel, in coal beds, as methane clathrates, and is an important fuel source and a major feedstock for fertilizers.Most natural...

. Oil and gas exploration are grouped under the science of petroleum geology
Petroleum geology
Petroleum geology refers to the specific set of geological disciplines that are applied to the search for hydrocarbons .-Sedimentary basin analysis:...

.

Exploration methods


Visible surface features such as oil seeps, natural gas seeps, pockmarks (underwater craters caused by escaping gas) provide basic evidence of hydrocarbon generation (be it shallow or deep in the Earth). However, most exploration depends on highly sophisticated technology to detect and determine the extent of these deposits using exploration geophysics
Exploration geophysics
Exploration geophysics is the applied branch of geophysics which uses surface methods to measure the physical properties of the subsurface Earth, in order to detect or infer the presence and position of ore minerals, hydrocarbons, geothermal reservoirs, groundwater reservoirs, and other geological...

. Areas thought to contain hydrocarbons are initially subjected to a gravity survey
Gravimeter
A gravimeter or gravitometer is an instrument used in gravimetry for measuring the local gravitational field of the Earth. A gravimeter is a type of accelerometer, specialized for measuring the constant downward acceleration of gravity, which varies by about 0.5% over the surface of the Earth...

, magnetic survey
Magnetometer
A magnetometer is a measuring instrument used to measure the strength or direction of a magnetic field either produced in the laboratory or existing in nature...

, passive seismic
Passive seismic
Passive seismic is the detection of natural low frequency earth movements, usually with the purpose of discerning geological structure and locate underground oil, gas, or other resources. Usually the data listening is done in multiple measurement points that are separated by several hundred meters,...

 or regional seismic reflection surveys
Reflection seismology
Reflection seismology is a method of exploration geophysics that uses the principles of seismology to estimate the properties of the Earth's subsurface from reflected seismic waves. The method requires a controlled seismic source of energy, such as dynamite/Tovex, a specialized air gun or a...

 to detect large scale features of the sub-surface geology. Features of interest (known as leads) are subjected to more detailed seismic surveys which work on the principle of the time it takes for reflected sound waves to travel through matter (rock) of varying densities and using the process of depth conversion
Depth conversion
Depth conversion is an important step of the seismic reflection method, which converts the acoustic wave travel time to actual depth, based on the acoustic velocity of subsurface medium ....

 to create a profile of the substructure. Finally, when a prospect has been identified and evaluated and passes the oil company's selection criteria, an exploration well
Oil well
An oil well is a general term for any boring through the earth's surface that is designed to find and acquire petroleum oil hydrocarbons. Usually some natural gas is produced along with the oil. A well that is designed to produce mainly or only gas may be termed a gas well.-History:The earliest...

 is drilled in an attempt to conclusively determine the presence or absence of oil or gas.

Oil exploration is an expensive, high-risk operation. Offshore and remote area exploration is generally only undertaken by very large corporations or national governments. Typical shallow shelf oil wells (e.g. North Sea
North Sea
In the southwest, beyond the Straits of Dover, the North Sea becomes the English Channel connecting to the Atlantic Ocean. In the east, it connects to the Baltic Sea via the Skagerrak and Kattegat, narrow straits that separate Denmark from Norway and Sweden respectively...

) cost USD$10 – 30 million, while deep water wells can cost up to USD$100 million plus. Hundreds of smaller companies search for onshore hydrocarbon deposits worldwide, with some wells costing as little as USD$100,000.

Elements of a petroleum prospect



A prospect is a potential trap which geologists believe may contain hydrocarbons. A significant amount of geological, structural and seismic investigation must first be completed to redefine the potential hydrocarbon drill location from a lead
Lead (geology)
A lead in hydrocarbon exploration, is a subsurface structural or stratigraphic feature with the potential to have entrapped oil or natural gas. When exploring a new area, or when new data becomes available in existing acreage, an explorer will carry out an initial screening to identify possible leads...

 to a prospect. Five geological factors have to be present for a prospect to work and if any of them fail neither oil nor gas will be present.
  • A source rock
    Source rock
    In petroleum geology, source rock refers to rocks from which hydrocarbons have been generated or are capable of being generated. They form one of the necessary elements of a working petroleum system. They are organic-rich sediments that may have been deposited in a variety of environments including...

     - When organic-rich rock such as oil shale
    Oil shale
    Oil shale, an organic-rich fine-grained sedimentary rock, contains significant amounts of kerogen from which liquid hydrocarbons called shale oil can be produced...

     or coal is subjected to high pressure and temperature
    Catagenesis (geology)
    Catagenesis is a term used in petroleum geology to describe the cracking process which results in the conversion of organic kerogens into hydrocarbons.-Theoretical reaction:...

     over an extended period of time, hydrocarbons form.
  • Migration - The hydrocarbons are expelled from source rock by three density-related
    Density
    The mass density or density of a material is defined as its mass per unit volume. The symbol most often used for density is ρ . In some cases , density is also defined as its weight per unit volume; although, this quantity is more properly called specific weight...

     mechanisms: the newly-matured hydrocarbons are less dense than their precursors, which causes overpressure; the hydrocarbons are lighter medium, and so migrate upwards due to buoyancy, and the fluids expand as further burial causes increased heating. Most hydrocarbons migrate to the surface as oil seep
    Seep
    A petroleum seep is a place where natural liquid or gaseous hydrocarbons escape to the earth's atmosphere and surface, normally under low pressure or flow. Seeps generally occur above either terrestrial or offshore petroleum accumulation structures...

    s, but some will get trapped.
  • Trap - The hydrocarbons are buoyant and have to be trapped within a structural (e.g. Anticline
    Anticline
    In structural geology, an anticline is a fold that is convex up and has its oldest beds at its core. The term is not to be confused with antiform, which is a purely descriptive term for any fold that is convex up. Therefore if age relationships In structural geology, an anticline is a fold that is...

    , fault block) or stratigraphic trap
  • Seal or cap rock - The hydrocarbon trap has to be covered by an impermeable rock known as a seal or cap-rock in order to prevent hydrocarbons escaping to the surface
  • Reservoir - The hydrocarbons are contained in a reservoir rock. This is a porous sandstone
    Sandstone
    Sandstone is a sedimentary rock composed mainly of sand-sized minerals or rock grains.Most sandstone is composed of quartz and/or feldspar because these are the most common minerals in the Earth's crust. Like sand, sandstone may be any colour, but the most common colours are tan, brown, yellow,...

     or limestone
    Limestone
    Limestone is a sedimentary rock composed largely of the minerals calcite and aragonite, which are different crystal forms of calcium carbonate . Many limestones are composed from skeletal fragments of marine organisms such as coral or foraminifera....

    . The oil collects in the pores within the rock. The reservoir must also be permeable so that the hydrocarbons will flow to surface during production.

Exploration risk


Hydrocarbon exploration is a high risk investment and risk assessment is paramount for successful exploration portfolio management. Exploration risk is a difficult concept and is usually defined by assigning confidence to the presence of five imperative geological factors, as discussed above. This confidence is based on data and/or models and is usually mapped on Common Risk Segment Maps (CRS Maps). High confidence in the presence of imperative geological factors is usually colored green and low confidence colored red . Therefore these maps are also called Traffic Light Maps, while the full procedure is often referred to as Play Fairway Analysis . The aim of such procedures is to force the geologist to objectively assess all different geological factors. Furthermore it results in simple maps that can be understood by non-geologists and managers to base exploration decisions on.

Terms used in petroleum evaluation

  • Bright spot - On a seismic section, coda that have high amplitudes due to a formation containing hydrocarbons.
  • Chance of success - An estimate of the chance of all the elements (see above) within a prospect working, described as a probability. High risk prospects have a less than 10% chance of working, medium risk prospects 10-20%, low risk prospects over 20%. Typically about 40% of wells recently drilled find commercial hydrocarbons.
  • Dry hole - A formation that contains brine instead of oil.
  • Flat spot - An oil-water contact on a seismic section; flat due to gravity.
  • Hydrocarbon in place - amount of hydrocarbon likely to be contained in the prospect. This is calculated using the volumetric equation - GRV x N/G x Porosity x Sh x FVF
    • GRV - Gross rock volume - amount of rock in the trap above the hydrocarbon water contact
    • N/G - net/gross ratio - proportion of the GRV formed by the reservoir rock ( range is 0 to 1)
    • Porosity - percentage of the net reservoir rock occupied by pores (typically 5-35%)
    • Sh - hydrocarbon saturation - some of the pore space is filled with water - this must be discounted
    • FVF - formation volume factor - oil shrinks and gas expands when brought to the surface. The FVF converts volumes at reservoir conditions (high pressure and high temperature) to storage and sale conditions
  • Lead - a structure which may contain hydrocarbons
  • Play - A particular combination of reservoir, seal, source and trap associated with proven hydrocarbon accumulations
  • Prospect - a lead which has been fully evaluated and is ready to drill
  • Recoverable hydrocarbons - amount of hydrocarbon likely to be recovered during production. This is typically 10-50% in an oil field and 50-80% in a gas field.

Licensing


Petroleum resources are typically owned by the government of the host country. In the USA most onshore (land) oil and gas rights (OGM) are owned by private individuals. Sometimes this is not the same person who owns the surface rights. In this case oil companies must negotiate terms for a lease of these rights with the individual who owns the OGM. In most nations the government issues licences to explore, develop and produce its oil and gas resources, which are typically administered by the oil ministry. There are several different types of licence. Typically oil companies operate in joint ventures to spread the risk, one of the companies in the partnership is designated the operator who actually supervises the work.
  • Tax
    Tax
    To tax is to impose a financial charge or other levy upon a taxpayer by a state or the functional equivalent of a state such that failure to pay is punishable by law. Taxes are also imposed by many subnational entities...

     and Royalty
    Royalties
    Royalties are usage-based payments made by one party to another for the right to ongoing use of an asset, sometimes an intellectual property...

     - Companies would pay a royalty on any oil produced, together with a profits tax (which can have expenditure offset against it). In some cases there are also various bonuses and ground rents (license fees) payable to the government - for example a signature bonus payable at the start of the licence. Licences are awarded in competitive bid rounds on the basis of either the size of the work programme (number of wells, seismic etc.) or size of the signature bonus.

  • Production Sharing contract (PSA) - A PSA is more complex than a Tax/Royalty system - The companies bid on the percentage of the production that the host government receives (this may be variable with the oil price), There is often also participation by the Government owned National Oil Company (NOC). There are also various bonuses to be paid. Development expenditure is offset against production revenue.

  • Service contract - This is when an oil company acts as a contractor for the host government, being paid to produce the hydrocarbons.

Reserves and resources


Resources are hydrocarbons which may or may not be produced in the future. A resource number may be assigned to an undrilled prospect or an unappraised discovery. Appraisal by drilling additional delineation wells or acquiring extra seismic data will confirm the size of the field and lead to project sanction. At this point the relevant government body gives the oil company a production licence which enables the field to be developed. This is also the point at which oil reserves
Oil reserves
The total estimated amount of oil in an oil reservoir, including both producible and non-producible oil, is called oil in place. However, because of reservoir characteristics and limitations in petroleum extraction technologies, only a fraction of this oil can be brought to the surface, and it is...

 can be formally booked.

Definition of oil reserves


Oil reserves are primarily a measure of geological risk
Risk
Risk is the potential that a chosen action or activity will lead to a loss . The notion implies that a choice having an influence on the outcome exists . Potential losses themselves may also be called "risks"...

 - of the probability
Probability
Probability is ordinarily used to describe an attitude of mind towards some proposition of whose truth we arenot certain. The proposition of interest is usually of the form "Will a specific event occur?" The attitude of mind is of the form "How certain are we that the event will occur?" The...

 of oil existing and being producible under current economic conditions using current technology. The three categories of reserves generally used are proven, probable, and possible reserves.
  • Proven reserves - defined as oil and gas "Reasonably Certain" to be producible using current technology at current prices, with current commercial terms and government consent- also known in the industry as 1P. Some Industry specialists refer to this as P90 - i.e. having a 90% certainty of being produced.
  • Probable reserves - defined as oil and gas "Reasonably Probable" of being produced using current or likely technology at current prices, with current commercial terms and government consent - Some Industry specialists refer to this as P50 - i.e. having a 50% certainty of being produced. - This is also known in the industry as 2P or Proven plus probable.
  • Possible reserves - i.e. "having a chance of being developed under favourable circumstances" - Some industry specialists refer to this as P10 - i.e. having a 10% certainty of being produced. - This is also known in the industry as 3P or Proven plus probable plus possible.

Reserve booking


Oil and gas reserves are the main asset of an oil company - booking is the process by which they are added to the Balance sheet. This is done according to a set of rules developed by the Society of Petroleum Engineers
Society of Petroleum Engineers
The Society of Petroleum Engineers is a not-for-profit professional organization whose mission is to collect, disseminate, and exchange technical knowledge concerning the exploration, development and production of oil and gas resources and related technologies for the public benefit and to provide...

 (SPE). The Reserves of any company listed on the New York Stock Exchange
New York Stock Exchange
The New York Stock Exchange is a stock exchange located at 11 Wall Street in Lower Manhattan, New York City, USA. It is by far the world's largest stock exchange by market capitalization of its listed companies at 13.39 trillion as of Dec 2010...

 have to be stated to the U.S. Securities and Exchange Commission. In many cases these reported reserves are audited by external geologists, although this is not a legal requirement. The U.S. Securities and Exchange Commission rejects the probability concept and prohibits companies from mentioning probable and possible reserves in their filings. Thus, official estimates of proven reserves will always be understated compared to what oil companies think actually exists. For practical purposes companies will use proven plus probable estimate (2P), and for long term planning they will be looking primarily at possible reserves.

Other countries also have their national hydrocarbon reserves authorities for example, Russia’s State Commission on Mineral Reserves (GKZ), to which companies operating in these countries have to report.

See also

  • Wildcatter
    Wildcatter
    A wildcatter is an American term for a person who drills wildcat wells, which are oil wells drilled in areas not known to be oil fields. A wildcatter notable for his success was Texan oil tycoon Glenn McCarthy....

  • Abiogenic petroleum origin
    Abiogenic petroleum origin
    Abiogenic petroleum origin is a largely abandoned hypothesis that was proposed as an alternative to theory of biological petroleum origin. It was relatively popular in the past, but it went largely forgotten at the end of the 20th century after it failed to predict the location of new wells.The...

  • Energy development
    Energy development
    Energy development is the effort to provide sufficient primary energy sources and secondary energy forms for supply, cost, impact on air pollution and water pollution, mitigation of climate change with renewable energy....

  • Future energy development
  • Hubbert peak
  • Petroleum
    Petroleum
    Petroleum or crude oil is a naturally occurring, flammable liquid consisting of a complex mixture of hydrocarbons of various molecular weights and other liquid organic compounds, that are found in geologic formations beneath the Earth's surface. Petroleum is recovered mostly through oil drilling...

  • Renewable energy
    Renewable energy
    Renewable energy is energy which comes from natural resources such as sunlight, wind, rain, tides, and geothermal heat, which are renewable . About 16% of global final energy consumption comes from renewables, with 10% coming from traditional biomass, which is mainly used for heating, and 3.4% from...

  • Giant oil and gas fields
    Giant oil and gas fields
    The world's 932 giant oil and gas fields are considered those with of ultimately recoverable oil or gas equivalent. Geoscientists believe these giants account for 40 percent of the world's petroleum reserves. They are clustered in 27 regions of the world, with the largest clusters in the Persian...

  • Upward continuation
    Upward continuation
    Upward continuation is a method used in oil exploration and geophysics to estimate the values of a gravitational or magnetic field by using measurements at a lower elevation and extrapolating upward, assuming continuity. This technique is commonly used to merge different measurements to a common...

  • NORM
    Naturally occurring radioactive material
    Naturally Occurring Radioactive Materials and Technologically Enhanced Naturally Occurring Radioactive Materials consist of materials, usually industrial wastes or by-products enriched with radioactive elements found in the environment, such as uranium, thorium and potassium and any of their...

  • Drill baby drill


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