Oil 101 – A FREE Introduction to the Oil and Gas Industry
So, What is Upstream?
Most oil and gas companies’ business structures are organized according to business segment, assets, or function.
The upstream segment of oil and gas is also known as exploration and production, or E&P because it encompasses activities related to searching for, recovering, and producing crude oil and natural gas.
Upstream is all about wells, where to locate them; how deep and how far to drill them; and how to design, construct, operate and manage them to deliver the greatest possible return on investment with the lightest, safest and smallest operational footprint.
In fact, the E&P sector should probably be called the EDP sector – because “you can’t find oil if you don’t drill wells.”
Exploration
Obtaining the Lease
Let’s start with exploration which involves the operator obtaining a lease and permission to drill from the owner of onshore or offshore acreage thought to contain oil or gas.
Then the operator must conduct geological and geophysical surveys to select the first well site to explore for, and hopefully find, economic accumulations of oil or gas.
This well is often called a “wildcat well.”
Drilling is physically creating the “borehole” in the ground that will eventually become a productive oil or gas well.
This work is typically done by rig contractors and service companies in the Oilfield Services business sector. On a wellsite, there can be as many as 30-40 different service contractors providing expertise to the operator.
Wells can be relatively simple or unbelievably complex. Wells can totally vertical for miles or both deep and horizontal.
There are also highly complex “J” and “S” configured wells with numerous branches, or laterals, emanating from the original, or “mother”, hole. These are called “deviated wells.”
Production
Finally, let’s discuss production, where reserves are “converted to cash” by maximizing the recovery of hydrocarbons from subsurface reservoirs. Essentially, production is efficiently bringing the hydrocarbons to the surface and treating them as needed to make them marketable.
So that’s the basics of E&P. We will drill deeper into each of these operations in the complete Oil 101 course at a later date. Now, let’s talk about unconventional resources, clearly the hottest topic in oil and gas over the last decade.
Unconventional Future of Oil and Gas
Unconventional resources are defined as any resource extracted, or produced, by any method other than the traditional vertical or slightly deviated well.
The three main sources of technological breakthroughs that have made unconventional developments profitable include:
Horizontal drilling
Hydraulic fracturing
Subsea engineering (especially deep water production)