The Upstream Oil and Gas Life Cycle- A Non-Scientific Perspective
Oil and Gas is an interesting subject by itself. There is plenty of debate about a ton of subjects in the field. For example, the term fossil fuel relates to the theory that oil deposits form due to the decomposition of organic matter, specifically dinosaurs. This organic matter gets trapped in mineral formations such as shale and are pressurized and subjected to heat over thousands of years forming what is called an oil deposit. These deposits are often highly pressurized containing oil, natural gas, water, sulfur and so on.
Early oil exploration was not an exact science. Wild Cats even tried to use magic to find oil. Yes, magic. It’s called Dowsing. It’s a technic where you take two rods or sticks and cross them. The user then walks the field until the two sticks react to an underground water, oil or mineral deposit. They mark the spot and a well is drilled. Times have advanced. Today oil companies use geological surveys, seismic testing and highly scientific techniques to identify mineral deposits potentially holding oil.
Once a potential deposit is identified, the operator drills a well. Traditional wells were vertical meaning straight up and down. As drilling got more sophisticated, operators were able to turn the drill bit in the hole giving birth to the concept of horizontal drilling. This drilling technic allows a well that surfaces on tract A to turn and go beneath tract A, B and C. This allowed greater oil capture.
Despite the advancement of drilling, it was still very difficult to access oil in certain types of formations, particularly shale. With a shale formation, the non-oil minerals can be very fine, and everything is tight meaning that oil does not easily flow from point A to point B. Fracking is the process of injecting fluid down the drill hole. This fluid exists at various locations at very high pressure and essentially fractures the shale. Additional, other minerals are injected into the whole that keep the fractures open. This process allows the trapped oil in the formation to flow easier and quicker.
Horizontal drilling coupled with fracking is what has given birth to America’s oil independence. America as opposed to countries such as Saudi Arabia does not have a ton of free-flowing oil formations. Saudi Arabia’s oil fields are highly porous meaning a vertical well can produce a fair amount of oil. Allot of America’s oil is trapped in low-porosity shale formations that are not economical to drill without fracking.
Depending on the formation, oil and gas of varying grade is extracted from the ground. Oil goes into oil storage tanks while gas is transferred up the line for processing.
Trucked oil is typical purchased as is and adjusted for quality and temperature. Piped oil may require treatment prior to entering the pipeline.
Gas often requires on-site treatment to reduce the level of potentially corrosive elements such as sulfur. Upon treatment, the gas enters a gathering line where additional compression, separation and treatment may occur. The gathering line delivers the gas to a processing plant. Processing plants vary on the methods used to separate products. I believe cryo is the current gold standard for processing plants. It involves reducing the temperature of the gas to various level. This reduction in temperature allows gas-byproducts such as propane and ethane to drop out in liquid form. Upon separation, natural gas is delivered into an interconnecting pipeline for delivery across the state or country while gas by-products are moved and sold separately.
Depending on your contract, either the operator or the plant may conduct the sale of certain gas products. Oil is often sold by the operator.
Every situation is different. The landowner comes into play at various points in this conversation as well. Hopefully, this brief overview helped to map out some of the process for you. If you need help with a particular aspect of the upstream process, please contact me for a free 30-minute consultation or check out our oil and gas law page.
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