Oil Exploration / Hydrocarbon Exploration

Oil Drilling:
Oil is a fossil fuel that can be found in many countries around the world. Oil is formed from the remains of tiny plants and animals (plankton) that died in ancient seas between 10 million and 600 million years ago. After the organisms died, they sank into the sand and mud at the bottom of the sea. Over the years, the organisms decayed in the sedimentary layers. In these layers, there was little or no oxygen present. So microorganisms broke the remains into carbon-rich compounds that formed organic layers. The organic material mixed with the sediments, forming fine-grained shale, or source rock. As new sedimentary layers were deposited, they exerted intense pressure and heat on the source rock. The heat and pressure distilled the organic material into crude oil and natural gas. The oil flowed from the source rock and accumulated in thicker, more porous limestone or sandstone, called reservoir rock. Movements in the Earth trapped the oil and natural gas in the reservoir rocks between layers of impermeable rock, or cap rock, such as granite or marble.

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 geophysics. Oil Exploration is a very expensive high risk operation usually undertaken only by large corporations and Governments. There are onshore hydrocarbon deposits worldwide and cost 100 to 1000 million dollars or more. A prospect is a potential trap which contains the hydrocarbons.

Potential petroleum prospects could be a source rock, a reservoir or a trap.

A source rock :- When organic-rich rock such as oil shale or coal is subjected to high pressure and temperature over an extended period of time, hydrocarbons form which could be extracted.

Reservoir:- This could be a porous sandstone or limestone. The oil collects in the pore within these rocks. The hydrocarbons must flow to the surface during exploration. For this it needs to be permeable.

Trap:- Since hydrocarbons are buyoant they could be trapped within a structural fault.

Petroleum resources are owned by governments of the host country and also some private corporations who are able to to afford the huge cost of investment and also pay the exhorbitant taxes. Companies would also pay royalty on oil produced together with profit tax, bonuses and other ground rents. A PSA or a production sharing contract is a system wherein the company bids on the percentage of the production that the host government receives. A company can also act as a contractor to the company and is paid only for their manufacturing capablities.

Oil Reserves could be of 3 types:

Proven Reserves, Probable Reserves and Possible Reserves.

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 (SPE).