Upstream oil and gas production and operations identify deposits, drill wells, and recover raw materials from underground. It includes the search, exploration, drilling, and extraction phases. They are also often called exploration and production (E&P) companies. Exploration and production are the early stages of energy production, which includes searching and extracting oil and 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 wells to deliver the greatest possible return on investment.
This sector includes related services such as:
· Rig operations
· Feasibility studies
· Machinery rental
· Extraction of chemical supply
The resource owners and operators of E&Ps work with a variety of contractors, such as engineering procurement and construction (EPC) contractors, as well as with join-venture partners and oil field service companies.
Uses traditional vertical or slightly deviated well to extract and produce oil & gas
1. Horizontal Drilling
Horizontal wells reduce the size of the drill pad footprint and enable production along the length of a reservoir
2. Hydraulic Fracturing or Fracking
3. Subsea Engineering
Four stages of E&P
1. Search & Exploration
· Involves the search for hydrocarbons, the primary components of petroleum and natural gas.
· Land surveys are performed to help identify the areas that are the most promising before drilling.
· Geologists study rock formations and layers of sediment within the soil to identify if oil or natural gas is present. The process can involve seismology
· Once it has been determined that there appear to be reserves beneath the ground, the test drilling process can begin
2. Well Construction
· After identifying potentially viable fields, a well is drilled to test the findings and determine whether there are enough reserves to be commercially viable for sale.
· Making a hole by drilling or grinding through the rock beneath the surface. A steel pipe is inserted into the hole so that the drill can be inserted in the pipe
· Core samples are taken and studied by geologists, engineers, and paleontologists to determine if there is the proper quality of natural gas or petroleum in the underground reserve to produce and sell commercially
· Production of oil wells begins.
· Engineers estimate how many wells will be needed and the best method of extraction. The estimated cost of the number of wells is determined.
· The construction of the platform begins, which could be on land or offshore.
· The necessary environmental protections are also implemented at this stage.
· Companies can drill horizontally tapping into vertical wells to search for natural gas pockets, which can produce far more natural gas than a typical vertical well.
· Oil and gas deposits are extracted from the wells. Sometimes, natural gas can be processed at the same site as the well.
· Petroleum is usually extracted on-site, stored temporarily, and eventually shipped via a pipeline to a refinery.
4. Abandonment of Wells
Once a site is no longer productive, meaning all reserves have been extracted and all opportunities have been exhausted, the wells are plugged or sealed. Attempts are made to restore the area in an effort to help the environment.
Business Key Characteristics
· High Risk – High Return
· Highly Regulated
· Impact by global politics
· Technology Intensive
Key Players of Upstream
Major oil companies also called integrated oil companies-IOC also operate assets in other segments of industry like (ExxonMobile-bp-Chevron-Shell)
National Oil Companies are industry participants that are owned and managed by government around the world like (ADNOC-Saudi Aramco-Pemex)
Those are companies that are not integrated into other segments. They are solely dedicated to finding and producing Oil and Gas like (Apache-Halliburton)
· Oilfield Services
Those are companies that provide the specialized equipment, services and technical skills needed for Exploring, Drilling, Completing, Testing, Producing and Maintaining crude oil and gas wells. They are companies that do not produce oil and gas or own assets that contain hydrocarbon reserves
On a typical drilling well site there could be over 30 Oilfield service companies handling the mechanical, technical and analytical operations needed to successfully drill and complete a well
Appreciation: Thanks to all originators who participated in the materials and the videos of this article