How to Explore for Oil

Three Parts:Knowing Where to LookMapping Potential ReservoirsDrilling an Exploratory Well

Exploring for oil requires patience, scientific know-how, legal and economic expertise, and a tolerance for risk. While exploratory wells are successful about 60% of the time,[1] those numbers are closer to 10% for wildcat wells (drilled in areas greater than 1.5 miles from the nearest producing well).[2] Because the cost of drilling is rising quickly,[3] you will want to do everything you can to be sure your exploratory well finds oil.

Part 1
Knowing Where to Look

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    Know that oil is found in sedimentary rock formations. Oil is formed from microscopic ocean organisms that sank to the bottom of the ocean millions of years ago, forming layers of organic material and mud.[4] Time and pressure transform the mud into shale, the organic material into oil, and surrounding sand and calcium deposits into sandstone and limestone.[5] Because the oil is less dense than rock, it migrates laterally and vertically through fissures in the rock and through tiny pours in the surrounding sandstone until it is blocked by a barrier of impermeable rock, called a trap (usually composed of shale or a salt dome). This trapped oil is called a reservoir.
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    Use regional geology as a guide to where oil might be found. Look for areas with thick layers of sedimentary rocks and for features that might indicate an oil trap.
    • Domed formations of rock often indicate salt domes – formed when areas of the ocean repeatedly dried out, leaving layers of salt, which were later buried by sediments.
    • Creases in the rock or faults can cut off permeable layers with impermeable rock.[6] Imagine layer upon layer of rock, with a permeable layer sandwiched between two impermeable ones. Oil would typically escape the permeable layer by moving to the sides, but if a fault or fold of rock moves one of the impermeable layers up or down, it can block the lateral flow of oil, as shown here.
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    Know where oil reserves are most frequently discovered. Because oil results from the rapid burial of microorganisms in a low oxygen environment, it is often found in the off shore coastal margins of ocean basins (like the Gulf of Mexico or Caspian Sea), which provide these conditions. The movement of tectonic plates (gigantic sections of the earth's crust)[7] has also left many oil deposits in arctic or desert environments.[8]
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    Consider drilling in or near areas with proven reserves. The further you move away from proven oil fields, the less likely you are to find oil. Historically, wildcat wells (drilled in areas greater than 1.5 miles from the nearest producing well) only find enough oil to pay for drilling 6-12% of the time. Only 2-3% yield enough oil to justify an adjacent well, and only 1 out of 700 discover enough oil to develop a field.[9]
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    Look for seeps or leaks. If no trap is present, oil will flow to the surface. The resulting surface oil is called a seep, and seeps are a good indicator that there may be oilfields nearby in areas where impermeable rock does form a trap. Many traps, particularly in the ocean, also have small fissures that allow for oil to slowly leak out. The detection of trace amounts of hydrocarbons in the water might indicate a reservoir.[10]

Part 2
Mapping Potential Reservoirs

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    Map and study the structures you are considering. In 2007, the cost of drilling an exploratory well averaged $4 million,[11] and offshore wells cost much more: $20 to $100 million.[12] Before you drill, you’ll want to do everything you can to make sure the reservoir is large, porous enough to hold lots of oil, and permeable enough to produce at high rates.[13]
    • Porosity – Even though sandstone appears solid, it is in fact porous, much like a sponge. Porosity is a measure of a rock’s ability to hold fluid. It is normally expressed as a percentage of the total rock which is taken up by pore space. For example, sandstone with 8% porosity will by 92% solid rock and 8% open space containing oil, gas or water. 8% is the minimum porosity required for a decent oil well.[14]
    • Permeability – Permeability is a measure of how easily fluid flows through a rock. If it takes a lot of pressure to squeeze fluid through, then the rock has low permeability (low perm). Shale, for instance, while highly porous, has very low permeability, making it difficult to pump oil from shale. If fluid passes through easily, then it has high permeability (high perm). Sandstone is typically highly permeable. Permeability is usually expressed in units call millidarcies. Productive oil reservoirs come from rocks that have ten to several hundred millidarcys.[15]
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    Conduct a magnetic survey. Oil is found in sedimentary rocks, which are non-magnetic, as opposed to magnetic igneous rocks, which are formed from cooling lava or magma.[16] An airborne magnetometer can measure the magnitude of the earth’s magnetic field over a large area, helping to determine if enough sedimentary rocks are likely to be present. A field balance can then be used on the earth’s surface to measure magnetism in specific locations, helping to map the location of sedimentary and igneous rock formations.[17]
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    Use seismic data to map the density, thickness, and position of the rock. Seismic data is collected by sending sound waves into the earth’s crust. There are two types of seismic data which, when combined and analyzed with computers, can help locate low density rock layers (sandstone or limestone) topped with higher density rock (shale), as well as folds, faults, or domes that might create traps.[18]
    • Refraction sends sound waves down to a bed of rock, which they travel along before bouncing back up to sensors. Because sound moves faster through denser rock, refraction can be used to map out rock densities.[19]
    • Reflection is based on the echo of sound waves off layers of varying density rock, which reflect the waves back to the surface, allowing engineers to determine the position and thickness of layers.[20] By using multiple geophones or hydrophones (sensitive microphones on land and water, respectively), scientists can create three-dimensional images of the earth’s sediment layers.[21]
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    Evaluate core samples at promising sites. A core is a narrow column of rock that is taken from the top to bottom of a well. It shows the rock in sequential order as it appears in the ground. Core samples provide more detailed information on porosity, permeability, and saturation of the rock, as well as indicating how thick the various layers are.[22]
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    Use the data you have collected to create a 3D visualization of the potential reservoir. Running the seismic and magnetic survey data through computer programs can create a three dimensional picture of the strata that will let you know if the potential reservoir is large enough to be profitable.[23]

Part 3
Drilling an Exploratory Well

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    Have your landman or negotiator obtain a production sharing contract (PSA) through the government (for non-US oil rights) or a lease with the private landowner or Federal or State offshore block (for US oil rights). You don't want to spend a lot of money drilling an expensive exploration well if you don't own clear sub-surface rights.
    • Under a PSA, a state engages a foreign oil company (FOC) as a contractor to provide technical and financial services for exploration and development operations. The FOC is given a share of the oil produced as a reward for the risk taken and services rendered. The state remains the owner of the petroleum produced.[24]
    • Leases in offshore blocks or federal lands are arranged through federal or state government-organized sales.[25]
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    Drill an exploratory well. In 2010, 61% of exploratory wells were successful,[26] but the rate for wildcat wells is much lower (6-12%).[27]
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    Analyze rock samples as you drill. Checking the porosity, permeability, and saturation of the rock can help you know if it is worth it to keep drilling your exploratory well.[28]
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    Test the well’s productivity. You will want to determine flow rate in terms of standard barrels per day and the reservoir size in order to estimate the lifetime well productivity.[29]
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    Decide whether it will be profitable to set up a producing well. Plugging and abandoning an exploratory well costs only a few thousand dollars, whereas completing the well for production can cost from $50,000 to millions of dollars, depending on the depth of the well and whether it is on land or at sea.[30][31] To make sure it is worth it to proceed, estimated lifetime productivity must be weighed against the costs of completing the well, operating expenses, the market for oil, and the local tax/royalty regime.

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