In Pursuit of Petroleum

HOW IS IT FOUND?
The hunt for oil and natural gas uses tried-and-true principles of petroleum accumulation combined with the latest state-of-the-art tools.

Back in the earliest days of oil exploration, people looked for petroleum by drilling along creeks, on top of oil seeps, and on surface domes and structures. Most times, luck was more of a factor in their success than skill.

The science of petroleum exploration developed along with the industry. Today, the easy oil and gas has already been found, and the hunt for hydrocarbons is an extremely sophisticated, highly technical effort.

Oil and gas are now sought in many remote locations around the globe: in water more than 10,000 feet deep in the Gulf of Mexico, the deserts of Egypt and China, the mountainous western Canada and Colombia, the islands of Indonesia, and the swamps along the coasts of Louisiana and Nigeria’s Niger Delta.

Nevertheless, the fundamentals of geology remain unchanged. Oil and gas are found in sedimentary rocks, which cover about 75% of the earth’s land area. About 700 sedimentary basins dot the world; about half of these have been explored for oil and gas. Limestones, dolomites, sandstones, shales and siltstones are the hunting grounds for petroleum geologists.

It is within these layered rocks that the explorer searches for the four elements necessary for a petroleum accumulation: source, reservoir, trap and seal. Petroleum source rocks are often thick, black marine shales laid down in ancient seas. As soon as a plant or animal dies, bacteria attack its remains. If oxygen is plentiful, as in soil, bacteria will consume all the organic matter.

But in very fine-grained muds deposited on the sea floor, oxygen is limited and much of the organic matter escapes destruction. As these muds are buried by successive layers of sediment, rising heat “cooks” the organic matter, throwing off water, carbon dioxide and hydrocarbons.

Generating crude oil from organic matter in source rocks is a slow process, requiring mil- lions of years. Temperatures must be just perfect — oil can only be formed between 120 and 350 degrees Fahrenheit, temperatures found at burial depths between 5,000 and 21,000 feet. If the source rocks get any hotter, natural gas and graphite are formed instead.

Reservoir rocks are hosts for hydrocarbons. Much the opposite of good source rocks, reservoir rocks have porosity and permeability and are deposited in environments of considerable energy. High-energy environments such as waves and currents remove mud particles and most of the organic matter, leaving the pores open. Reservoir-quality sandstones and lime- stones usually contain very little organic matter; oil and gas migrate into reservoirs after they have been generated.

Movement of oil and gas from source rocks into reservoirs is called primary migration. Often times, reservoirs are full of oil that has moved just a short distance from surrounding shales. But, huge oil accumulations also exist in areas that are hundreds of miles from the original source rocks. Once crude oil and natural gas have formed, they continually seek lower pressures, moving through natural conduits in the earth’s layers. If no barriers intercede, hydrocarbons will eventually seep out on the surface.

What often occurs, however, is that migrating oil and gas hits a sealing layer beyond which it cannot pass. Seals are sedimentary rocks with negligible permeabilities that do not allow oil and gas to migrate any farther upward. Thick salt layers provide excellent seals, as do shales.

Oil and gas are now contained in a trap. Folded or faulted rock layers can form structural traps, which are commonly anticlines, domes or horst blocks. Stratigraphic traps form as a result of changes within the rock layers, as when porous rocks such as reefs or river-channel sandstones are surrounded by nonporous rock. Combination traps, with both structural and stratigraphic elements, are also possibilities.

Once in a trap, gas, oil and water separate by density, with gas rising to the cap position, oil in the middle and water occupying the bottom. The boundary between gas and oil is called the gas-oil contact; the boundary between oil and water is the oil-water contact.

PETROLEUM EXPLORATION TOOLS
Maps have always been key tools of petroleum exploration. Since the early 1900s, explorers have found many oil and gas fields by drilling domes and anticlines that could be identified from surface mapping. The size, position, dips and strikes of surface beds are all recorded with instruments such as plane tables and Brunton compasses. Today, the map of an explorer includes this “traditional” information, as well as that gleaned from aerial photographs and satellite pictures.

Early geologists made common use of sample and drilling information from wells. As technology advanced, well log data and core data added a great deal of knowledge.

Today, information from such instruments as formation sampling tools can assist in the evaluation of both rocks and fluids in a wellbore. Among wireline tools that provide valuable insights into the subsurface are electric, radioactive and acoustic logs, as well as dipmeters, borehole imaging logs and magnetic resonance imaging logs. Data from drillstem tests are also incorporated into a subsurface picture. Even geochemical techniques, which seek to correlate surface measurements of various chemical compounds with the underground occurrence of hydrocarbons, are sometimes called into play.

Geophysicists also bring some tremendous tools to the trade of petroleum exploration. Three common geophysical methods used to look for oil are magnetic, gravity and seismic exploration. Magnetic methods measure the strength of the Earth’s magnetic field at a specific point on the surface, while gravity techniques seek to determine the strength of the Earth’s gravity at a location.

Both methods are useful in reconnaissance mapping and are usually employed in the early stages of basin evaluation.

Seismic is the real workhorse of the industry, however. In seismic prospecting, acoustic sources such as dynamite, vibrations or sonic impulses from compressed air transmit sound into the ground. As acoustic signals pass into the subsurface, they are reflected and refracted off the various sedimentary layers. Signals that bounce back to the surface are recorded and processed to form an image of the subsurface.

Two-dimensional (2-D) seismic yields a cross-sectional view of the subsurface in two planes, length and height, while a 3-D survey delivers a complete volume of data that allows the explorer to image the subsurface in fine detail. A further enhancement is 4-D seismic, which adds the dimension of time to the geophysical process. In this technique, successive 3-D surveys are acquired over an area to track the movements of fluids in the subsurface.

Traditional seismic relies on the information carried in compressional waves, but an emerging approach extracts subsurface information carried in shear waves. This type of seismic, called multi-component or full-wave seismic, is very good at imaging stratigraphic reservoirs and fractured reservoirs.

WHERE SHALL WE DRILL?
Nonetheless, piles of highly processed seismic data, satellite images, high-tech well logs and computer-aided mapping programs can’t create oil or gas where none exists. The explorer still must hunt for some basic clues.

One of the most tried-and-true axioms of petroleum exploration is that the best place to look for oil and gas is near where it’s already been found. Working in a known hydrocarbon basin eliminates many of the uncertainties of source, reservoir and seal, and the hunt can focus on location of possible traps.

The first phase of exploration is a search for traps similar to those that are already producing. Explorers are also ever alert for possibilities of new trap types that have not yet been known to produce in an area, such as updip pinchouts of permeability or fault traps.

Oil and gas “shows” in previously drilled wells nearby are of supreme importance, because they are direct indications that a trap exists. Other important clues include changes in the rate of dip, dip reversal or flattening of dip of the rock layers. The location and position of faults is another key. These can indicate an unusual structural condition.

Seismic attributes offer other clues. Amplitudes of seismic signals contain tremendous geological detail, and much effort is invested in interpreting these subtleties. One seismic signature may show a promising gas-charged sand; another may indicate a tight limestone bed with no commercial potential.

Geologists and geophysicists formerly worked with pencils and paper maps and sections; today they build complex, 3-D interpretations on their desktop workstations. The fundamentals of prospecting remain unchanged, but phenomenal strides have been made in an individual’s ability to view and integrate data from many sources.

THE DECISION TO DRILL
If, after carefully weighing all the data—and being fully aware of its varying degrees of reliability—an explorer still believes that an un-drilled trap does exist, a prospect has been born. The land situation, productive possibilities and expected costs must be considered to mature the idea. Lots of great prospects are never drilled because the company couldn’t tie up the acreage through leasing the mineral rights. Other ideas are discarded because the potential reserves are judged insufficient in light of a prospect’s risks and drilling expenses.

Some prospects that were once thought to be viable become impossible and must be deferred or canceled if oil and gas prices fall lower than the original assumptions. A prospect is a labor of many months or even years. Companies typically have many internal screenings to evaluate prospects. They consider the risks of the geological and geophysical factors; estimate possible reserves and production rates; design the drilling and completion programs; and estimate the operating costs, royalty and tax burdens, and arrive at estimated cash flow.

Prospects are ranked against other opportunities available to the company, such as drilling in other U.S. basins or other countries, or acquiring reserves or acreage from another company. And, they are reexamined as oil and gas prices, company budgets and capital sources fluctuate.

If the decision to drill is made, federal and/or state drilling permits are secured and a drilling rig is hired. The abstract idea will finally be tested with money and with iron. In the end, Mother Nature will have the last word, despite all the high-tech equipment, intellectual effort, and land and seismic expenses that have been invested by the prospector.

(Source: Excerpt from E&P: An Investor’s Guide—Peggy Williams)