It is estimated that around 7,000 companies with combined annual revenue of $260 billion make up the oil and gas exploration and production industry. Major companies include Chesapeake Energy, Anadarko Petroleum, Murphy Oil,Devon Energy, and Occidental Petroleum. The industry is moderately fragmented: 10 percent of companies generate 60 percent of revenue.
This industry segment does not include transmission, refining, or retailing of petroleum and natural gas products.
Demand is driven by economic activity, population growth, and energy efficiency levels for residential, industrial, and transportational uses of oil and gas. Profitability of individual companies is driven by the success rate of new wells drilled and the ability to increase production from existing wells. Large companies have an advantage in access to capital, including the ability to buy or merge smaller companies. Small companies compete by focusing on a few geographic areas and developing expertise within those areas. The industry is capital intensive: average annual revenue per employee is about $2 million. Major products of the oil and gas exploration and production industry are crude oil (about 45 percent of industry revenue) and natural gas (55 percent). About 80 percent of US petroleum production comes from offshore wells and 20 percent from land-based wells.
Crude oil and natural gas are found in underground basins that meet certain geologic conditions. All exploration companies have staff geologists, and many hire companies specializing in geological research to identify areas with high potential for petroleum-bearing formations. Since the first US oil well was drilled in 1858, there have been hundreds of thousands of drillings (lately about 30,000 to 50,000 wells per year). Geologists use the geologic data from these drillings to identify areas with promise. To further improve the probability of finding petroleum, geologists can create 3D maps of underground rock formations using seismic waves from controlled explosions or sound generators (vibroseis).
Once a company selects an area to explore, it must obtain a lease on the mineral rights. Most companies hire a land services company to research the ownership of mineral rights. In most states, the mineral rights can be separated from the surface rights and owned by different parties. Land services companies employ landmen to present lease proposals to the mineral rights owners. The leases are for a fixed period, typically two to five years, and pay the owner a fixed fee for the right to drill during that period. The lease also defines access rights and rights to install and operate a well, along with royalty payments to the mineral rights owner for any hydrocarbon products extracted.
The exploration site is cleared and leveled and a drilling rig and crew are brought to the site. Rotary rigs consist of a derrick and power source (usually two or more diesel engines), along with ancillary equipment, such as desanders and desilters, mud pumps, stacks of pipe, and living quarters for the crew. The crew commonly has 20 to 30 members and operates in 8-hour shifts, 24 hours per day, 7 days a week until completion. A typical land-based well costs about $300 per foot to drill, and many wells cost $1 to $2 million to bring to production. The majority of commercial oil fields have been found at depths of 2,000 to 15,000 feet. Natural gas fields are generally between 2,000 and 25,000 feet. As a well is being drilled, geologists examine the cuttings evacuated from the borehole to evaluate the type and content of rock at each depth. Most exploration companies use a combination of their own rigs and crews and third-party drilling companies.
Gas flowing from a well has to be treated onsite to become transportable before it can be moved through a pipeline to a treatment plant. Onsite treatment of natural gas removes liquids and corrosive gases.
Offshore drilling can be conducted in the shallow waters of the continental shelf or in deep seas. In shallow waters up to 500 feet, a drilling rig, such as a jackup rig, is towed to the drilling site and part of the platform sunk to the bottom. Legs are lowered from the upper platform to the sunken platform and the upper platform is then jacked up to the desired height above the water. Drilling is then conducted in a manner similar to onshore drilling. In deeper waters, submersible rigs or deepwater drillships may be used. There are usually three shifts of crews for the offshore rigs – two living aboard, the third ashore. The shifts are then rotated in two-week intervals. Large rigs can have as many as 200 workers living aboard.
Wells require periodic workovers to maintain production levels. During service, a workover rig or a smaller service unit is used to raise and lower equipment into the well. Sand, rock, and other debris can be removed from the well using oil- or water-based mud or a nitrogen foam pumped into the well under high pressure. In some instances, wells can be drilled nearby and water or a gas (carbon dioxide or nitrogen) can be pumped in to drive the petroleum or natural gas toward the production well.
Information technology is used extensively in creating the seismic 2D and 3D subsurface maps of potential drilling areas. To monitor production, companies operate Supervisory Control and Data Acquisition (SCADA) networks. These networks connect sensors and other equipment at each production site back to a staffed central control facility. The communication network may be older legacy wireline or microwave connections or a modern wireless system.
Who Works in Oil Exploration
There is no better time to have started in or to be a petroleum engineer, geoscientist, or other oil exploration professionals. Within just a few years of starting his or her career, these people can earn over $100,000. Below is a breakdown of the jobs that are essential to most oil exploration.
What They Do: Geophysicists study the physical aspects of the earth and its atmosphere and apply scientific principles in order to solve problems. Almost half of the geophysicists in the country are employed by private companies in the mining, oil, and natural gas industries.
How They Fit in Oil Exploration: Geophysicists who work for mining, oil, and natural gas companies usually look for deposits of petroleum or minerals. They locate areas where there is a high probability of finding these deposits. For example, they measure and chart the sound waves created by explosions. The information they obtain from their tests and equipment readings helps them to determine the kinds and patterns of rock beneath the surface. Then they can advise company executives who decide whether to open a mine or drill a well. Readings taken from devices that measure magnetic forces also help geophysicists find out what is under the ground and sea.
Expected Background: To become a professional geophysicist, a bachelor's degree is necessary. Because geophysics is a broad science drawing from many fields, a bachelor's degree in geology, chemistry, mathematics, or engineering can qualify candidates for a beginning position or for graduate work in a branch of geophysics. Positions in research and exploratory geophysics often require at least a master's degree. Instructors of geophysics in four-year colleges usually need a doctoral degree.
Average Pay: $63, 800 per year
Oil Land Agents
What They Do: Landmen constitute the business side of the oil and gas and mineral exploration and production team. Company landmen negotiate deals and trades with other companies and individuals, draft contracts (and administer their compliance), acquire leases and ensure compliance with governmental regulations.
How They Fit into Oil Exploration: Independent field landmen serve clients on a contract basis and are generally the industry’s contact with the public as they research courthouse records to determine ownership and prepare necessary reports, locate mineral/land owners and negotiate oil and gas leases and various other agreements with them, obtain necessary curative documents and conduct surface inspections before drilling. Independent land consultants serve clients on a contract basis and much effort is directed to due diligence examinations required in the purchase and sale of companies and properties.
Average Pay: $63,600 per year
Oil Drilling Engineers
What They Do: A drilling engineer develops, plans, costs, schedules and supervises the operations necessary to the process of drilling oil and gas wells, from initial well design to testing, completion and abandonment. Engineers are employed on land, on offshore platforms or on mobile drilling units, either by the operating oil company, a specialist drilling contractor or a service company.
How They Fit into Oil Exploration: These engineers manage the complex drilling operation once the geophysicist identifies potential areas for oil. They manage the drilling teams and technology, maintain drilling safety and address environmental concerns.
Average Pay: $72,300 per year
What They Do: After the well is built they determine the best way to bring petroleum from deep in the ground to the surface.
How They Fit into Oil Exploration: Data gathering is key to these positions as production engineers maximize the amount of oil that come from a well. In addition, they must determine how best to separate oil, gas, and water once they all come out of the ground. The beginning of this process continues as production engineers work closely with reservoir engineers to make the well productive on an on-going basis. They plan and design methods to improve efficiency in production. Assure compliance with approved methods and quality standards. Has knowledge of commonly-used concepts, practices, and procedures within a particular field. Relies on instructions and pre-established guidelines to perform the functions of the job. Works under immediate supervision. Primary job functions do not typically require exercising independent judgment. Typically reports to a supervisor or manager.
Expected Background: Bachelor's degree in engineering and 0-2 years of experience in the field or in a related area.
Average Pay: $62, 400 per year
What They Do: Determine reservoir pressures using complex computer models and mathematical formulas.
How They Fit into Oil Exploration: Once these resources are discovered, petroleum engineers work with geologists and other specialists to understand the geologic formation and properties of the rock containing the reservoir, determine the drilling methods to be used, and monitor drilling and production operations. They design equipment and processes to achieve the maximum profitable recovery of oil and gas. Because only a small proportion of oil and gas in a reservoir flows out under natural forces, petroleum engineers develop and use various enhanced recovery methods. These include injecting water, chemicals, gases, or steam into an oil reservoir to force out more of the oil and doing computer-controlled drilling or fracturing to connect a larger area of a reservoir to a single well. Because even the best techniques in use today recover only a portion of the oil and gas in a reservoir, petroleum engineers research and develop technology and methods to increase recovery and lower the cost of drilling and production operations.
Average Pay: $98, 500 per year
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