Chapter 4 - Searching for and Evaluating Oil and Gas Flashcards Preview

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Flashcards in Chapter 4 - Searching for and Evaluating Oil and Gas Deck (56):

The ownership or control of an area of interest (onshore or offshore) may rest with a government, a business entity, or an individual. For that reason, and E&D firm must do what?

Enter into a business arrangement that will define the rights and obligations of all parties before exploratory drilling begins.


Two kinds of license arrangements are commonly used by the oil and gas industry around the world:

Production-sharing agreement and service or production contracts


Define Production Sharing Agreement.

The production-sharing agreement (PSA; also called a production-sharing contract [PSC]) is the most widely used business arrangement. Under a PSA, a government awards to a company the right to explore for and to produce hydrocarbons. The oil company bears the technical and financial risk of the initiative as it undertakes exploration, development, and ultimately production.


Under a Production Sharing Agreement, what happens if the efforts are successful?

If the efforts are successful, the company is allowed to use the money from sale of the produced oil to recover capital and operational expenses. The remainder is spit between the government and the company according to a predetermined ratio. Under some PSAs, changes in international oil and gas prices or production rates can affect the share of production awarded to the company.


Define Service Contract.

Under a service contract, an E&D company acts as a contractor for the host government and is paid to produce the hydrocarbons.


Define Production Contract.

Under a production contract, a company takes over an existing or underdeveloped field, works to improve production, and is paid an amount based on an agreed-to portion of the increased production.


In some production contract cases, what happens?

In some cases, a government will claim a royalty interest on any oil that a company produces. This gives the government the right to collect a stream of future payments, typically a percentage of the value of the oil produced. In addition, the government may impose taxes on profits realized by the company as a result of the oil production. A government may also demand payment of various bonuses and fees. One example is a signature bonus, to be paid by the company at the start of the license.


Exploration Activities: Define Geologic methods.

The geologic techniques involve mapping and sampling of rock formations that outcrop at the earth’s surface. Geologic information about an area is sometimes available from geologic agencies, based on earlier drilling activities for such resources as water, brine, coal, and minerals. These data can provide clues about fluid content, porosity, permeability, age and formation sequence (layering) of subsurface rocks.


Exploration Activities: Define Geochemical methods.

Visible surface features-oil or natural gas seeps on the ground, or specific geological features on the seafloor-sometimes indicate the presence of deep or shallow hydrocarbon deposits. Geochemical methods can evaluate the chemical and bacterial properties of the soil above suspected oil and gas reservoirs, looking for changes induced by the slow escape and upward migration of hydrocarbons.


Exploration Activities: Define Geophysical methods.

Geophysical analysis can help to determine subsurface strata depth, thickness, and rock properties.


List the geophysical procedures.



Which geophysical procedure is most widely used.

Seismographic techniques are widely used because they yield the most useful information about rock structures. In particular, they can identify traps capable of containing oil and gas.


Survey methods: Define Gravimetric survey.

In a gravimetric survey, geophysicists measure variations in gravitational force. These variations give clues about the properties and extent of subsurface structures.


Survey methods: Define Magnetic survey.

A magnetic survey measures minute variations in the strength and direction of the earth’s magnetic field. This can also provide information about subsurface rock structures.


Survey Methods: Define Seismic survey.

Seismographic or seismic surveys create and then study shock waves as they are refracted (bent) and reflected by subsurface rock interfaces. Seismic methods can routinely assess structures at depths of up to 20,000 feet, with accuracy of 10-20 feet.


What instruments are used to detect shock waves?

Geophones, or seismometers


Seismic survey: Define passive seismic survey.

A passive seismic survey detects natural, low frequency movements (up to 10 cycles per second) of the earth’s crust. Geophones are placed at multiple measurement points, typically several hundred yards apart, listen for periods lasting from sever hours to several days.


Seismic survey: Define active seismic survey.

In an active (or seismic reflection) survey conducted on land, researchers direct sound waves into the subsurface by using large, truck-mounted mechanical thumpers, or by setting off small, controlled explosions.


How are active seismic surveys conducted offshore?

Offshore, and active seismic survey is conducted by a specially designed vessel that tows two kinds of equipment as it moves slowly across the water. The first type is a sound source (typically, an air gun), mounted close to the stern that directs sound energy towards the ocean floor. The second type is a long plastic tube, called a streamer that can stretch up to five miles behind the vessel.


What is attached to the streamer in active seismic surveys conducted offshore?

A streamer is designed to float 20-50 feet below the water’s surface and to hold 200-300 carefully spaced vibration detectors, called hydrophones.


In cases where towing long streamers is not possible, a method called a seafloor seismic survey is typically used. Explain.

In this arrangement, one or more hydrophone streamers are laid out in fixed positions on the ocean floor and the seismic vessel with its sound source moves above them.


Define Seismic Imaging.

Advanced computer technology has enabled three-dimensional (3D) seismic imaging. This approach may increase the likelihood of successful locating a reservoir by as much as 50%. The seismic imagery can be presented to one or more analysts (sometimes wearing special goggles) in a true 3D environment. Images can be moved and rotated as desired, and the analysts in some cases can actually walk around inside the image itself.


Define Wildcat.

An exploratory well drilled far from any known hydrocarbon deposits is called a wildcat.


Define the cost of exploratory wells.

Selecting the number and location of exploratory wells is critical, because drilling is very expensive. Onshore wells can cost as much as $15 million depending on well depth, while a 100-day offshore drilling program in deep water can cost $100 million.


What is the key objective of exploratory drilling.

To determine the depth and thickness of pay zones-vertical sections of geologic formation whose pores may hold oil and gas (and probably some water) in varying concentrations.


Define Well Logging.

Logging refers to the performance of tests during (and sometimes after) the drilling process that allows geologists and drill operators to gain a clearer picture of subsurface formations and to monitor drilling progress. More than a hundred different logging tests can be performed.


Define Lithographic log.

A lithographic log is a physical description of the rock through which the well is being drilled. The information for this kind of log comes primarily from well cuttings-small chips of rock created by the drill bit and brought up to the surface by circulating fluid called drilling mud. Geologists take samples of regular intervals and study the chips under a microscope. They then prepare a written description of the well, showing what kinds of rock were found at what depth.


What would a more precise lithographic log entail?

A more precise lithographic log may be desired for a subsurface interval of interest. To prepare such a log, workers can use a special drill to extract a core-a cylinder of rock typically two to five inches in diameter and 20-90 feet long.


Define rotary coring.

In rotary coring, the bottom end of the drill has a bit comprising sharp teeth of tungsten steel or industrial diamonds arranged around its outer edge. It cuts in a circle around the outside of the wellbore. As the drill moves downward, the rock core passes up through the hollow bit and into a cylinder called a core barrel, mounted right above the bit.


Define percussion sidewall coring.

Alternatives to rotary coring punch or drill holes outward outward into the rock formation, perpendicular to the wellbore. One such approach is percussion sidewall coring, in which multiple small core tubes, or bullets, are fired into the sidewall to take samples. The tubes are then pulled back into the coring tool by wires and brought back up to the surface for study.


Define rotary sidewall drilling.

As the name implies, a small rotating bit drills into the sidewall to obtain a sample. The drill bit can be moved to take multiple samples, each of which is captured and segregated within the tool prior to retrieval.


Define Drill-time log.

A drill-time log, as the name implies, records the rate of penetration (ROP) of the drill as it moves down through the rock layers. Drilling time is a function of both drilling parameters (e.g., drill rotation, weight on the drill bit, and type of bit) and rock properties. Assuming drilling parameters are held constant, changes in ROP can indicate a change in the type of rock encountered by the bit.


Define mud log.

A mud log records the chemical analysis of drilling mud and well cuttings as well as being drilled, looking for traces of hydrocarbons. Correlating this analysis with drilling depth can help to pinpoint rock formations that bear gas or oil.


Define Wireline logs.

Several kinds of analyses can be conducted with wireline logs. Instruments of various kinds are mounted inside a special cylinder called a sonde-typically 25-75 feet long and 3-10 inches in diameter- that is moved slowly up and down a well on a flexible electrical cable, or wireline. In preparation for wireline logging, the drill string is removed, and the wellbore is typically filled with drilling mud.


What does a wireline log record?

Electrical, radiation-based, acoustic, and ultrasonic instruments record such parameters as resistivity, rock type, porosity (and pre size), density, fluids content, and even the orientation of layers in the rock.


Define Real-time methods.

Wireline logging is done after a well has been drilled. However, companies can also now take real-time measurements and conduct logging while drilling.


For the measuring type “Gamma” what is the measurement mechanism and parameter assed.

Natural gamma radiation.

Lithology (correlation); presence of potential reservoir rock; shale content.


For the measuring type “Density” what is the measurement mechanism and parameter assed.

Bulk density

Porosity; lithology


For the measuring type “Neutron” what is the measurement mechanism and parameter assed.

Hydrogen index

Lithology; porosity; gas indicator


For the measuring type “Acoustic” what is the measurement mechanism and parameter assed.

Sound travel time; acoustic waveform

Porosity; lithology; seismic calibration


For the measuring type “Resistivity” what is the measurement mechanism and parameter assed.

Electrical resistance of formation

Saturation; permeability


For the measuring type “Induction” what is the measurement mechanism and parameter assed.

Induced electrical current level



For the measuring type “Image” what is the measurement mechanism and parameter assed.

Resistivity or acoustic pixelated image

Sedimentology; fracture/fault analysis


For the measuring type “NMR” what is the measurement mechanism and parameter assed.

Nuclear magnetic resonance

Porosity; pore size; permeability; saturation


For the measuring type “Formation Tester” what is the measurement mechanism and parameter assed.

Pore pressure

Fluid types; pressures and contacts


For the measuring type “Spontaneous Potential” what is the measurement mechanism and parameter assed.

Electrical current between fluids of different salinity

Presence of potential reservoir rock


For the measuring type “Caliper” what is the measurement mechanism and parameter assed.

Wellbore dimension

Wellbore diameter


Define Measuring While Drilling (MWD).

Properties such as azimuth and deviation of the wellbore can be tracked by MWD systems. They can create a directional log, using magnetometers to show the orientation of the drill bit and the direction in which the well is being drilled.


Define Logging While Drilling (LWD).

LWD tools can measure virtually all of the parameters described in the section on wireline logging. Sensors are located just above the drill bit, powered by batteries or by small turbines driven by circulating drilling mud. Data can be sent to the surface as a series of digitally coded pressure pulses, where they are decoded by a computer.


Define cutting evaluation.

The analysis of rock cuttings (also called well cuttings) are an important evaluation tool. During well drilling, rock cuttings are usually collected every one to five feet. These cuttings are small fragments of rock that provide clues as to the presence of hydrocarbons; they are examined closely for evidence (“shows”) of oil and gas.


Why are cuttings are cores also useful?

For evaluating the conditions under which the rock layers were first formed and later transformed to provide favorable conditions for hydrocarbon generation, accumulation, and trapping.


Define Drill stem flow testing.

Drill stem flow testing is the direct sampling of a portion of a well to check for the presence of oil or gas. A vertical section (pay zone) of the well is temporarily completed (sealed above and below the zone to be tested); drilling mud is removed; and water, gas and oil are allowed to flow into the section.


At the outset of a project, discussions with key stakeholders can be vital to identify opportunities for collaboration, potential issues of concer, and procedures for obtaining needed approvals. Stakeholders may include?

- Government and regulatory bodies
- Development partners
- Neighboring property holders
- Nongovernmental organizations (environmental or human rights groups)
- Financial institutions
- Suppliers
- Contractors


For making decision to begin production, on the financial side of the ledger, estimates must be developed for:

- Capital costs (production platforms; drilling gear; and production facilities, e.g. compressors, pumps, separators, and instrumentation).
- Operating costs (including for maintenance and workovers).
- Personnel needs (workforce size and skills, labor costs, and overhead).
- Expected revenues (from oil and gas sales, tariffs, and payments from partners).


Before making the decision to begin production, special attention must be paid to agreements with a host government in regards to financial issues, such as:

- Taxes
- Royalty rates
- Royalty payment method
- Financial liabilities
- Involvement in social development or training programs

Related issues include expectations for inflation, future oil and gas prices, and exchange rates.


Before making the decision to begin production, what technical and operation factors must be considered?

- Expected rate of decline in well production over time
- Expected oil and gas quality (and required cleanup/treatment actions)
- Environmental regulations
- Proximity of storage facilities and pipelines (or other transportation methods) for getting oil and gas to market
- Planning for possible operational problems during drilling and production
- Decommissioning of equipment and sites at the conclusion of the project.