Exploration & Production fundamentals

Learn essential theoretical and practical aspects of the exploration and production of oil and natural gas.

The lifecycle of a project

Galp is present along the lifecycle of an Exploration & Production project. Consult the activities which we are involved in and the countries where we are present.

The lifecycle involves the following stages:

Gaining access

This stage involves technical, political, economic, social and environmental analyses of the possible areas of interest.

Associated with these aspects, an analysis of competitiveness must be included to verify whether it will hold any competitive advantage, which may be the case if the Company already has a presence in a given country, even if in another area of business.

Exploration

Usually, investments in exploration are made many years before the production actually starts. Therefore, it is essential that there is at least one scenario in which the estimated production justifies the investment made.

During the exploration stage the geological history of the area is studied and the probability of hydrocarbon occurrence is quantified. A programme of works and of magnetic, gravimetric and seismic studies are also prepared.

Prospecting

In the exploration of oil deposits, geophysical methods are used, such as seismic methods that enable us to investigate the structure of the earth in depth.

When prospecting on land, equipment can be used that triggers low intensity earthquakes.

The vibrations produced cross the rock layers and are reflected as they pass from one layer to another.

Vibrations reflected by the deep layers are detected on the surface by devices called geophones and are recorded using very sophisticated equipment.

Drilling

When studies suggest the existence of an oil field of economic size, a survey is carried out.

For this, a drilling rig capable of drilling holes in the subsoil to great depths is mounted on a suitable platform.

At the end of a pipe column, a special drill bit drills into the rock and opens a well.

The materials ground by the bit are dragged to the surface by the drilling mud which at the same time cools the bit and also serves as a lubricant.

Appraisal

The purpose of the appraisal stage is to evaluate the potential identified during the exploration stage.

The appraisal’s objective is to reduce uncertainties, namely those related to the levels of recoverable volumes in a reservoir. In other words, the purpose of this stage is not to find additional volumes, but to confirm those that have already been found.

After gathering the necessary information for the initial estimate of reserves and resources, the next step is to check what options exist for developing the field.

The goal of the viability study is to document the technical options available, of which at least one should be economically viable.

The study should include:

  • The design of the process.
  • The size of the equipment.
  • Locations and the systems of oil lifting and export.

It should include, from early on, a cost estimate and an implementation schedule.

At this stage, four options must be considered:

  1. Proceed with the development.
  2. Follow an appraisal plan with the goal of optimising the technical development.
  3. Sell the discovery. Many companies specialise in applying their skills in the field of exploration without the intention of investing in the development activity.
  4. Abandon the area.

Development

Based on the results of the viability studies, and assuming that at least one option is viable, a conceptual development plan (CDP) for the field can be formalised and executed, moving on to the development phase.

The main purpose of the development plan is to serve as the project’s conceptual specification regarding surface and subsea facilities and the operational and maintenance principles required to support a proposal for the necessary future investment.

Production

The production stage begins as soon as the first quantities of marketable hydrocarbons (first oil or first gas) start to flow in the wellhead.

Typically, the production stage has three distinct phases:

  1. Ramp-up phase, with the beginning of production of the first wells.
  2. Plateau phase, in which the production facilities are operating at full capacity, with a constant production rate.
  3. Decline phase, generally the longest phase, during which all wells will have entered into production decline.

Abandonment

Usually there are two options for deferring the abandonment phase: by reducing operating costs or by increasing production.

When the production of the reservoir is no longer enough to cover costs, but the infrastructure is still in its service life, there may arise an opportunity to develop neighbouring reservoirs, which by their size would not be economically viable on a standalone basis. Ultimately, all economically viable reserves will be produced and the field will be abandoned. The challenge will be to minimise the environmental impacts without major costs.

The process to abandon the field is agreed with the local government authorities. Usually the wells are closed with cement and the surface infrastructures will be removed, some eventually being reusable.
The subsea equipment, such as well completions, may be totally or partially removed depending on what is agreed with the authorities.

In the onshore operations, the dismantling of the facilities can be done gradually, avoiding a high cost peak coinciding with the end of the field’s production.
However, for the offshore operations, the costs can be much more significant, and harder to be phased.

The origin and composition of oil

Oil results from the decomposition, over time, of organic matter – plant and marine animals residues, among others. This organic matter is transformed as it is exposed to different pressures and temperatures, depending on its depth.

Over time the deposition of organic matter is subjected to an increase in temperature and pressure, caused by the weight of the sediment deposits which accumulate in successive layers.

The transformation of organic matter is divided into four different stages:

Primary migration

The parent rock is a sedimentary rock in which the organic matter is transformed. With the increased pressure and the fracture of the parent rock, the oil flows into the upper geological formations. This is called primary migration.

After the oil comes out and the pressure of the parent rock consequently decreases, the fractures are again closed.

Secondary migration

After the primary migration, oil moves through permeable formations until it finds an impermeable formation or trap. This movement is called secondary migration.

The trap consists of the presence of a low permeability sealant rock layer that prevents the migration of oil to the surface, superimposed on a reservoir rock that may or may not contain an oil accumulation.

Traps can be classified as structural or stratigraphic:

  • Structural traps – originated by structural deformation of the lithology.
  • Stratigraphic traps – caused by a change in the lithology in which sealant rocks, such as salt, are deposited on the reservoir rock.

Origin of oil

The geological evolution processes, which are very slow, caused successive layers of sediments to be deposited on the bottoms of the sedimentary basins. This process gave rise to very thick sequences with the most recent layers covering the oldest.

As some layers are covered by others, their weight causes the older ones to experience increasing pressures at the same time as their temperature increases.

Over the years, organic matter is transformed into carbon-rich compounds, using the oxygen dissolved in the sediments.

When a sedimentary rock has a lot of organic matter under conditions to produce large amounts of hydrocarbons, it is called source rock.

The hydrocarbons generated in the source rocks move through more porous rocks to other surfaces that are termed reservoir rocks.

When the reservoir rocks, appropriately covered by impermeable rocks, are deformed by tectonic movements, they can retain the hydrocarbons forming accumulations or deposits of oil.

.

Classification of hydrocarbons volumes

According to the definitions approved by the SPE and the WPC, proven reserves are the quantities of oil which, by analysis of geological and engineering data, can be estimated with reasonable certainty as being, from a given date, commercially recoverable from known deposits and under current economic conditions, operating methods and government regulations.

If deterministic methods are used, the term "reasonable certainty" is intended to express a high degree of confidence that the quantities will be recovered.

If probabilistic methods are used, there should be at least a 90% probability that the quantities actually recovered will in fact be equal to or exceed the estimate.

The definition of current economic conditions should include historical oil prices and associated costs.

Usually, reserves are considered proven if the production capacity of the deposit is supported by the current production or by formation tests. In this context, the term ‘proven’ refers to the actual quantities of oil reserves and not just to the productivity of the well or deposit.

The area of ​​the deposit considered as proven includes (1) the area delineated by drilling and defined by fluid contacts, if applicable, and (2) the undrilled portions of the reservoir that can reasonably be considered commercially productive on the basis of available geological and engineering data.

Reserves may be classified as proven if the facilities to process and transport those reserves to the market are operational at the time of the estimate or if there is a reasonable expectation that such facilities will be installed.

2P reserves correspond to the sum of proven (1P) and probable reserves. According to the definitions approved by the SPE and the WPC, probable reserves are a category of unproved reserves.

Unproved reserves are based on geological or engineering data similar to those used in the estimates of proven reserves but in relation to which technical, contractual, economic or regulatory uncertainties preclude such reserves from being classified as proven.

The probable reserves are the quantities of oil which, by analysis of geological and engineering data, have lower probability of being recovered than the proven reserves, but higher than the possible reserves.

If probabilistic methods are used, there should be at least a 50% probability that the quantities actually recovered will in fact be equal to or exceed the 2P estimate.

3P reserves correspond to the sum of proven, probable and possible reserves. According to the definitions approved by the SPE and the WPC, possible reserves are a category of unproven reserves.

Unproven reserves are based on geological or engineering data similar to those used in the estimates of proven reserves, but in relation to which technical, contractual, economic or regulatory uncertainties preclude such reserves from being classified as proven.

Possible reserves have a lower probability of being recovered than probable reserves.

If probabilistic methods are used, there should be at least a 10% probability that the quantities actually recovered will in fact be equal to or exceed the 3P estimate.

Contingent resources refer to quantities of oil estimated, at a given date, as being potentially recoverable from known deposits but that are not yet commercially recoverable.

This may be the case for several reasons such as those related to the maturity of the project (the discovery needs further appraisal in order to provide support for the development plan), those of a technical nature (it’s necessary to develop and test new technology that allows the estimated quantities to be commercially explored) or those related to the market (the sales contracts are not yet in place or the infrastructure needs to be installed in order to bring the product to the clients).

The quantities classified in this category cannot be considered as reserves.

Prospective resources refer to quantities of oil estimated, at a given date, as being potentially recoverable from unknown deposits by the application of future development projects.

The volume estimate of a particular prospect is subject to commercial and technological uncertainties.

The quantities classified in this category may not be considered as reserves nor as contingent resources.

 

Print:

Share: