OIL DRILLING 101: A STEP BY STEP BREAKDOWN
For many people, the common image that comes to mind when they think of oil drilling is the
“bubbling crude” that rose from the soil of Jed Clampet’s backyard in “The Beverly Hillbillies”.
But drilling for oil is nothing like the opening images of the popular television show. It is a
highly scientific and complex process that involves a team of qualified people to harvest oil and
gas that is deeply embedded in the earth’s surface. Oil and Gas Worldwide has been finding and
drilling oil and gas for the past 20 years. They have over 200 successful wells across Texas and
the Gulf Coast. To help you better understand what is actually involved in finding, preparing and
drilling for oil, they offer this helpful breakdown.
Oil and Gas Investment and Tax Benefits
During the first year, the intangible cost of drilling which includes: mud, labor, grease and
chemicals is completely tax deductible. The costs, which make up nearly eighty percent of the
cost of a well, are referred to as intangible drilling costs or IDC. On the contrary, the costs of an
oil and gas investment that are devoted to equipment are referred to as tangible drilling costs or
TDC. Like IDC, tangible drilling costs are also 100% tax deductible during the initial year of
investment.
What is Oil?
Oil comes from the remains of tiny plants and animals that died between 10 and 600 million
years ago. After the organisms died, they sank into the sand and mud at the bottom of the seas
and oceans. Over the years, the organisms decayed into carbon rich compounds that formed
organic layers under the earth’s surface. These organic layers mixed with sediments, forming
fine-grained shale, or source rock. As new layers and sediments formed, they exerted intense
pressure and heat on the source rock. This heat and pressure distilled the organic material in the
source rock into crude oil and natural gas.
Finding Oil
The task of finding oil and gas that is deeply embedded in the earth is first assigned to a
geologist. Modern day oil geologists start their search for oil by examining surface rocks and
terrain with the help of satellite images. They also use a variety of other high tech equipment
such as gravity meters, magnometers and sand sniffers. Gravity meters measure tiny changes in
the Earth's gravitational field that can indicate flowing oil. Magnetometers measure tiny changes
in the Earth's magnetic field caused by flowing oil. Sniffers are sensitive electronic devices
which detect the smell of hydrocarbons, which can indicate the presence of oil. Perhaps the most
common method used by geologists to find oil is seismology. Seismology creates shock waves
that pass through hidden rock layers. Geologists then interpret the waves that are reflected back
to the surface to determine if oil is present.
Preparing the Land
Once a geologist has selected a site, it must be surveyed to determine its boundaries and studies
to determine any possible environmental impact must be done. Lease agreements, permits, titles
and right-of way access for the land must also be obtained. For off-shore sites, legal jurisdiction
must be determined. Once the legal issues have been settled, a crew goes about preparing the
land. The land is cleared and leveled, and access roads are built. A well pad must be constructed
to separate the wildlife, crops or residences from the well. The pad must be large enough to
accommodate emergency, maintenance and construction equipment necessary for operations and
repairs during the life of the well. Because water is used in drilling, there must be a source of
water nearby. If there is no natural source, a well must be dug. Once the land and well pad have
been prepared, several holes are made to support the rig and its 90 foot derrick or mast. Some
rigs are built on ships or barges when there is no foundation to support a rig (as in marshes or
lakes). Depending upon the location of the drill site and its access, ancillary equipment is then
transported to the site by truck, helicopter or barge.
Casings and Cementing
Prior to the arrival of a big drilling rig, workers install “conductor casing”. Conductor casing,
which is usually no more than 20 to 50 feet long, is installed to prevent the top of the well from
caving in and to help in the process of circulating the drilling fluid up from the bottom of the
well. The casing is usually 16 to 20 inches in diameter. The hole for the casing is usually drilled
with a small auger on the back of a truck. The casing is then cemented in place.
Once the conductor casing is in place and the rig has arrived, workers start drilling a 600 to 1000
foot hole to accommodate the “surface casing”. Surface casing is a large diameter, low-pressure
pipe that is designed to protect the earth’s aquifer from contamination during drilling. The casing
itself comes in 40-foot sections, which are threaded at both ends. Workers, or "roughnecks",
attach the sections with a "collar" which also is threaded .The roughnecks then tighten the collar
with a large pipe wrench. Once the surface casing has been run into the hole, special cement is
pumped in. The cement seals the area between the surface casing and the side of the hole.
Drilling the Well
Once the surface casing is in place, workers can actually begin drilling for oil. The well is drilled
by a rig rotating pipe (or drill pipe) with a bit attached to the end. Drill pipe is added in 30 foot
lengths at a time. Weight is applied to the bit through the use of drill collars or thick walled
tubular pieces made from solid pieces of steel. A liquid consisting of fresh water and bentonite,
also called drilling mud, is circulated in the hole during drilling to remove cuttings and maintain
pressure. Blow out preventers or BOPs are installed at the surface to control any unexpected
changes in pressure.
Logging
Once the hole reaches the desired depth, logging begins. Logging is the process of determining
which of the formations between the surface and the bottom of the well contain oil and gas and
which formations contain merely water. An electrical cable and a "logging tool" are lowered into
the hole, and the tool sends electrical charges into the formation. The tool then sends geological
information to a "logging" truck where a computer processes the information. The information
which can be derived from logging includes rock type, porosity, and resistivity.
The Casing Point Decision
Once this information is gathered and studied, a decision is made to either plug or complete the
well. This is called the "casing point decision". If a decision is made to complete the well, then
more casing is lowered in to reach the bottom of the hole. Cement is once again pumped into the
hole to seal the area between the surface casing and the side of the hole. However, the cement to
hold this casing stops at least 500 feet below the surface to prevent natural gas leaks. Setting this
casing is the final step before well stimulation can begin.
Well Stimulation
Well stimulation consists of various techniques used to loosen the oil that is trapped in the
porous rock. Hydraulic fracing (pronounced fracking) is the most commonly used method.
Fracing involves pumping water at extremely high pressure into the hole until a crack develops
in the rock formation. Water and sand are then pumped into the crack. The sand holds the cracks
open until all the oil escapes the rock and flows into the casing.
Well Completion
Well stimulation consists of various techniques used to loosen the oil that is trapped in the
porous rock. Hydraulic fracing (pronounced fracking) is the most commonly used method.
Fracing involves pumping water at extremely high pressure into the hole until a crack develops
in the rock formation. Water and sand are then pumped into the crack. The sand holds the cracks
open until all the oil escapes the rock and flows into the casing.
Production
Once the well has been completed, it moves to the production stage. The oil and gas streams are
separated. The gas flows into a gas pipeline that carries it to processing plants and then onto the
consumer for purchase. Meters are installed from the wellhead to measure the amount of gas that
is being purchased. The oil that is separated flows into tanks and is stored until it trucked or
shipped via pipeline to a refinery.
At Oil and Gas Worldwide we invite you to experience the excitement of oil and gas coming
out of the ground. See for yourself firsthand. It could be yours. We are pleased to present
accredited investors a chance to invest. For more information please call 1-800-833-0563 or
log on to www.oilandgasworldwide.com
WELL PLANNING
1. OBJECTIVE
Well Planning is an orderly process which involves number of steps. The objective of well
planning is to design a drilling program which includes various operations related to the drilling
operation. The three major points to be considered while planning a well:
Safety of Manpower and equipment
Cost
Reach the target successfully
The flow path for Well Planning can be seen below:
Safety should be kept at highest priority. In oil and gas industry, safety of manpower comes
before the safety of equipments. Companies have a separate department which looks over the
safety issues - Health, Safety and Environment (HSE) department.
The well should be planned in such a way that the total cost incurred is minimum without
compromising with safety aspects.
The objective of drilling a hole to the given target depth will not be achieved if the final well
configuration is not usable. Usable means that the hole configuration (direction, inclination,
diameter etc) should be as per plan and the reservoir should not get damaged due to any activity
related to drilling operation.
2. ACTIVITIES BEFORE WE START DRILLING OPERATION
There are list of operations to be conducted before we start the drilling operation. Below is an
ordered sequence of operations/activity to be conducted before we initiate drilling:
Release of location
Survey of location (surface/subsea)
Civil work and foundation to be made for onshore drillsite and soil coring/ sea bed survey
to be done in case of offshore well.
Preparation of GTO
Preparation of well plan/programme
Preparation of bill of material and initiation of purchase procedure (if required).
Procedure for obtaining sanction for purchase of material.
Rig allocation and rig move.
3. INPUT DATA FOR WELL PLANNING
Following are the information required for well planning:
Well data package consisting of - seismic data, location map, structural map, expected
pore pressure, offset and correlation logs and information about formation type, top and
thickness.
Offset well data consisting of - bit record, mud report, logging data, drilling report, well
completion report, complication report and production/injection report.
Proposed logging, testing and coring programme.
Government regulations
Company policy
4. GEO TECHNICAL ORDER (GTO)
GTO is a document consisting of following data :
The data may be in form of table, chart, graph or picture.
a. General Well Data
Well Name
Well Number
Area
Location
Water Depth
Elevation
Well Type
Category
Profile
Objective of the Well
b. Geological Data
Depth
Age
Formation
Lithology
Interval of Coring
Electro Logging
Collection of Cutting
Angle of Dip
Oil/Gas Shows
Formation Pressure
Formation Temperature
Mud Loss/ Caving
c. Mud Parameters
Type of Mud
Specific Gravity
Viscosity
pH
Sand Percent
Filtration Loss
d. Drilling Data
Casing policy
Rise of cement
Type of drilling
Type and size of bit to be used for different interval
Number of bits expected
Meterage per bit
Weight on Bit (WOB)
RPM of rotary
Stand Pipe Pressure (SPP)
Pump Discharge
Bit nozzle details
Drilling time
Remarks, if any
e. Deviation Data
Well profile
Kick off Point (KOP)
Inclination
Azimuth
Surface Coordinates
Target Coordinates
5. DRILLING PROGRAMME PREPARATION
Drilling programme includes all th steps initiating from well design to final cost estimation. In
general, a drilling programme can be broken down into 12 main sections listed below:
Well Details
Well Objective
Casing Policy
Wellhead Selection
BOP Requirement
Cementing Programme
Deviation Programme
Survey Requirements
Mud Programme
Bit and Hydraulics Programme
Evaluation Requirements
Estimation of well Cost
Well Details:
Well detail includes the following information - Location, Field/Structure, Well Name, Well
Number, Well type, Location Data, Water Depth, Measured Depth (MD), True Vertical Depth
(TVD), Operator, Name of Rig, Type of Rig.
A typical Well Detail for a well is shown in figure below:
Well Objective:
The exploration department provides information regarding the objective of the well to be
drilled. The objective of the well may be to reach a certain target depth and evaluate a formation/
to exploit hydrocarbon/ any other objective.
Such details are provided in this section.
Example: "To test hydrocarbon prospect of fore reef facies in Oligocene, Miocene and
Carbonate in Eocence section of XYZ feature." or "To exploit Kalol pay sand".
Casing Policy
Casing policy includes data such as how many casing strings/ liners are to be used, casing
specification for different intervals, Casing seat selection, Casing design and recommended
practices.
Casing pipes are put into the wellbore for the following reasons:
To isolate troublesome formations like shale, lost circulation zones and flowing halites
To protect fresh water zone from being contaminated
To protect producing formation from mud and mud filtrate contamination
To protect caving or damage of weaker zones due to high head produced by the drilling
fluid column.
To provide stable seat for packers, liner hangers etc.
To provide a confined flow conduit
Most of the decision pertaining to casing policy is based on formation pore pressure. For a
development well the formation pore pressure can be obtained from the offset well data, but in
case of exploratory well no offset well data is available. For such cases seismic data are utilized
to predict formation pore pressure.
Other than formation pore pressure, formation fracture pressure is also used in casing design.
Formation fracture pressure is important while determining the the accurate position of casing
seat as well as designing drilling fluid for that interval. It either be obtained be offset well data or
by conducting leak off test. Once leak off test is carried out, equations such as 'Danies' are used
by employing values of Poisson's Ratio for a given formation to estimate probable fracture
gradient at other depths in the well. In case of continuous depositional basins, we can use
'Eaton's Equation' with suitable modification to estimate fracture pressure gradient.
Casing seat selection is done based on formation properties like the formation pore pressure and
formation fracture pressure.
For more details on Casing Seat Selection, please go through my blog post on CASING SEAT
SELECTION.
Casing design keeps the following four forces/pressure in consideration:
Burst
Collapse
Tension
Other loadings (if any)
The burst pressure acts in outward direction from inside the casing and if exceeds the pressure
acting inwards, the casing may burst out.
The collapse pressure acts in inward direction on the outer body of casing. If the collapse
pressure exceeds the pressure acting outwards, the casing may collapse.
Tension acts in downward direction. If the tension in the casing is more, it may lead to snapping
of casing from the weakest point.
For more details on Casing Design, please go through my blog post on CASING DESIGN.
Well Head Selection
After completing the casing design, we can determine the specification of well head which suits
the designed casing policy. The wellhead must be of correct pressure rating, designed for desired
services like H2S and capable of accommodating all the designed and contingent casing strings.
After the wellhead is selected, its specification should be clearly mentioned in the drilling
programme along with other related useful data.
BOP Requirement
The BOP selection for a particular well depends on the company policy and the anticipated
bottom hole pressure. The BOP should never be under rated, i.e., the pressure rating of BOP
should never be less than the anticipated BHP. The BOP stack data and the specification along
with the safe practices should be clearly mentioned in the drilling programme.
Cementing Programme
Completion
Once a well has been drilled and tested (logged, cored and pressure data), a decision must be
made whether to complete the well or plug it. Examination of the target reservoir rock porosity
and permeability may indicate that the potential flow of oil and gas from the well will not justify
the cost to complete the well. In these cases, the well is plugged with concrete in several places,
and the well is abandoned.
IIf, however, the well's test information indicates that the well will be commercially productive,
the well is completed. If the well is to be completed,
production casing is run down the hole and cemented.
Once the casing is in place, a tool called a "perforating
gun" is lowered into the well-bore to blast holes through
the casing, cement and into the reservoir. These holes
are made in order for there to be communication
between the reservoir and the production casing. Tubing
may then be lowered into the casing. A plug may then be
set above the perforations as a barrier between the
production casing and the tubing. This allows the earth's
natural pressure to push hydrocarbons to the well-bore
and to the surface through the tubing unless a pumpjack
is necessary to raise the fluids to the surface.
Several steps are taken at this time to cut out excessive
costs from the production process. A large drilling rig
will be replaced by a smaller, moveable completion rig.
Also, a completion team will use a swabbing method to
force the reservoir to give up fluids naturally. This
natural flow rate will be measured and compared to
other wells in the area. If it is not up to par, then further
measures will be taken to increase the volume of
production. These measures include chemically or
physically treating the reservoir to stimulate the flow.
Acid treatment can be used in a reservoir containing
limestone. A physical method would be to pump fluid
containing small beads into a reservoir under great
pressure to fracture the reservoir. The beads are then
used to keep the fractures open to allow the flow to
increase.
When a satisfactory rate of production has been established, the well will be tested to calculate
the maximum production for the well over a period of 24 hours. This is termed as a well's
potential. This and other completion information may be required by the state and will aid other
geologists and analysts scouting for oil and/or natural gas in the same area.
If a well contains more than one zone of interest, the operator will usually begin by producing
the lowest zone in the well-bore first and then work their way up the well-bore as each zone
becomes depleted. When a zone is completed, a multi-valve device will be connected to the
surface called a "Christmas tree." This device is placed at the top of the production casing and
will allow connections to flow the oil and gas. Equipment to process the recovered oil and gas is
placed near the well to make sure the oil or gas is ready for transportation.
Production
Production is the process of extracting petroleum from the underground reservoir and bringing it
to the surface to be separated into gases and fluids that can be sold to refineries. Production
begins with a high level of production and decreases through time until the well is ultimately
plugged and abandoned. This decrease in production is a natural result of the inevitable decline
in original pressure within the reservoir. The time period for commercial production and the rate
of production depends on the reservoir.
Either gas expansion and/or water encroachment provides the principal natural energy for most
petroleum reservoirs to produce. Both can operate as reserves are taken from the reservoir. The
reduction in pressure around the well-bore as hydrocarbons are extracted causes other
hydrocarbons to move into their space. This process continues until the energy is depleted and/or
the well makes too much water to be commercially productive.
Engineers take the past performance of a well and use it to project the future reserves of a well.
One way of predicting future production is to measure the percentage of decline in production
over a given period of time and use this rate of decline to estimate future reserves.
Reservoir Engineering
Reservoir engineering is the application of scientific principles to develop and maintain
petroleum reservoirs to maximize economic benefit. For example, carefully spacing out wells
over a reservoir and restricting production rates can make a difference in the overall productivity
of the reservoir. In 1904, Anthony Lucas, who had discovered Spindletop, spoke about the
decline in production. He claimed that "the field had been poked with too many holes and that
the cow was milked too hard." Oil operators in that day gave little thought to reservoir depletion
as they completed wells. They produced a well at the highest rate they could without regard for
well spacing. As a result, in the 1920's the federal government questioned the wasteful treatment
of reservoirs and decided to initiate studies. These studies consisted of applied mathematics,
geology, chemistry, fluid dynamics, and physics to aid in the analysis of hydrocarbons within a
reservoir. Reservoir engineering began as engineers implemented what the government learned.
Recovery
Initially an oil reservoir is in primary recovery. Gaseous fuels, natural gas or water are usually
present, and supply the needed pressure. Depending on the reservoir, once the natural flow
ceases, the reservoir will have yielded only 15 to 70 percent of the total volume of the oil it
contains. The rest is trapped in unconnected rock pockets or is bound to the rock and refuses to
migrate toward the wellbore.
Petroleum engineers have developed a number of ways to help the reluctant oil migrate to the
wellbore. The most common approach is to drill adjacent wells and use them to inject water into
the reservoir to force the oil to move toward the production wells. Another is to inject gas into
adjacent wells to maintain reservoir pressure or to enhance gravity drainage. Both approaches are
referred to as secondary recovery processes. Even after secondary recovery steps have been
taken, as much as 50 percent of the oil in the reservoir will remain. Tertiary oil recovery reduces
the oil's viscosity to increase oil production.
Step 1 – The Petroleum Geologist Prospects
Prospecting With Maps
Prospecting is the work the geologist does to locate a place to drill a well!
Most petroleum geologists work in an office, where they have access to a lot of data. This
includes electric logs, core records, drilling records, scout tickets, and production data. They use
the data to construct maps, cross-sections, and databases. These tools help them locate the best
places to drill wells.
The geologist studies his maps and cross-sections and runs computer simulations that help him
select the next best location to drill. He is always thinking about the next drilling location…or
prospect!
He will want to know what type of trap he is dealing with, and the composition of the
sedimentary rocks he will be drilling through. He needs to estimate the porosity of his
prospective “pay zone.” He wants to know if high pressures can be expected in the new hole. If
seismic data is involved in the prospect, he will consult with the geophysicist and get his opinion
of the prospect.
The geologist is interested in anything that happens in her area, particularly news of new
discoveries by other companies! If she sees a promising new area, she will recommend to the
land department that an attempt be made to lease the acreage; the leased land will then be
available for drilling later.
When the geologist has finally found the correct spot, she spends much time cross-checking to
ensure she has not missed anything. She wants to make sure she is not “surprised” by any of the
following:
Discovering the selected location was already drilled by another company 40 years ago
(and was dry)
Discovering that her company has no legal right to drill on the location (lease problems)
Unexpected faults or other geologic problems that crop up during drilling and ruin the
prospect
Discovering that the hole is being drilled in the wrong place after drilling begins (it has
happened!)
Step 2 – The Petroleum Geologist Packages The Deal
Packaging
Once the new location is defined, and the geologist is satisfied the prospect is a good one, the
work is just beginning. He has a large amount of rough data available in the form of work maps,
that he used to satisfy himself of the feasibility. Now, he must condense this large data mass into
a set of presentation materials that can be shown to non-geologists.
To package the deal, he will prepare sets of simplified maps and cross-sections, often highly-
colored and attractive to the eye. He may use Powerpoint, or other presentation software.
Creativity, design sense, and art skills are important during this phase. He needs to anticipate all
possible questions, and be prepared to answer each one of them. He must be very sure of himself
and his facts before he moves to the next step.
Step 3 – The Petroleum Geologist Sells the Deal
Selling the Deal
Now the geologist must step into a role that is often uncomfortable for him … selling his
prospect. It may be uncomfortable because geologists are scientists, with scientific backgrounds
and schooling. They are used to talking to other scientists. But now the geologist must become a
salesman in order to convince people who are not geology experts of the value of the
prospect. These people may include managers, bankers, engineers, and oil and gas investors.
He is looking to convince his clients that
the prospect is worth drilling,
investors will get a fair return for their money
the provided financing will be money spent wisely
Even an inexpensive test well can cost a couple of million dollars, and some exploration tests
may easily run into many tens of millions! So the geologist wants to be very sure of his
facts. All his clients must believe the proposed well has a reasonable chance of being successful.
The geologist will meet with the landman (females in the business are also called “landmen”),
who will ensure the company has the legal right to drill the well. He will consult with the
engineer, who will determine the exact cost of drilling the well. Marketing personnel will ensure
that the company has a market (buyer) for the oil, or a pipeline for the gas. Managers,
responsible for ensuring the company’s drilling budget is spent wisely, will also approve the
well. If outside financing will be used, the geologist will explain the prospect to representatives
of the bank or other individuals or partnerships that put up the money.
When he’s done, the geologist will have “sold” his prospect to anywhere from a few to several
dozen people.
Step 4 – The Petroleum Geologist Monitors the Drilling of the Well
Drilling the Well
Next comes the part that every geologist enjoys the most! Drilling the well! It has now been
several months since the geologist started working on his prospect. Now the surface owners have
been paid, permits acquired, and money raised. Roads and the drilling location have been built,
pipe and supplies have been ordered. Also, the energy company has engaged a drilling
contractor who owns and operates the drilling rig.
The drilling contractor will drill the well in the manner specified by the company. The contractor
will have leeway to select the type of drill bits to be used, hire a drilling crew, and make many
other decisions concerning the actual drilling. Virtually all holes are drilled by contractors.
Drilling a well is a very complex procedure involving many people. Nearly everything must go
right. Dangerous machinery, bad weather, and continuous mechanical failures must be faced
daily. The work goes on for weeks to months, 24 hours a day, nonstop. A slip-up at any point can
ruin the very expensive hole, cost a fortune, or get people killed.
The geologist will closely monitor all aspects of the drilling as it takes place. He will select an
electric-logging company, and the proper wireline logging tools to evaluate the hole. He will
usually hire a mud logging contractor to “sit” the well day and night. The mud logger will study
the well cuttings, report shows of oil and gas, and keep track of other things on the location. The
geologist will monitor the formation tops as they are encountered, and discuss the progress of the
drilling with the investors. The geologist will decide where and when to take cores or drill-stem
tests. Finally, after the well is logged with electric logs, he will examine the logs and recommend
the well be completed or plugged.
Step 5 – The Petroleum Geologist Works With The Engineer to Complete the Well
Completing the Well
At last the hole is drilled! At this time, a decision must quickly be made to attempt a completion,
or plug the well. Completion costs are extremely high, so it must be believed that the completion
will be worth the money. Justifying a completion can be a grueling process. It almost always
takes place in the middle of the night!
The job of completing the well is mainly in the hands of the petroleum engineer. The engineer
will decide what type of casing to use, and the method of cementing, He will design the
completion procedure (which may involve perforating, breakdowns, acid jobs, or fracks).
However, he will depend on the geologist to advise him on various topics. To start, the geologist
will give the engineer a list of formation tops, and tell the engineer exactly which zones should
be tested.
The geologist is often the person most familiar with the technical practices of other oil
companies in the area. He may suggest a certain style or method of perforation, or offer advice
on cementing techniques. He may be familiar with the most successful fracturing or breakdown
procedures in the area. He will relay this information to the petroleum engineer, who will usually
be thankful for the help! Working as a team, the geologist and petroleum engineer will get the
well completed, and put it to work providing energy for all of us!
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