Oil Wells: From Planning through Production to Abandonment - Research Paper Example

Oil Wells: From Planning through Production to Abandonment Abstract The paper presents an overview of the entire process of developing an oil well from planning to abandonment. A five-step model is used: planning, drilling, completion, production, abandonment. The analysis is carried out in the wake of the BP disaster in the Gulf in April 2010. Technological, regulatory and political factors are all considered. 1. Planning Locating an oil well is a two step process. At the first stage a potential site is viewed as a lead. A lead, in common language, is a location that demonstrates all the characteristics of a site that would contain hydrocarbons. At the second stage, if site-specific examination has confirmed the presence of hydrocarbons and it is ready to drill, it is a prospect. At the first stage geologists look for the source, “organic matter that is buried and preserved in the ancient sedimentary rocks. … The most common organic-rich sedimentary rock (the source rock for most gas and oil) is black shale.” (Hyne, 2001, p. xxxiv) Everything from field surveys to remote sensing is employed at this stage of meta-analysis. Confirmation at this level is a lead. Currently many of these leads are found offshore, in deeper and deeper water. Infield.com reporting on prospects of the deepwater drilling sector earlier this year was full of optimism: Recent years have seen the growth and formalization of the global deepwater offshore industry. … Such factors have encouraged operators to invest billions annually chasing this offshore frontier, and across this report we see very few market segments associated with deepwater production not seeing upwards potential. (“Why the Oil Market …, 2010) The lead is then intensively analyzed. Again, an entire range of tools are used to determine the probability of success if wells are drilled. This may even extend to exploratory drilling-operations 2. Drilling Drilling-operations are, literally, very large scale drills. The bits shear away or crush the strata until they reach the hydrocarbon bearing target. The drill is lubricated with drilling fluid that keeps the drill bit cool and removes debris also. Various other operations can augment the drilling depending on the type of rock being drilled through. The entire environment of drilling has changed drastically in the last three months with the huge BP oil spill in the Gulf. US Interior Sec. Ken Salazar imposed a 6-month moratorium on deepwater drilling on May 27. A federal judge ruled the moratorium was extra-legal on June 22 and the US Department of the Interior immediately announced it would appeal. (Snow, 2010) The disaster and the political and economic uncertainty that it triggered were unexpected: It might be said about the entire industry that it is uncertain in many ways but these events have been extraordinary. In the immediate aftermath of the explosion the Wall Street Journal wrote, “the industry is booming.” It also warned, “the accident might temporarily damp the pace of oil development in the deepest reaches of the Gulf, which has become a significant exploration hotspot for international oil companies seeking new sources of petroleum.” (Cassellman, Gold and Gonzalez, 2010) BP shares have fallen significantly and political uncertainty and a public relations disaster have cast a shadow over the industry. 3. Completion Completion is the stage when drilling-operations are complete and production can begin. This means that all of the structural and functional elements of the rig are complete. It also means that all relevant legislation and regulations have been met, that approval from the relevant agencies has been granted, and safety measures are in place. The last step is the creation of perforations in the casing at the critical depth and the introduction of fracturing fluids to stimulate hydrocarbon movement. Again, the importance of the legal and political factors in this stage cannot be overstated. Deepwater drilling-operations in the wake of the Gulf oil disaster are a clear example. However, there are others. The political controversy around drilling in the Alaskan Wildlife Refuge is another example. These factors are at play in completion of all oil rigs marine and land-based. The federal government is completely reorganizing the Minerals Management Service. The new director, Michael R. Bromwich talked tough to the New York Times this week: “I think it is vital to create [investigative capability] both to investigate internal allegations of misconduct, and to pursue with aggressiveness and diligence allegations that the companies are not doing what they are supposed to do ...” (Broder, 2010) At the same time the BP disaster has highlighted attention on the various safety systems designed to prevent blowouts such as the BP disaster. The New York Times has published a collection of industry documents online. One, a decade old, questions the 'fail-safe' reputation of Blowout Preventers (BOP). (“RISK ASSESSMENT OF THE DEEPWATER … “, 2000) It has also been suggested that the relief well being drilled should become a permanent safety feature in wells, marine and land-based, to pack up the BOP. The technology and the regulation of completion is changing rapidly at the moment. The trend in the current industry climate is clearly towards greater regulation and more safety features 4. Production At the production stage the well begins to generate oil, revenue and return on the investment of capital and time. The type and quality of the hydrocarbons the well produces and the rate of flow determines the rate of return. There are three stages in the production phase. The first phase is known as primary recovery. At this stage natural geological forces create enough pressure to force the oil out. When pumps have to be installed or mechanical means used to increase the pressure the secondary recovery phase is entered. The tertiary phase involves the introduction of more complicated technology to heat the hydrocarbon and increase its viscosity. (Hyne, 2006, 135-161) The BP disaster, the regulatory environment and politics have little influence over the productivity of a well. In economic terms, “Production or lifting costs are the expenses associated with bringing oil and gas from the reservoir to the surface, separating the oil from any associated gas, and treating the produced oil and gas to remove impurities such as water and hydrogen sulfide.” (Petrostrategies, Inc.) 5. Abandonment According to the Schlumberger Oilfield Glossary abandonment consists of “the plugging of wells; removal of well equipment, production tanks and associated installations; and surface remediation.” (“Abandonment Costs”) It is all of the operations and costs associated with ending the production of a well. Conclusion The life cycle of an oil well involves five distinct stages. Each one has different technical demands and is influenced by diverse political, regulatory, and environmental issues. Each one must be completed cost-effectively for a well to be productive and profitable. To varying degrees the recent BP disaster has affected all five phases. It has affected the production step least and, the drilling and completion phases the most. Works Cited “Abandonment Costs” Schlumberger Oilfield Glossary. Web. http://www.glossary.oilfield.slb.com/Display.cfm?Term=abandonment%20costs. Accessed 23 June 2010. Broder, John M. (2010) “New Drilling Agency will have Investigative arm” New York Times. 23 June 2010. Web. http://www.nytimes.com/2010/06/24/us/24interior.html?ref=us. Accessed 25 June 2010. Cassellman, Ben, Russell Gold and Angel Gonzalez, (2010) “Blast Jolts Oil World” Wall Street Journal. 22 April, 2010. Web. http://online.wsj.com/article_email/SB10001424052748704133804575197613591134990-lMyQjAxMTAwMDIwODEyNDgyWj.html. Accessed 21 June 2010. Hyne, Norman J. (2001). Nontechnical Guide to Petroleum Geology, Exploration, Drilling and Production. 2nd ed. PenWell Corp. Tulsa, Oklahoma. Petrostrategies, Inc. http://www.petrostrategies.org/. Accessed 22 June 2010. “RISK ASSESSMENT OF THE DEEPWATER HORIZON BLOWOUT PREVENTER (BOP) CONTROL SYSTEM April 2000 - Final Report” Prepared for:CAMERON CONTROLS CORP. EQE INTERNATIONAL. Web. http://documents.nytimes.com/documents-on-the-oil-spill?ref=us#text/p1. Accessed 21 June 2010. Snow, Nick (2010) “Salazar, despite court setback, defends deepwater moratorium” Oil & Gas Journal 23 June 2010. Web. http://www.ogj.com/index/article-display/4023941628/articles/oil-gas-journal/drilling-production-2/drilling-operations/2010/06/salazar_-despite_court.html. Accessed June 24, 2010. “Why the Oil Market Favors the Deepwater Subsector” (2010) Web. http://seekingalpha.com/article/143958-why-the-oil-market-favors-the-deepwater-subsector. Accessed 20 June 2010. Read More