Oil 101: Introduction to Oil and Gas - Upstream What is Upstream? This Midstream content is derived from our Oil 101 Upstream ebook and can be found in our oil and gas learning community. This Upstream module includes the following sections (use the links below for quick access): -Introduction to Upstream -Upstream Business Characteristics -Oilfield Services -Reserves – Formation and Importance -Production – The First Step in Adding Value -The Unconventional Future of Upstream Upstream What is Upstream? Most oil and gas companies’ business structures are segmented and organized according to business segment, assets, or function. The upstream segment of the business is also known as the exploration and production (E&P) sector because it encompasses activities related to searching for, recovering and producing crude oil and natural gas. The upstream segment is all about wells: where to locate them; how deep and how far to drill them; and how to design, construct, operate and manage them to deliver the greatest possible return on investment with the lightest, safest and smallest operational footprint. Exploration The exploration sector involves obtaining a lease and permission to drill from the owners of onshore or offshore acreage thought to contain oil or gas, and conducting necessary geological and geophysical (G&G) surveys required to explore for (and hopefully find) economic accumulations of oil or gas. Drilling There is always uncertainty in the geological and geophysical survey results. The only way to be sure that a prospect is favorable is to drill an exploratory well. Drilling is physically creating the “borehole” in the ground that will eventually become an oil or gas well. This work is done by rig contractors and service companies in the Oilfield Services business sector. Production The production sector of the upstream segment maximizes recovery of petroleum from subsurface reservoirs.

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Oil 101:
Introduction to Oil and Gas
What is Upstream?

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What Oil 101: Upstream Will Cover
This Oil 101: Upstream module includes the following sections:
Introduction to Upstream
Upstream Business Characteristics
Oilfield Services
Reserves – Formation and Importance
Production – The First Step in Adding Value
The Unconventional Future of Upstream

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Company Structure
Most oil and gas companies are segmented and organized
according to business segment, assets, or function.

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Generally, this consists of:
UPSTREAM MIDSTREAM
DOWNSTREAM

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Upstream = E&P
The upstream segment of the business is also known as
the exploration and production (E&P) sector.

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E&P encompasses activities related to searching for,
recovering and producing crude oil and natural gas.

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It’s all about the
WELLS.

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Where to locate them,
How deep and how far to drill them,
How to design, construct, operate and manage
them...

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...to deliver the greatest possible return on
investment with the lightest, safest and smallest
operational footprint.

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Exploration
The exploration sector involves obtaining a lease
and permission to drill.

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Drilling
Drilling is physically creating the “borehole” in the ground
that will eventually become an oil or gas well.
This work is done by rig contractors and service companies
in the Oilfield Services business sector.

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Simple or Complex
Wells can be drilled on land or in miles of water. They can
be less than 100 feet (30 meters) deep and totally vertical,
or 20,000 feet (6,000 meters) deep and horizontal.

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Drilling
There are even highly complex “J” and “S” configurations
with numerous branches, or laterals, emanating from the
original, or “mother”, hole.

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Production
The production sector of the upstream segment maximizes
recovery of petroleum from subsurface reservoirs.
Production brings the oil to the surface.

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Production - Decline Curve
The inevitable fact of every oil or gas field is that
production will eventually decline.
The question is how fast?

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An ‘Unconventional’ Upstream
Unconventional resources are considered by the petroleum
industry to be any resources extracted, or produced, by any
method other than the traditional vertically drilled well.

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This includes horizontal drilling and hydraulic fracturing, or
fracking.

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Hydraulic Fracturing
Hydraulic fracturing, or fracking, is the process of injecting
water, chemicals, and sand into wells.
The resulting fractures in surrounding rock formations
allows for hydrocarbons to escape.

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Deepwater Drilling
Some of the largest oil and gas discoveries of the last
decade have been found in deep water off the coasts of
Africa and South America as well as the Gulf of Mexico.

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Upstream Business Characteristics

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Unbelievably Complex
The upstream industry is arguably the most complex of all
the oil and gas business sectors.

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Who are the Players?
Independents, Majors, NOCs,
Oilfield Services

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Independents
The companies that focus solely on Exploration and
Production are called Independents.

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Independents are known for their ability to make decisions
and move quicker than other industry participants.
They are also considered early adopters of the more
innovative drilling and production technologies.

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Majors
Major Oil Companies (also called Integrated Oil Companies
– IOCs) also have assets in the downstream — the
refineries and service stations that bring the products to the
end-user customers.

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These companies have the prominent and advertised
brands that you are familiar with:

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NOCs
National Oil Companies (NOCs) are those industry
participants that are owned and managed by governments
around the world.

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Oilfield Services
What is the oilfield services sector?

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Oilfield Service
The Oilfield Services sector of the Upstream segment
consists of companies that build the infrastructure and
provide the specialized equipment.

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The Oilfield Services industry provides the following support:
Exploration services
Drilling services
Well completion
Production services
Offshore

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Oilfield Services
Oilfield services and supply companies do not typically
produce oil and gas or own the assets that contain them.

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Oilfield Services
At a typical drilling well site, there could be 25-30 different
oilfield service companies handling the mechanical,
technical and analytic operations needed to successfully
complete a well.

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Oil Reserves
Reserves, Reservoirs, Types of Crude Oil

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Oil Reserves
The vast amounts of crude oil and natural gas trapped
underground are referred to as reserves.

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Oil Reserves
Proven reserves are the estimated quantities which
geological and engineering data demonstrate can be
recovered in future years from known reservoirs, assuming
existing economic, technical and operating conditions.

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Oil & Gas Reservoir Characteristics
Oil and gas are not found in easy-to-access underground
pools or puddles but, instead, are trapped in various rock
formations and geological structures.

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Oil & Gas Reservoir Characteristics
There are four key types of geological formations needed
to have oil and gas reserves in place

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Source rock – where the oil or gas was formed

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Reservoir – where oil or gas reside, having migrated
through microscopic structures in the surrounding rock

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Seal – which is impermeable and stops the migration of the
oil and gas

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Trap – which is the combination of the reservoirs and seals

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Types of Crude Oil:
Heavy, Light, Sweet, Sour

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Types of Crude Oil
There are hundreds of different grades of crude oil that
come out of the ground.
Most commonly, the crude will be described as light or
heavy and sweet or sour.

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Types of Crude Oil

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There’s So Much More...
This material was taken from our free Oil
101 course.

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Who are we?
EKT Interactive has been a leading oil and gas
training company since 1986.
Visit us at www.ektinteractive.com to learn
more.