The upstream segment of the oil and gas industry contains exploration activities, which include creating geological surveys and obtaining land rights, and production activities, which include onshore and offshore drilling.
Crude oil is categorized using two qualities: Density and sulfur content.
Light and sweet crude oil is usually priced higher, and therefore more sought-after, because it is easier to refine to make gasoline than heavy and sour crude oil.1 Oil volume is measured in barrels (bbl), which equals 42 gallons.2
Natural gas is found in both associated formations, meaning it is formed and produced with oil, and non-associated reservoirs. Gas can either be dry (pure methane), or wet (exists with other hydrocarbons like butane). Although wet gas must be treated to remove the other hydrocarbons and other condensates before it can be transported, it can increase producers' revenues because they can sell those removed products.3
Oil and gas exploration encompasses the processes and methods involved in locating potential sites for oil and gas drilling and extraction. Early oil and gas explorers relied upon surface signs like natural oil seeps, but developments in science and technology have made oil and gas exploration more efficient. Geological surveys are conducted using various means from testing subsoil for onshore exploration to using seismic imaging for offshore exploration. Energy companies compete for access to mineral rights granted by governments by either entering a concession agreement, meaning any discovered oil and gas are the property of the producers, or a production-sharing agreement, where the government retains ownership and participation rights.4 Exploration is high risk and expensive, involving primarily corporate funds.5 The cost of an unsuccessful exploration, such as one that consisted of seismic studies and drilling a dry well, can cost $5 million to $20 million per exploration site, and in some cases, much more. However, when an exploration site is successful and oil and gas extraction is productive, exploration costs are recovered and are significantly less in comparison to other production costs.6
Proven reserves measure the extent to which a company thinks it can produce economically recoverable oil and gas in place, as of a certain point in time, using existing technology.7 The estimates for proven reserves are updated over the life of a lease, based on regular reassessments.8 Technology can impact the estimates: For example, the advances in hydraulic fracturing and horizontal drilling caused the U.S. Geological Survey to increase its proven reserves estimate for the Marcellus Shale by 40 times the original value.9 In addition to technology, prices and existing infrastructure influence reserves estimates.
Oil and gas production is one of the most capital intensive industries: It requires expensive equipment and highly skilled labors.11 Once a company identifies where oil or gas is located, plans begin for drilling. Many oil and gas companies contract with specialized drilling firms and pay for the labor crew and rig dayrates.12 Drilling depths, rock hardness, weather conditions and distance of the site can all affect the drilling duration.13 Tracking data using smart technologies can help with drilling efficiency and well performance by providing real-time information and trends.14 While every drilling rig has the same essential components, the drilling methods vary depending on the type of oil or gas and the geology of the location.15
In onshore drilling facilities, the wells are grouped together in a field, ranging from a half acre per well for heavy crude oil to 80 acres per well for natural gas.16 The group of wells are connected by carbon steel tubes which sends the oil and gas to a production and processing facility where the oil and gas are treated through a chemical and heating process.17 Onshore production companies can turn on and off rigs more easily than offshore rigs to respond to market conditions.18
Offshore drilling uses a single platform that is either fixed (bottom supported) or mobile (floating secured with anchors).19 Offshore drilling is more expensive than onshore drilling, and fixed rigs are more expensive than mobile rigs.20 Most production facilities are located on coastal shores near offshore rigs.
Fracking, or hydraulic fracturing, is a technique using a high pressure liquid to extract oil or gas from geologic formations. While the technology has existed since the 1940s, it became more economical in the late 1990s when George Mitchell's Mitchell Energy & Development Corporation patented slick water fracturing.21 The use of fracking has led to recovering gas, followed by oil, from previously inaccessible parts of drilled wells in addition to extractions from coalbed wells, tight sand formations and shale formations. Fracking is now used in 90% of new U.S. oil wells, especially as the number of conventional reservoirs has decreased.22
The North American Industry Classification System is the standard used by Federal statistical agencies in classifying business establishments for the purpose of collecting, analyzing, and publishing statistical data related to the U.S. business economy. Codes start with two-digits at the broadest industry level, and become more specific at the six-digit level. Mexico, Canada and United States data is comparable at the five-digit code level. Other region, country, and organization-specific industry codes exist for data tracking purposes. Knowing how a particular industry or a company within an industry is classified can help when researching, since information is often organized within these codes.
|21||Mining, Quarrying, and Oil and Gas Extraction|
|2111||Oil and Gas Extraction|
|211120||Crude Petroleum Extraction|
|211130||Natural Gas Extraction|
|333131||Mining Machinery and Equipment Manufacturing|
|333132||Oil and Gas Field Machinery and Equipment Manufacturing|
Additional works on production and exploration in the oil and gas industries in the Library of Congress may be identified by searching the Library of Congress Online Catalog under appropriate subject headings. Choose the topics you wish to search from the following list of Library of Congress subject headings to link directly to the Catalog and automatically execute a search for the subject selected. For assistance in locating the many other subject headings which relate to this subject, please consult a reference librarian.