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Oil and Gas Industry: A Research Guide

Upstream: Production and Exploration

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. 

  • Density is measured by API gravity, and ranges from light (high API gravity/low density) to heavy (low API gravity/high density).
  • Sulfur content ranges from sweet (low sulfur content) to sour (high 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

The advent of shale gas in the United States is one of the biggest breakthroughs in the history of the energy industry. Prior to its development, the United States was viewed as a growing natural gas importer. But, production from shale gas has catapulted the United States into being the world's largest producer of natural gas and a fast-growing exporter. The two primary technological advances that made production from shale and other tight formations economically possible were horizontal drilling and hydraulic fracturing.

Exploration

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.

Production

Arthur Rothstein, photographer. Oil wells, Marion County, Illinois. 1940. Farm Security Administration - Office of War Information Collection. Library of Congress Prints and Photographs Division.

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

Onshore

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

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.

Hydraulic Fracturing

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

Resources

The following materials link to fuller bibliographic information in the Library of Congress Online Catalog. Links to additional online content are provided when available.

Upstream Industry Codes

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

Library of Congress Catalog Searches

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.

Notes

  1. U.S. Energy Information Administration, “Crude Oils Have Different Quality Characteristics,” Today in Energy, (July 16, 2012). Back to text
  2. Steven M. Gorelick, Oil Panic and the Global Crisis (Oxford, UK: Wiley-Blackwell, 2010), 20. The abbreviation bbl originates with the Standard Oil Company who provided the barrels (bl) with the company's trademark blue paint, resulting in a blue barrel or bbl. Back to text
  3. Michael D. Tusiani and Gordon Shearer, LNG: A Nontechnical Guide (Tulsa, OK: PennWell Corp, 2007), 70. Back to text
  4. Tusiani and Shearer, LNG: A Nontechnical Guide, 70.; Martin S. Raymond and William L. Leffler, Oil & Gas Production in Nontechnical Language, 2nd ed., (Tulsa, OK: PennWell, 2017), 329.Back to text
  5. Tusiani and Shearer, LNG: A Nontechnical Guide, 70.Back to text
  6. Oil and Gas Exploration and Production: Reserves, Costs, Contracts. (Paris: Centre for Economic Management, Institut Français du Pétrole, c2004), 66. Back to text
  7. Stewart Glickman and Shang Yang Chuah, Oil, Gas & Consumable Fuels Industry Surveys (New York: CFRA, 2019). Back to text
  8. Tusiani and Shearer, LNG: A Nontechnical Guide, 89. Back to text
  9. Ron Gecan, Natalie Tawil and Mark Lasky, “The Economic and Budgetary Effects of Producing Oil and Natural Gas from Shale,” in Producing Oil and Natural Gas from Shale, ed. Joelle Bolton (Nova Science Publishers, 2015), 20. Back to text
  10. Tusiani and Shearer, LNG: A Nontechnical Guide, 89. Back to text
  11. Darshan Kalyani, Oil Drilling & Gas Extraction in the US, (IBISWorld Industry Report, 2018). Back to text
  12. Morgan Downey, Oil 101 (Wooden Table Press, 2009), 103. Back to text
  13. Oil and Gas Exploration and Production: Reserves, Costs, Contracts. (Paris: Centre for Economic Management, Institut Français du Pétrole, c2004); Kalyani, Oil Drilling & Gas Extraction in the US. Back to text
  14. Martin S. Raymond and William L. Leffler, Oil & Gas Production in Nontechnical Language, 2nd ed., (Tulsa, OK: PennWell, 2017), 325. Back to text
  15. Charles F. Conaway, The Petroleum Industry: A Nontechnical Guide, (Tulsa, OK: PennWell, 1999), 121. Back to text
  16. Conaway, The Petroleum Industry: A Nontechnical Guide, 173. Back to text
  17. Oil and Gas Exploration and Production: Reserves, Costs, Contracts. (Paris: Centre for Economic Management, Institut Français du Pétrole, c2004). Back to text
  18. Travis Hoium, “Offshore vs. Onshore Drilling: Which is a Better Investment?” The Motley Fool External, (Jan. 29, 2013). Back to text
  19. Conaway, The Petroleum Industry: A Nontechnical Guide, 177. Back to text
  20. Kalyani, Oil Drilling & Gas Extraction in the US. Back to text
  21. "Unlocking the Potential of Unconventional Gas," Pipeline & Gas Journal 240, no. 3 (Mar 2013): 26-30,32-34. Back to text
  22. Mary Tiemann and Adam Van, Hydraulic Fracturing and Safe Drinking Water Act Regulatory Issues, R41760,, (Congressional Research Service, July 13, 2015)  Back to text