PROCESSES
Before Drilling
Before you can begin drilling for hydrocarbons, there are a couple of issues that need to be resolved. For example, where will the drill rig be placed? On whose land? Do you have permission? Do you own the mineral rights to remove the hydrocarbons once they are discovered? Have you obtained the proper permits from a myriad of governmental agencies? How do you know that oil and gas are present beneath the drill rig? There are a number of considerations before the drill rig begins operations. These activities generally fall into the broad categories of mapping, leasing, and permitting.
Mapping
Mapping deals with land surface determinations and measurements. It is the methodology by which we describe where things are located. In a world where individual property ownership is practiced, such a description has legal application. A legal description for a parcel of land is analogous to what a street number and street name, city, state, and zip code are to a mail carrier. The legal description gives surveyors and property owners a mechanism by which to precisely locate tracts of real estate. It also allows property to be transferred, leased, and mortgaged.
An accurate surface map facilitates determining land ownership above the hydrocarbons and who owns the minerals beneath the surface; seldom are the mineral and surface owners the same.
Leases
The concept is simple, but most people do not understand what the system is or how it works. But it is utilized to establish well locations, to determine land ownership, to assign mineral rights, and to accurately plot property lines and boundaries. Drill rigs are very large pieces of equipment. When combined with the support equipment, supplies, work force, and access roads, the total area needed for a drilling operation can easily exceed 40 – 750 acres in size.
Drilling and production companies must know ownership before they can proceed with their plans. Permission to conduct operations must be obtained from both parties. This job is usually that of a Landman, a person whose job it is to seek out the owners of both estates and negotiate leases and contract with them on behalf of the production company for the right to drill and withdraw the hydrocarbons.
Permits
Each state and county has a regulatory body that oversees petroleum operations. The regulatory body requires a number of permits for such things as drilling on public land, off shore (within the three-mile limit), and along the coastline. In Texas, the governmental agency responsible is the Texas Railroad Commission. It regulates location and construction of prospect wells, requirements for fresh water protection in vicinity or drilling, formation drainage allocation, and well to well spacing requirements.
PROCESSES
Drilling Rigs
The drilling process is a very in-depth process. A well site must first be selected then all the legal documents obtained. Drilling operations can begin only after the site has been prepared, ground has been leveled, roads have been built, a derrick has been erected, and other equipment that comprises the drill rig has been put in place. Water is a vital component in the drilling process for mixing drilling mud (lubricant). Water can be hauled into the location by trucks or pumped from a nearby lake, pond, or water well. If no source is available, a new water well must be drilled before the drilling process can begin.
The most common drill rigs are of the rotary rig type (see image). Today’s rotary drill rig consists of multiple engines that supply power, hoisting equipment that raises and lowers the drill string (drill pipe), and rotating equipment that turns the drill string and the drill bit. These engines also drive the circulating equipment that pumps liquids (mud) down the hole to lubricate the drill string and drill bit which are rotating in the hole. These liquids remove cuttings,… which are tiny bits of rock, and controls down hole pressure to prevent blowouts,…. unexpected pressure, which overcomes the weight of the drilling mud and explodes to the surface.
The conventional drill bit has three movable cones containing teeth made of tungsten carbide steel and sometimes industrial diamonds (see image). The rotating cones are the cutting heads. The downward force on the drill bit is the result of the weight of the overhead drill stem (steel pipe, pipe joints called collars) and drilling equipment on the derrick all of which can amount to thousands of pounds. Keep in mind that the entire pipe and bit assembly rotate together in the hole.
While the bit cuts the rock at the bottom of the hole, surface pumps are forcing drilling fluids down the hole through the inside of the drill pipe and out the bit. This fluid lubricates and removes cuttings. The fluid (with the cuttings) then flows out the center of the drill bit and is forced back up the outside of the drill pipe onto the surface of the ground where it is cleaned of debris and pumped back down the hole. This is an endless cycle that is maintained as long as the drill bit is turning in the hole. The drilling crew is under the supervision of the Driller. The person who works on a platform high in the derrick is called a Derrickman; he has the very dangerous job of handling the upper part of the drill stem as it is raised and lowered. Roughnecks are the workers on the derrick floor; their job is to add new pipe joints as the well depth increases. The entire crew and operation of the rig is under the supervision of the Tool Pusher. A typical drill rig will operate 24 hours per day, 7 days per week. It never shuts down for holidays.
PROCESSES
Drilling Procedures
Drilling and Testing Procedures
- File permits
- Build Location
- Move rig on location and rig up
- Drill surface hole and set surface casing
- Complete drilling of the well
- Log the well and run any other test that may be needed (i.e. cores, drill stem test, etc.)
- Either plug the well as a non-producer or set and cement the casing.
PROCESSES
Drilling Cost
Leases
The right to enter and drill on the property owner’s land is accomplished by obtaining a lease. The lease is subject to title search and proper recording in much the same way as real estate. Many times the bonus for a mineral lease exceeds the value of the property itself. Between legal cost for title work and lease bonus wells see costs in excess of $1,000,000 for leasing alone. Some leases with multiple mineral and land owners take several months if not years to negotiate and finalize.
Site Preparation
Most times, a road must be built to the site. Good roads are a necessity in order for trucks and heavy equipment to reach the well. Once at the site, a level area is cleared about 2/3 the size of a football field. Bulldozers, dump trucks, excavators, and road graders are typically used for this process. General this process takes between 2 and 3 weeks, but if extensive road work is needed it can take much longer Construction of roads and drilling site is a major cost factor which can easily exceed $400,000 per location.
Drilling
When the site is prepared, the drilling rig can be moved into position. A rotary rig is the modern equipment used. It is capable of drilling over 1,000 feet per day through use of a rotary bit driven by huge engines. Fluid or air if forced under pressure down the center of the drill stem to clean out the hole continuously during drilling. The drilling operation is a very complicated one requiring enormous amounts of planning and teamwork. A modern drilling project can encompass the use of 30-40 different individual companies to fully complete the process. Cost depend on the depth and complexity of the well. Modern horizontal well drilling costs can easily reach over forty percent of AFE ( Authorization for Expenditure, and or Budget Cost for the well) and will exceed $4,000,000 just in the drilling phase. Without drilling complications these wells generally take about 3 weeks to complete the drilling phase.
Rig Mobilization
Moving a drilling rig is not a simple task. Every time a well is drilling a drilling rig must be moved in and assembled. The process normally takes 3-5 days. After the well is drilled the rig must be cleaned and disassembled and moved off location. Rig mobilization and assembly expenses vary depending on how far the rig must be transported, but generally run between $250,000 to $350,000.
Miscellaneous costs
Costs outlines above are only some of the cost incurred preparing, drilling, completing and producing of an oil or gas well. in total, this complete process will encompass 40-50 different individual contracting companies and hundreds of additional minor expenses.
PROCESSES
Prospects
While all of the parameters mentioned above must be met before drilling for hydrocarbons can begin, a key element that has to be determined before leases and permits are obtained is deciding WHERE to drill. Anyone can drill an oil well anywhere if there is enough money, but the primary purpose is to locate hydrocarbons. Thus finding the right location, one where there is a propensity of information supporting the idea that oil exists beneath it, is of paramount importance. Oil sites have been sought using a variety of different techniques. For example, in the early days oil was found by wandering about the countryside with an open flame, a little optimism, and a lot of adventure. Others have used exploration philosophies ranging from drilling old Indian graves to putting on an old hat and galloping about the prairie until the hat comes off and drilling where it lands.
One of the earliest exploration tools was referred to as Creekology. Early drillers recognized a connection between river bottoms and the occurrence of hydrocarbons but didn’t understand why. It wasn’t until later that the anticlinal theory was developed which explained the phenomenon.
This random approach to hydrocarbon exploration has resulted in locating oil, but, more often than not, the culmination has been a dry hole. The application of geology to hydrocarbon exploration is a recent development.
Evaluating a prospect (a location where a well could be located to discover hydrocarbons in commercial quantities) relies upon the answers to two questions: What is the likelihood of finding hydrocarbons at this site, and are the economics such that it will create a sufficient profit margin to justify the expense of drilling? Geology is used to help answer the first question while economic projections and market analysis help answer the second. Even though geological methods are utilized in the hunt for hydrocarbons, it doesn’t always provide all of the answers to all of the questions. While the scientific method is a valid approach, the results are only as good as the information that was used. And the same holds for the economic analysis. World demand for oil and gas is in a constant state of unrest. Political stability, weather (cold winters in the northeastern United States), consumer demands (increased travel during holiday periods), and supply drastically affect prices. Financial risk versus potential profitability must be established, and this requires the probability of geological success (discussed earlier) and three commercial parameters:
- Potential profitability of venture,
- Available risk to investment funds, and
- Aversion to risk.
The interplay of all three criteria produce a subjective evaluation of the economics of the prospect.
But one other aspect of the prospect is also important and that is whether the well in question will be drilled in an existing field (where producing wells currently exist) or is a new prospect (an area where no oil or gas wells exist). Each type carries with it a different degree of risk, but also a different degree of potential reward. So defining the prospect is a difficult and an inexact science. Exploration techniques utilizing geological methods are the primary means used to locate prospects.