Oil Drilling

OIL DRILLING 101: A STEP BY STEP BREAKDOWN

For many people, the common image that comes to mind when they think of oil drilling is the

“bubbling crude” that rose from the soil of Jed Clampet’s backyard in “The Beverly Hillbillies”.

But drilling for oil is nothing like the opening images of the popular television show. It is a

highly scientific and complex process that involves a team of qualified people to harvest oil and

gas that is deeply embedded in the earth’s surface. Oil and Gas Worldwide has been finding and

drilling oil and gas for the past 20 years. They have over 200 successful wells across Texas and

the Gulf Coast. To help you better understand what is actually involved in finding, preparing and

drilling for oil, they offer this helpful breakdown.

Oil and Gas Investment and Tax Benefits

During the first year, the intangible cost of drilling which includes: mud, labor, grease and

chemicals is completely tax deductible. The costs, which make up nearly eighty percent of the

cost of a well, are referred to as intangible drilling costs or IDC. On the contrary, the costs of an

oil and gas investment that are devoted to equipment are referred to as tangible drilling costs or

TDC. Like IDC, tangible drilling costs are also 100% tax deductible during the initial year of

investment.

What is Oil?

Oil comes from the remains of tiny plants and animals that died between 10 and 600 million

years ago. After the organisms died, they sank into the sand and mud at the bottom of the seas

and oceans. Over the years, the organisms decayed into carbon rich compounds that formed

organic layers under the earth’s surface. These organic layers mixed with sediments, forming

fine-grained shale, or source rock. As new layers and sediments formed, they exerted intense

pressure and heat on the source rock. This heat and pressure distilled the organic material in the

source rock into crude oil and natural gas.

Finding Oil

The task of finding oil and gas that is deeply embedded in the earth is first assigned to a

geologist. Modern day oil geologists start their search for oil by examining surface rocks and

terrain with the help of satellite images. They also use a variety of other high tech equipment

such as gravity meters, magnometers and sand sniffers. Gravity meters measure tiny changes in

the Earth's gravitational field that can indicate flowing oil. Magnetometers measure tiny changes

in the Earth's magnetic field caused by flowing oil. Sniffers are sensitive electronic devices

which detect the smell of hydrocarbons, which can indicate the presence of oil. Perhaps the most

common method used by geologists to find oil is seismology. Seismology creates shock waves

that pass through hidden rock layers. Geologists then interpret the waves that are reflected back

to the surface to determine if oil is present.

Preparing the Land

Once a geologist has selected a site, it must be surveyed to determine its boundaries and studies

to determine any possible environmental impact must be done. Lease agreements, permits, titles

and right-of way access for the land must also be obtained. For off-shore sites, legal jurisdiction

must be determined. Once the legal issues have been settled, a crew goes about preparing the

land. The land is cleared and leveled, and access roads are built. A well pad must be constructed

to separate the wildlife, crops or residences from the well. The pad must be large enough to

accommodate emergency, maintenance and construction equipment necessary for operations and

repairs during the life of the well. Because water is used in drilling, there must be a source of

water nearby. If there is no natural source, a well must be dug. Once the land and well pad have

been prepared, several holes are made to support the rig and its 90 foot derrick or mast. Some

rigs are built on ships or barges when there is no foundation to support a rig (as in marshes or

lakes). Depending upon the location of the drill site and its access, ancillary equipment is then

transported to the site by truck, helicopter or barge.

Casings and Cementing

Prior to the arrival of a big drilling rig, workers install “conductor casing”. Conductor casing,

which is usually no more than 20 to 50 feet long, is installed to prevent the top of the well from

caving in and to help in the process of circulating the drilling fluid up from the bottom of the

well. The casing is usually 16 to 20 inches in diameter. The hole for the casing is usually drilled

with a small auger on the back of a truck. The casing is then cemented in place.

Once the conductor casing is in place and the rig has arrived, workers start drilling a 600 to 1000

foot hole to accommodate the “surface casing”. Surface casing is a large diameter, low-pressure

pipe that is designed to protect the earth’s aquifer from contamination during drilling. The casing

itself comes in 40-foot sections, which are threaded at both ends. Workers, or "roughnecks",

attach the sections with a "collar" which also is threaded .The roughnecks then tighten the collar

with a large pipe wrench. Once the surface casing has been run into the hole, special cement is

pumped in. The cement seals the area between the surface casing and the side of the hole.

Drilling the Well

Once the surface casing is in place, workers can actually begin drilling for oil. The well is drilled

by a rig rotating pipe (or drill pipe) with a bit attached to the end. Drill pipe is added in 30 foot

lengths at a time. Weight is applied to the bit through the use of drill collars or thick walled

tubular pieces made from solid pieces of steel. A liquid consisting of fresh water and bentonite,

also called drilling mud, is circulated in the hole during drilling to remove cuttings and maintain

pressure. Blow out preventers or BOPs are installed at the surface to control any unexpected

changes in pressure.

Logging

Once the hole reaches the desired depth, logging begins. Logging is the process of determining

which of the formations between the surface and the bottom of the well contain oil and gas and

which formations contain merely water. An electrical cable and a "logging tool" are lowered into

the hole, and the tool sends electrical charges into the formation. The tool then sends geological

information to a "logging" truck where a computer processes the information. The information

which can be derived from logging includes rock type, porosity, and resistivity.

The Casing Point Decision

Once this information is gathered and studied, a decision is made to either plug or complete the

well. This is called the "casing point decision". If a decision is made to complete the well, then

more casing is lowered in to reach the bottom of the hole. Cement is once again pumped into the

hole to seal the area between the surface casing and the side of the hole. However, the cement to

hold this casing stops at least 500 feet below the surface to prevent natural gas leaks. Setting this

casing is the final step before well stimulation can begin.

Well Stimulation

Well stimulation consists of various techniques used to loosen the oil that is trapped in the

porous rock. Hydraulic fracing (pronounced fracking) is the most commonly used method.

Fracing involves pumping water at extremely high pressure into the hole until a crack develops

in the rock formation. Water and sand are then pumped into the crack. The sand holds the cracks

open until all the oil escapes the rock and flows into the casing.

Well Completion

Well stimulation consists of various techniques used to loosen the oil that is trapped in the

porous rock. Hydraulic fracing (pronounced fracking) is the most commonly used method.

Fracing involves pumping water at extremely high pressure into the hole until a crack develops

in the rock formation. Water and sand are then pumped into the crack. The sand holds the cracks

open until all the oil escapes the rock and flows into the casing.

Production

Once the well has been completed, it moves to the production stage. The oil and gas streams are

separated. The gas flows into a gas pipeline that carries it to processing plants and then onto the

consumer for purchase. Meters are installed from the wellhead to measure the amount of gas that

is being purchased. The oil that is separated flows into tanks and is stored until it trucked or

shipped via pipeline to a refinery.

At Oil and Gas Worldwide we invite you to experience the excitement of oil and gas coming

out of the ground. See for yourself firsthand. It could be yours. We are pleased to present

accredited investors a chance to invest. For more information please call 1-800-833-0563 or

log on to www.oilandgasworldwide.com

WELL PLANNING

1. OBJECTIVE

Well Planning is an orderly process which involves number of steps. The objective of well

planning is to design a drilling program which includes various operations related to the drilling

operation. The three major points to be considered while planning a well:

Safety of Manpower and equipment

Cost

Reach the target successfully

The flow path for Well Planning can be seen below:

Safety should be kept at highest priority. In oil and gas industry, safety of manpower comes

before the safety of equipments. Companies have a separate department which looks over the

safety issues - Health, Safety and Environment (HSE) department.

The well should be planned in such a way that the total cost incurred is minimum without

compromising with safety aspects.

The objective of drilling a hole to the given target depth will not be achieved if the final well

configuration is not usable. Usable means that the hole configuration (direction, inclination,

diameter etc) should be as per plan and the reservoir should not get damaged due to any activity

related to drilling operation.

2. ACTIVITIES BEFORE WE START DRILLING OPERATION

There are list of operations to be conducted before we start the drilling operation. Below is an

ordered sequence of operations/activity to be conducted before we initiate drilling:

Release of location

Survey of location (surface/subsea)

Civil work and foundation to be made for onshore drillsite and soil coring/ sea bed survey

to be done in case of offshore well.

Preparation of GTO

Preparation of well plan/programme

Preparation of bill of material and initiation of purchase procedure (if required).

Procedure for obtaining sanction for purchase of material.

Rig allocation and rig move.

3. INPUT DATA FOR WELL PLANNING

Following are the information required for well planning:

Well data package consisting of - seismic data, location map, structural map, expected

pore pressure, offset and correlation logs and information about formation type, top and

thickness.

Offset well data consisting of - bit record, mud report, logging data, drilling report, well

completion report, complication report and production/injection report.

Proposed logging, testing and coring programme.

Government regulations

Company policy

4. GEO TECHNICAL ORDER (GTO)

GTO is a document consisting of following data :

The data may be in form of table, chart, graph or picture.

a. General Well Data

Well Name

Well Number

Area

Location

Water Depth

Elevation

Well Type

Category

Profile

Objective of the Well

b. Geological Data

Depth

Age

Formation

Lithology

Interval of Coring

Electro Logging

Collection of Cutting

Angle of Dip

Oil/Gas Shows

Formation Pressure

Formation Temperature

Mud Loss/ Caving

c. Mud Parameters

Type of Mud

Specific Gravity

Viscosity

pH

Sand Percent

Filtration Loss

d. Drilling Data

Casing policy

Rise of cement

Type of drilling

Type and size of bit to be used for different interval

Number of bits expected

Meterage per bit

Weight on Bit (WOB)

RPM of rotary

Stand Pipe Pressure (SPP)

Pump Discharge

Bit nozzle details

Drilling time

Remarks, if any

e. Deviation Data

Well profile

Kick off Point (KOP)

Inclination

Azimuth

Surface Coordinates

Target Coordinates

5. DRILLING PROGRAMME PREPARATION

Drilling programme includes all th steps initiating from well design to final cost estimation. In

general, a drilling programme can be broken down into 12 main sections listed below:

Well Details

Well Objective

Casing Policy

Wellhead Selection

BOP Requirement

Cementing Programme

Deviation Programme

Survey Requirements

Mud Programme

Bit and Hydraulics Programme

Evaluation Requirements

Estimation of well Cost

Well Details:

Well detail includes the following information - Location, Field/Structure, Well Name, Well

Number, Well type, Location Data, Water Depth, Measured Depth (MD), True Vertical Depth

(TVD), Operator, Name of Rig, Type of Rig.

A typical Well Detail for a well is shown in figure below:

Well Objective:

The exploration department provides information regarding the objective of the well to be

drilled. The objective of the well may be to reach a certain target depth and evaluate a formation/

to exploit hydrocarbon/ any other objective.

Such details are provided in this section.

Example: "To test hydrocarbon prospect of fore reef facies in Oligocene, Miocene and

Carbonate in Eocence section of XYZ feature." or "To exploit Kalol pay sand".

Casing Policy

Casing policy includes data such as how many casing strings/ liners are to be used, casing

specification for different intervals, Casing seat selection, Casing design and recommended

practices.

Casing pipes are put into the wellbore for the following reasons:

To isolate troublesome formations like shale, lost circulation zones and flowing halites

To protect fresh water zone from being contaminated

To protect producing formation from mud and mud filtrate contamination

To protect caving or damage of weaker zones due to high head produced by the drilling

fluid column.

To provide stable seat for packers, liner hangers etc.

To provide a confined flow conduit

Most of the decision pertaining to casing policy is based on formation pore pressure. For a

development well the formation pore pressure can be obtained from the offset well data, but in

case of exploratory well no offset well data is available. For such cases seismic data are utilized

to predict formation pore pressure.

Other than formation pore pressure, formation fracture pressure is also used in casing design.

Formation fracture pressure is important while determining the the accurate position of casing

seat as well as designing drilling fluid for that interval. It either be obtained be offset well data or

by conducting leak off test. Once leak off test is carried out, equations such as 'Danies' are used

by employing values of Poisson's Ratio for a given formation to estimate probable fracture

gradient at other depths in the well. In case of continuous depositional basins, we can use

'Eaton's Equation' with suitable modification to estimate fracture pressure gradient.

Casing seat selection is done based on formation properties like the formation pore pressure and

formation fracture pressure.

For more details on Casing Seat Selection, please go through my blog post on CASING SEAT

SELECTION.

Casing design keeps the following four forces/pressure in consideration:

Burst

Collapse

Tension

Other loadings (if any)

The burst pressure acts in outward direction from inside the casing and if exceeds the pressure

acting inwards, the casing may burst out.

The collapse pressure acts in inward direction on the outer body of casing. If the collapse

pressure exceeds the pressure acting outwards, the casing may collapse.

Tension acts in downward direction. If the tension in the casing is more, it may lead to snapping

of casing from the weakest point.

For more details on Casing Design, please go through my blog post on CASING DESIGN.

Well Head Selection

After completing the casing design, we can determine the specification of well head which suits

the designed casing policy. The wellhead must be of correct pressure rating, designed for desired

services like H2S and capable of accommodating all the designed and contingent casing strings.

After the wellhead is selected, its specification should be clearly mentioned in the drilling

programme along with other related useful data.

BOP Requirement

The BOP selection for a particular well depends on the company policy and the anticipated

bottom hole pressure. The BOP should never be under rated, i.e., the pressure rating of BOP

should never be less than the anticipated BHP. The BOP stack data and the specification along

with the safe practices should be clearly mentioned in the drilling programme.

Cementing Programme

Completion

Once a well has been drilled and tested (logged, cored and pressure data), a decision must be

made whether to complete the well or plug it. Examination of the target reservoir rock porosity

and permeability may indicate that the potential flow of oil and gas from the well will not justify

the cost to complete the well. In these cases, the well is plugged with concrete in several places,

and the well is abandoned.

IIf, however, the well's test information indicates that the well will be commercially productive,

the well is completed. If the well is to be completed,

production casing is run down the hole and cemented.

Once the casing is in place, a tool called a "perforating

gun" is lowered into the well-bore to blast holes through

the casing, cement and into the reservoir. These holes

are made in order for there to be communication

between the reservoir and the production casing. Tubing

may then be lowered into the casing. A plug may then be

set above the perforations as a barrier between the

production casing and the tubing. This allows the earth's

natural pressure to push hydrocarbons to the well-bore

and to the surface through the tubing unless a pumpjack

is necessary to raise the fluids to the surface.

Several steps are taken at this time to cut out excessive

costs from the production process. A large drilling rig

will be replaced by a smaller, moveable completion rig.

Also, a completion team will use a swabbing method to

force the reservoir to give up fluids naturally. This

natural flow rate will be measured and compared to

other wells in the area. If it is not up to par, then further

measures will be taken to increase the volume of

production. These measures include chemically or

physically treating the reservoir to stimulate the flow.

Acid treatment can be used in a reservoir containing

limestone. A physical method would be to pump fluid

containing small beads into a reservoir under great

pressure to fracture the reservoir. The beads are then

used to keep the fractures open to allow the flow to

increase.

When a satisfactory rate of production has been established, the well will be tested to calculate

the maximum production for the well over a period of 24 hours. This is termed as a well's

potential. This and other completion information may be required by the state and will aid other

geologists and analysts scouting for oil and/or natural gas in the same area.

If a well contains more than one zone of interest, the operator will usually begin by producing

the lowest zone in the well-bore first and then work their way up the well-bore as each zone

becomes depleted. When a zone is completed, a multi-valve device will be connected to the

surface called a "Christmas tree." This device is placed at the top of the production casing and

will allow connections to flow the oil and gas. Equipment to process the recovered oil and gas is

placed near the well to make sure the oil or gas is ready for transportation.

Production

Production is the process of extracting petroleum from the underground reservoir and bringing it

to the surface to be separated into gases and fluids that can be sold to refineries. Production

begins with a high level of production and decreases through time until the well is ultimately

plugged and abandoned. This decrease in production is a natural result of the inevitable decline

in original pressure within the reservoir. The time period for commercial production and the rate

of production depends on the reservoir.

Either gas expansion and/or water encroachment provides the principal natural energy for most

petroleum reservoirs to produce. Both can operate as reserves are taken from the reservoir. The

reduction in pressure around the well-bore as hydrocarbons are extracted causes other

hydrocarbons to move into their space. This process continues until the energy is depleted and/or

the well makes too much water to be commercially productive.

Engineers take the past performance of a well and use it to project the future reserves of a well.

One way of predicting future production is to measure the percentage of decline in production

over a given period of time and use this rate of decline to estimate future reserves.

Reservoir Engineering

Reservoir engineering is the application of scientific principles to develop and maintain

petroleum reservoirs to maximize economic benefit. For example, carefully spacing out wells

over a reservoir and restricting production rates can make a difference in the overall productivity

of the reservoir. In 1904, Anthony Lucas, who had discovered Spindletop, spoke about the

decline in production. He claimed that "the field had been poked with too many holes and that

the cow was milked too hard." Oil operators in that day gave little thought to reservoir depletion

as they completed wells. They produced a well at the highest rate they could without regard for

well spacing. As a result, in the 1920's the federal government questioned the wasteful treatment

of reservoirs and decided to initiate studies. These studies consisted of applied mathematics,

geology, chemistry, fluid dynamics, and physics to aid in the analysis of hydrocarbons within a

reservoir. Reservoir engineering began as engineers implemented what the government learned.

Recovery

Initially an oil reservoir is in primary recovery. Gaseous fuels, natural gas or water are usually

present, and supply the needed pressure. Depending on the reservoir, once the natural flow

ceases, the reservoir will have yielded only 15 to 70 percent of the total volume of the oil it

contains. The rest is trapped in unconnected rock pockets or is bound to the rock and refuses to

migrate toward the wellbore.

Petroleum engineers have developed a number of ways to help the reluctant oil migrate to the

wellbore. The most common approach is to drill adjacent wells and use them to inject water into

the reservoir to force the oil to move toward the production wells. Another is to inject gas into

adjacent wells to maintain reservoir pressure or to enhance gravity drainage. Both approaches are

referred to as secondary recovery processes. Even after secondary recovery steps have been

taken, as much as 50 percent of the oil in the reservoir will remain. Tertiary oil recovery reduces

the oil's viscosity to increase oil production.

Step 1 – The Petroleum Geologist Prospects

Prospecting With Maps

Prospecting is the work the geologist does to locate a place to drill a well!

Most petroleum geologists work in an office, where they have access to a lot of data. This

includes electric logs, core records, drilling records, scout tickets, and production data. They use

the data to construct maps, cross-sections, and databases. These tools help them locate the best

places to drill wells.

The geologist studies his maps and cross-sections and runs computer simulations that help him

select the next best location to drill. He is always thinking about the next drilling location…or

prospect!

He will want to know what type of trap he is dealing with, and the composition of the

sedimentary rocks he will be drilling through. He needs to estimate the porosity of his

prospective “pay zone.” He wants to know if high pressures can be expected in the new hole. If

seismic data is involved in the prospect, he will consult with the geophysicist and get his opinion

of the prospect.

The geologist is interested in anything that happens in her area, particularly news of new

discoveries by other companies! If she sees a promising new area, she will recommend to the

land department that an attempt be made to lease the acreage; the leased land will then be

available for drilling later.

When the geologist has finally found the correct spot, she spends much time cross-checking to

ensure she has not missed anything. She wants to make sure she is not “surprised” by any of the

following:

Discovering the selected location was already drilled by another company 40 years ago

(and was dry)

Discovering that her company has no legal right to drill on the location (lease problems)

Unexpected faults or other geologic problems that crop up during drilling and ruin the

prospect

Discovering that the hole is being drilled in the wrong place after drilling begins (it has

happened!)

Step 2 – The Petroleum Geologist Packages The Deal

Packaging

Once the new location is defined, and the geologist is satisfied the prospect is a good one, the

work is just beginning. He has a large amount of rough data available in the form of work maps,

that he used to satisfy himself of the feasibility. Now, he must condense this large data mass into

a set of presentation materials that can be shown to non-geologists.

To package the deal, he will prepare sets of simplified maps and cross-sections, often highly-

colored and attractive to the eye. He may use Powerpoint, or other presentation software.

Creativity, design sense, and art skills are important during this phase. He needs to anticipate all

possible questions, and be prepared to answer each one of them. He must be very sure of himself

and his facts before he moves to the next step.

Step 3 – The Petroleum Geologist Sells the Deal

Selling the Deal

Now the geologist must step into a role that is often uncomfortable for him … selling his

prospect. It may be uncomfortable because geologists are scientists, with scientific backgrounds

and schooling. They are used to talking to other scientists. But now the geologist must become a

salesman in order to convince people who are not geology experts of the value of the

prospect. These people may include managers, bankers, engineers, and oil and gas investors.

He is looking to convince his clients that

the prospect is worth drilling,

investors will get a fair return for their money

the provided financing will be money spent wisely

Even an inexpensive test well can cost a couple of million dollars, and some exploration tests

may easily run into many tens of millions! So the geologist wants to be very sure of his

facts. All his clients must believe the proposed well has a reasonable chance of being successful.

The geologist will meet with the landman (females in the business are also called “landmen”),

who will ensure the company has the legal right to drill the well. He will consult with the

engineer, who will determine the exact cost of drilling the well. Marketing personnel will ensure

that the company has a market (buyer) for the oil, or a pipeline for the gas. Managers,

responsible for ensuring the company’s drilling budget is spent wisely, will also approve the

well. If outside financing will be used, the geologist will explain the prospect to representatives

of the bank or other individuals or partnerships that put up the money.

When he’s done, the geologist will have “sold” his prospect to anywhere from a few to several

dozen people.

Step 4 – The Petroleum Geologist Monitors the Drilling of the Well

Drilling the Well

Next comes the part that every geologist enjoys the most! Drilling the well! It has now been

several months since the geologist started working on his prospect. Now the surface owners have

been paid, permits acquired, and money raised. Roads and the drilling location have been built,

pipe and supplies have been ordered. Also, the energy company has engaged a drilling

contractor who owns and operates the drilling rig.

The drilling contractor will drill the well in the manner specified by the company. The contractor

will have leeway to select the type of drill bits to be used, hire a drilling crew, and make many

other decisions concerning the actual drilling. Virtually all holes are drilled by contractors.

Drilling a well is a very complex procedure involving many people. Nearly everything must go

right. Dangerous machinery, bad weather, and continuous mechanical failures must be faced

daily. The work goes on for weeks to months, 24 hours a day, nonstop. A slip-up at any point can

ruin the very expensive hole, cost a fortune, or get people killed.

The geologist will closely monitor all aspects of the drilling as it takes place. He will select an

electric-logging company, and the proper wireline logging tools to evaluate the hole. He will

usually hire a mud logging contractor to “sit” the well day and night. The mud logger will study

the well cuttings, report shows of oil and gas, and keep track of other things on the location. The

geologist will monitor the formation tops as they are encountered, and discuss the progress of the

drilling with the investors. The geologist will decide where and when to take cores or drill-stem

tests. Finally, after the well is logged with electric logs, he will examine the logs and recommend

the well be completed or plugged.

Step 5 – The Petroleum Geologist Works With The Engineer to Complete the Well

Completing the Well

At last the hole is drilled! At this time, a decision must quickly be made to attempt a completion,

or plug the well. Completion costs are extremely high, so it must be believed that the completion

will be worth the money. Justifying a completion can be a grueling process. It almost always

takes place in the middle of the night!

The job of completing the well is mainly in the hands of the petroleum engineer. The engineer

will decide what type of casing to use, and the method of cementing, He will design the

completion procedure (which may involve perforating, breakdowns, acid jobs, or fracks).

However, he will depend on the geologist to advise him on various topics. To start, the geologist

will give the engineer a list of formation tops, and tell the engineer exactly which zones should

be tested.

The geologist is often the person most familiar with the technical practices of other oil

companies in the area. He may suggest a certain style or method of perforation, or offer advice

on cementing techniques. He may be familiar with the most successful fracturing or breakdown

procedures in the area. He will relay this information to the petroleum engineer, who will usually

be thankful for the help! Working as a team, the geologist and petroleum engineer will get the

well completed, and put it to work providing energy for all of us!