Professional Documents
Culture Documents
of Exploration
EMIL ATTANASI and PHILIP FREEMAN
United States Geological Survey
Reston, Virginia, United States
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9.
Introduction
Fundamental Concepts
Discovery Process of Conventional Oil and Gas
Exploration: Individual Firm Decisions
Industry: Exploration and Public Policy
U.S. Exploration: Market Failure and Regulation
International Oil and Gas Exploration Provisions
Trends in Exploration and Discovery
Conclusions
Glossary
barrel of oil equivalent Approximate energy equivalence
relations where one barrel of crude oil 6 thousand
cubic feet of gas or 1.5 barrels of natural gas liquids.
basin-centered accumulation A regionally extensive and
typically thick zone or unit of hydrocarbon saturated
low-permeability rock in the deep, central part of a
sedimentary basin.
common property resources Resources not under the
control of a single authority and where access is
unrestricted or cannot easily be restricted.
continuous-type accumulation A regionally pervasive hydrocarbon accumulation that is not bounded (delineated) by a hydrocarbon-water contact that commonly
occurs independent of structural and stratigraphic traps.
externality Situation where the welfare of an individual
depends not just on his own actions but directly on
actions of another independent economic agent, such as
when pollution upstream affects the welfare of downstream water users.
inferred reserves Expected cumulative additions to proved
reserves in oil and gas fields discovered as of a certain
date, where such additions come by extensions, additions of new pools, or enhancing hydrocarbon flow to
the well.
known recovery The sum of a fields past production and
its current estimate of proved reserves. Known recovery
is an estimate of field size.
1. INTRODUCTION
In many areas of the world outside of North America
and Europe, natural gas is still not an economic
commodity because there are no local natural gas
markets. On a Btu basis, natural gas is almost four
times more costly to transport than oil, so transporting gas to international markets can be prohibitively
expensive. Most of the description of the exploration/discovery process applies to both oil and gas. At
the heart of the discussion, however, is the assumption that gas is commercially valuable. In areas
outside of North America and Europe, it can be
expected that reporting of some gas discoveries and
535
536
2. FUNDAMENTAL CONCEPTS
Proved reserves are estimated quantities of hydrocarbons that geologic and engineering data demonstrate with reasonable certainty to be recoverable
from identified fields under existing economic and
operating conditions. Estimates of proved reserves
are important because they are the leading indicators
of short-term sustainability of oil and gas production. No more than 10 to 15% of proved reserves
(and often much less) can be extracted annually to
avoid reservoir damage. So proved reserve levels
limit annual production to amounts well short of
known recoverable resources.
The objective of oil and gas exploration is to
identify resources that can be added to proved
reserves. These resources should be of such a quality
and quantity that the resource can be commercially
developed immediately. Industry exploration consists
of a variety of activities that include surveying of
surface geology, processing and interpreting newly
collected geophysical data, reprocessing and interpreting previously collected data, acquiring mineral
rights and access, taking subsurface core samples,
and finally drilling exploratory oil and gas wells.
Exploration wells drilled to find reserves are
classified by risk level. Categories for exploration
wells are extension or outpost wells, new pool tests
(shallower or deeper pool), and new field wildcat
wells. Even the standard infill development well is not
without risk; some development wells are drilled that
fail to make contact with the producing reservoir.
Risk, or the probability of failure, on average tends to
increase from infill development wells to exploratory
1
2
4
Known productive
limits of proven pool
Land surface
Structural
accumulation
Discrete-types
Stratigraphic
accumulation
Continuous
basin-centered
accumulation
537
3. DISCOVERY PROCESS OF
CONVENTIONAL OIL AND GAS
Physical properties of the occurrence of oil and gas
fields tend to cause regularity in the process of oil and
gas discovery. The regularity provides the basis of
predicting yields of future exploration from estimated undiscovered resources. Oil and gas deposits
occur in sedimentary basins. Within a basin, discoveries are typically classified into sets of geologically similar deposits that are called petroleum plays.
The petroleum industry uses the concept of the
petroleum play, commonly identified in terms of a
geologic formation or strata, as a basis to classify
targets in a basin geologically.
The observed size-frequency distributions of discoveries in most petroleum plays and provinces are
highly skewed. A very small proportion of the
accumulations contain most of the discovered
resource. Figure 3 shows the frequency-discovery
size distribution of oil and gas fields discovered
in the Permian basin of the United States through
1996, and Table I shows volumes of hydrocarbons
538
4000
3500
3000
2500
2000
1500
1000
500
0
0.5<1 1<2 2<4 4<8 8<16 16 32 64 128 256 512 1024
<32 <64 <128 <256 <512 <1024 <2048
Field size (MMBOE)
FIGURE 3 Histogram showing the size-frequency distribution of oil and gas fields in the Permian basin discovered through
1996. One barrel of oil equivalent 6 thousand cubic feet of gas. MMBOE millions of barrels of oil equivalent. Data are
from the Energy Information Administration; field data are from 1998 issue of Oil and Gas Integrated Field File.
TABLE I
Proportion of Total Petroleum in the Permian Basin Contained in Various Size Classes of Fields
Fields
Size classa (BOE)
Number
Petroleum
Cumulative percentage
Cumulative percentage
20484096
0.02
4.86
4.86
10242048
0.10
12.14
17.01
5121024
14
0.38
19.05
36.05
256512
27
0.93
17.43
53.48
128256
35
1.64
11.23
64.71
64128
61
2.87
9.92
74.63
3264
1632
91
133
4.71
7.40
8.01
5.61
82.64
88.25
816
216
11.76
4.66
92.91
48
267
17.15
2.85
95.76
24
344
24.11
1.85
97.61
12
432
32.83
1.15
98.75
0.51
481
42.55
0.64
99.40
0.250.5
495
52.56
0.33
99.73
0.1250.25
0.06250.125
483
451
62.32
71.43
0.16
0.08
99.89
99.97
1414
100.00
0.03
100.00
o0.0625
a
In millions of barrels of oil equivalent (BOE) where 1 barrel of oil 6 thousand cubic feet.
250
200
Million of BOE per discovery
150
100
50
9596
9094
8589
8084
7579
7074
6569
6064
5559
5054
4549
4044
3539
3034
2529
0
2024
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FIGURE 4 Average sizes of fields discovered in 5 year intervals in the Permian basin between 1920 and 1996. Field data are
from the Energy Information Administration, 1998 issue of Oil and Gas Integrated Field File. 1 barrel of oil equivalent (BOE)
equals 6 thousand cubic feet of gas.
540
30
25
20
15
10
0
<0.5
0.5<1.0
1<2
2<4
4<8
8<16 16<32
Known recovery for province (BBOE)
32<64 64<128
FIGURE 5
Histogram showing the cumulative discovered through 1998 hydrocarbon volumes-frequency distribution for
U.S. basins through 1998. BBOE billions of barrels of oil equivalent. Data from NRG Associates, 2000.
TABLE II
The Ten Leading U.S. Onshore Petroleum Provinces of the Conterminous 48 States
Unitsa of oil and gas
(BBO)
(TCF)
(BBL)
(BBOE)
Discovery dateb
1. Gulf Coast
25.8
265.8
8.3
75.6
1901
2. Permian Basin
3. Anadarko Basin
34.4
5.0
102.3
157.1
6.5
5.6
55.7
34.8
1920
1916
16.5
84.6
3.5
32.9
1895
5. San Joaquin
15.4
13.2
0.8
18.2
1887
6. Appalachian Basin
3.4
43.0
0.0
11.0
1871
7. Los Angeles
9.0
7.5
0.4
10.5
1880
8. San Juan
0.3
45.5
1.5
8.8
1921
9. Bend-Arch Ft Worth
4.9
13.0
0.9
7.7
1902
10. Cherokee
6.3
2.3
0.0
6.7
1873
a
Units abbreviations: BBO billions of barrels of crude oil, TCF trillions of cubic feet of gas, BBL billions of barrels of natural gas
liquids, BBOE billions of barrels of oil equivalent. Gas and natural gas liquids conversion factors the following: 1 barrel of oil
equivalent 6 thousand cubic feet gas 1.5 barrels of natural gas liquids.
b
Discovery date refers to the discovery date of the first field of at least 10 million barrels of oil equivalent.
From NRG Associates, Significant oil fields in the United States 2000, database.
4. EXPLORATION: INDIVIDUAL
FIRM DECISIONS
Exploration expenditures are direct investments
made by individual firms for the purpose of locating
unidentified, but potentially commercial quantities of
oil and gas. For an individual firm, exploration often
begins with a hypothesis about the formation of
hydrocarbon accumulations in a specific geologic
setting. The process typically starts with a literature
search to identify potential geographic locations
where the hypothesis might be tested. The selection
of a target area includes review of geologic maps,
reconnaissance-type geochemical data and geophysical data compilation from the open literature and
from commercial vendors. Fieldwork is often required to verify interpretations and to collect
541
542
12000
Millions of dollars per year
2500
2000
1500
1000
500
0
10000
8000
6000
4000
19
77
19
79
19
81
19
83
19
85
19
87
19
89
19
91
19
93
19
95
19
9
19 7
99
20
01
2000
Year
United States
Foreign
19
77
19
79
19
81
19
83
19
85
19
87
19
89
19
91
19
93
19
95
19
9
19 7
99
20
01
3000
543
Year
United States
Foreign
summary, the industry exploration trend demonstrated by the FRS group of firms (representing the
industry leaders) has been to focus exploration effort
in the deepwater offshore areas and countries outside
of the United States where the opportunity to discover large accumulations is greater.
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545
8. TRENDS IN EXPLORATION
AND DISCOVERY
546
10,000
8,000
6,000
4,000
2,000
40
30
Western
hemisphere
20
10
0
1910
1930
hydrocarbons that are technically recoverable without reference to being commercial. The discovery
data presented in Figs. 9 and 10 must be viewed with
this caveat in mind.
Figure 9 shows the annual oil discovery rate,
averaged over 5-year intervals, that started in 1915
and annual production. The reported discoveries are
in fields that can be produced with conventional
production methods. The dominance of the Eastern
Hemisphere is striking. It is likely that new discoveries
will be revised upward as these fields are delineated
and developed, so the sharp decline in overall
discoveries is likely to be moderated. The peak levels
of discovery from 1955 to 1965, however, will not be
repeated. During this period, the Middle East
accounted for about half of the discoveries worldwide.
World production declined in response to the economic recession between 1980 and 1985, but it began to
increase after 1986. It now appears to substantially
exceed the past two decades of discoveries.
Figure 10 shows the natural gas discovery rate and
production for the world. The Eastern Hemisphere
discoveries dominate. The best years for discoveries
of gas worldwide were from 1965 to 1970. During
this period, the former Soviet Union accounted for
two-thirds of all gas discoveries. During the 1970s,
many of the largest gas discoveries were in the
offshore areas of the North Sea and the Middle East.
Figure 10 shows that gas production accelerated
1950
1970
1990
Years
Year
United States
Mexico, Canada, S. America
Eastern Hemisphere
Annual
production
Eastern
hemisphere
19
50
19
55
19
60
19
65
19
70
19
75
19
80
19
85
19
90
19
95
20
00
50
300
250
Annual
production
200
150
100
Eastern
hemisphere
Western
hemisphere
50
0
1910
1930
1950
1970
1990
Years
9. CONCLUSIONS
This discussion has identified the determinants of
oil and gas exploration, considered the effects of
Further Reading
Adelman, M. A. (1992). Finding and development costs in the
United States 19451986. In Advances in the Economics of
Energy and Resources (J. Maroney, Ed.), pp. 1158. JAI Press,
Greenwich, CT.
Adelman, M. A. (1993). Modeling world oil supply. Energy J. 14,
132.
Adelman, M. A., De Silva, H., and Koehn, F. (1991). User cost in
oil production. Res. Energy 13, 217240.
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