Oil and Gas Industry Challenges –– A Pocket Guide for Beginners (2022)

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Oil and Gas Industry Challenges –– A Pocket Guide for Beginners (2022)

Those new to the oil and gas industry might not know the lingo behind the process. The upstream category comprises all those activities, such as starting geological surveys. It also includes appropriate land rights and production strategies that reap maximum results. Such plans include onshore and offshore drilling.

However, before we delve into the changes associated with the oil and gas industries, we must have a clear idea of the two qualities to assess crude oil. These are density and sulfur content. The unit to measure density is API gravity, which starts from light (high API gravity/low density) to the heavy variety (low API gravity/high density). 

On the other hand, sulfur content can vary from sweet which contains a low sulfur content, to sour variety, with a high sulfur content. The light crude oil types get priced more than the other types and get greater appreciation. Additionally, it is more convenient to refine it to gasoline as opposed to heavy and sour crude oil.

Natural gas also gets produced alongside oil and in most reservoirs. The two basic categories of gas are dry (pure methane) and wet (existing in the compound of hydrocarbons like butane). Wet gas has the advantage of increasing the overall revenue for the producers. The reason behind such potential profits is that the waste products derived from it, such as the other hydrocarbons and other condensates, can get transported and sold individually.

When speaking of the United States, the shale gas breakthrough made a landmark in energy consumption and production history. It is perhaps because of this reason that the United States ranks as one of the fastest and largest natural gas exporters of all time. Alongside this breakthrough was the expansion of oil and gas field exploration through the two newly added systems, including horizontal and hydraulic fracturing. 

Exploration in the Fields 

Oil and gas field exploration talks about the many procedures and methods to find out the best sites for drilling. Over many years, explorers face fewer issues, such as oil seeps, and science and technology have drafted much more efficient systems to make exploration possible. Several surveys get conducted daily, which use several ways, such as analyzing the subsoil and seismic imaging for exploration onshore. 

The process further gets streamlined because companies now need legal mineral rights after clearing a concession agreement. It means that all extracted material falls under the custody of the producer after reaching a production-sharing agreement. In such an agreement, the government still exercises some ownership and participation rights.

Furthermore, extraction can become hazardous to health and may call the need for atrocious amounts of funding. To put into perspective, the money lost at a failed exploration expedition involving seismic studies and drilling a dry well can rise to about $5 million to $20 million. That, too, per every exploration visit. 

Hydraulic Fracturing

Hydraulic fracturing ranks as one of the most prominent techniques to create high pressure for extracting oil or gas from a potential mine. The technology got introduced in the 1940s but only recently put into practical use in the late 1990s. One of the many names behind its existence is George Mitchell, who introduced The Mitchell Energy & Development Corporation. Its new method of using slick water fracturing extracted the two minerals from areas where it was initially unheard of. These included drilled wells, coalbed wells, tight sand contraptions, and shale formations. In today’s world, fracturing remains a common practice in the oil and gas industry. It gets used most in the United States of America. Surprisingly, 90% of oil wells in the States use this specific extraction method. 

The process received so much recognition that it led to the closure of most conventional reservoirs that had existed at the time.

Last Thoughts 

On a brighter note, a successful exploration site can easily make enough profit to counter the money lost in production.  Therefore, companies always get advice to see how much they can produce in oil or gas that can prove to become economically reliable. Such estimates depend mainly on the technological expertise of the company, together with regular assessments. Other factors that determine output and profit include prices and the current infrastructure.

We hope this article helps you understand a lot about the challenges faced by oil and gas companies. If you like reading, don’t forget to share it with others. 

Infographic created by Smartcorr Systems, a corrosion monitoring equipment supplier