OIL 101

FUNDAMENTALS
OF UPSTREAM

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 UPSTREAM
This Upstream overview includes:

Exploration and Production (E&P)

Drilling and the Unconventional Future of Upstream

Upstream Business Characteristics

Key Players and Participants in Upstream

Oilfield Services

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What is Upstream?

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 Company Structure

Most oil and gas companies are organized according to

business segment, assets, or function.

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 Upstream = E&P

The upstream segment of the business is also known as the

exploration and production (E&P) sector.

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E&P encompasses, activities related to searching for,
recovering, and producing crude oil and natural gas.

Oil

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It’s all about the WELLS.

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 Where to locate them,

How deep and how far to drill them,

How to design, construct, operate, and manage them.

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...to deliver the greatest possible return on
investment with the lightest, safest, and
smallest operational footprint.

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 E&P should be called EDP sector because

“you can’t find oil if you don’t drill wells.”

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 Exploration
Exploration involves:

Operator obtaining a lease from

the Owner of onshore or offshore
acreage thought to contain oil or
gas.

Operator conducts geological and

geophysical surveys to determine
the first well site which is called a
“wildcat well.”
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 Drilling
Drilling is physically creating the
“borehole” in the ground that will
eventually become an oil or gas well.

This work is done by rig contractors

and service companies in the Oilfield
Services business sector.

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 Simple or Complex

Wells can be relatively simple or unbelievably complex.

Wells can be totally vertical for miles or both deep and
horizontal.

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 Deviated Wells
There are even highly complex “J”
and “S” configurations with
numerous branches, or laterals,
emanating from the original, or J Shaped
S Shaped

“mother”, hole.

These are called “deviated wells.”

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 Production
Production is where reserves are
“converted to cash” by maximizing the
recovery of hydrocarbons from
subsurface reservoirs.

Production is efficiently bringing the

hydrocarbons to the surface and
treating them as needed to make
them marketable.

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 Basics of E&P

Exploration Drilling Production

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 An ‘Unconventional’ Upstream

Unconventional resources are defined as any resource

extracted, or produced, by any method other than the
traditional vertical or slightly deviated well.

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Three main technologies that have made unconventional
developments profitable include:
• Horizontal Drilling
• Hydraulic Fracturing, or Fracking
• Subsea Engineering

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 Horizontal Drilling
Horizontal drilling is not
new, but the technology
has matured quickly.

Horizontal wells reduce the Horizontal

Drilling
size of the drill pad footprint
and enable production along
the length of a reservoir.

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 Hydraulic Fracturing
Hydraulic fracturing, or fracking, is
the process of injecting water,
chemicals, and sand into wells.
Hydraulic
Fracturing
The resulting fractures in Horizontal
Drilling
surrounding rock formations allow
for hydrocarbons to escape.

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 Deepwater Drilling

Some of the largest oil and gas discoveries of the last decade
have been found in deep water off the coasts of Africa and
South America as well as the Gulf of Mexico.

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Join now for access to free eBooks,
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body of digital learning content.

Free eBooks include:

 History of Oil
 Upstream Fundamentals
 Midstream Fundamentals
 Downstream Fundamentals
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Upstream Business Characteristics
High Risk – High Return

Highly Regulated

Impact by Global Politics

Technology Intensive

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 Unbelievably Complex

The upstream industry is arguably the most complex of all the

oil and gas business sectors.

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 Upstream Segments

The upstream segment is regulated in terms of production,

access to reserves, pricing and taxation, and more and more
stringent environmental regulations.

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 Upstream is a global business. Politics between
producing nations and major oil companies can be
very complicated.

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Finally, as we’ve seen in the last decade with developments of
unconventional prospects, upstream is extremely technology,
and thus capital, intensive.

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 Who are the Players?
Majors NOCs
Independents Oilfield Services

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 Majors

Major Oil Companies (also called Integrated Oil Companies

– IOCs) also operate assets in other segments of the
industry.

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These companies include the prominent global brands that you
are familiar with:

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 NOCs

National Oil Companies (NOCs) are those industry

participants that are owned and managed by governments
around the world.

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 Independents

Independents exist in each segment of oil and gas, and are not
integrated into other segments.

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 Oilfield Services
What is the oilfield services sector?

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 Oilfield Service

This sector includes those companies that provide the

specialized equipment

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services and technical skills needed for:

Exploring

Drilling

Completing

Testing

Producing and Maintaining

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 Oilfield Services

Oilfield services and supply companies do not typically

produce oil and gas or own the assets that contain
hydrocarbon reserves.

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 Oilfield Services

At a typical drilling well site, there could be 30 or more

different oilfield service companies handling the
mechanical, technical and analytic operations needed
to successfully drill and complete a well.

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 There’s More?

This Upstream material was taken from our free

Oil 101: Introduction to Oil & Gas
course.

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 Who are we?
EKT Interactive staff have provided oil and gas training
since 1986.

Visit us at www.ektinteractive.com to learn more.

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