January 20, 2006

How to Drill for Oil or Natural Gas

By Adam Wilmoth, The Daily Oklahoman

Jan. 20--The cost and complexity of oil and natural gas wells varies widely from site to site depending on a range of factors such as depth of the well, geological formations, distance from civilization and other drilling operations. In general, however, drilling follows a similar pattern that largely has been unchanged for decades. The following is a synopsis of the steps involved in drilling a typical Oklahoma oil or natural gas well: 1. Identification A geologist or a team of geologists determine a possible drilling location based on data from existing wells in the area and from other data. * Workers involved: One to 10. * Cost: Generally $5,000 to $35,000, plus a small percentage of the profit from the well. 2. Obtain drilling rights After a production company determines a site appears commercially viable, a land manager or a team of land managers work to secure the mineral rights. If the area already is controlled by another company, the landmen work to buy the leases. If no other companies are involved in the site, the landmen make offers to involved mineral owners. Under Oklahoma law, if most -- but not all -- land owners agree to participate in the well, the producer can move forward with the wells. Holdouts are forced to either participate or sell their interest. * Workers involved: One to many land managers. Lawyers are involved if the case advances to forced pooling. * Cost: $10,000 to several hundred thousand dollars, depending on the size of the property and complexity of the case. 3. Seismic imaging Exploration and production companies either hire a team to shoot the seismic imaging data, or they buy data that has already been completed. Seismic data is collected by setting up sensors on the surface of the area to be measured. Vibrations are then created either by setting off dynamite or by using a special tractor trailer that "bounces" heavily. The results are interpreted by one or a team of geologists and geophysicists. Reservoir engineers then determine the potential production level in the area. * Workers involved: Generally a team of about six shoots the seismic, plus a team or individual geologists, geophysicists and reservoir engineers. * Cost: $10,000 to several hundred thousand dollars, depending on size and location. 4. Drilling site preparation A construction company is hired to build dirt or gravel roads to the drilling site. The company then prepares for the drilling rig by building berms around the area to contain a possible leak or blowout. * Workers involved: Generally five to 25, depending on terrain and how far the site is from other operations. 5. Well drilling A drilling company and trucking company then move the rig into place on the prepared platform. Drillers then dig the hole in concert with a pipe company and a mudding company. These companies work to ensure the drill pipe moves smoothly. In many cases, a directional drilling team is used to steer the hole toward the proper target zone. In Oklahoma, directional drilling is used particularly in areas of complex geology and for drilling into unconventional resources, such as shale or coal. When the drilling is finished -- or sometimes while the hole is being drilled -- a logging company team runs equipment down the hole. The equipment sends back information on the hole that helps determine how much oil, natural gas and other substances the well will produce. * Workers involved: Several dozen, depending on depth and complexity of the well. * Cost: Several hundred thousand dollars to several million dollars, depending on the depth and complexity of the well.

6. Completion After a well is drilled, the drilling company places pipe in the hole and cements it in place. The pipe and surrounding oil and natural-gas-producing rock is then perforated using high-pressure water. Depending on the rock formation, completion companies often then fracture the rock by pumping high-pressure water, sand, acid and other chemicals into the hole. * Workers involved: Generally five to 25, depending on depth and complexity of the well. * Cost: $10,000 to several hundred thousand dollars, depending on the well's depth and complexity. 7. Pipeline connection Equipment designed to separate the oil, natural gas and water is then installed by the production company. The purchaser then installs storage tanks for crude oil and water and a pipeline for natural gas production. * Workers involved: Generally five to 15, depending on complexity and distance from other production. * Cost: $50,000 to $200,000 8. Land restoration After the well is completed and tied into the production line, construction crews restore the drilling location. Generally the only thing left after production is a road, a wellhead and possibly a few small storage tanks. * Employees involved: Five to 15. * Cost: $5,000 to $20,000


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