The entire petroleum industry is usually divided into three major components and refers to an Oil and Gas Company’s location in the supply chain:

• Upstream

• Midstream

• Downstream

The primary role of the upstream industry is to find and produce crude oil and natural gas. The upstream industry is sometimes referred to as the exploration and production (E&P)(1) sector. They conduct exploration activities for locating potential underground or underwater crude oil and natural gas deposits. Exploratory wells are drilled to assess the economic potential. This is followed by drilling and operating the wells to recover and bring the crude oil or raw natural gas to the surface.

The midstream industry(2) , on the other hand, processes the extracted oil and gas, stores the products, markets and transports commodities. This provides the crucial link between the producer and the consumer. The downstream industry(3)  comprises the oil refineries, petrochemical plants, their distributors, retail outlets and natural gas distribution companies. This sector is the customer-facing sector of the oil and gas industry. There are, however, some companies which combine the functions of two or more of the above mentioned sectors. Such companies are referred to as integrated oil and gas companies.

Upstream Oil and Gas Production(4): 

To meet the primary goal of exploration and producing crude oil and natural gas, the upstream oil and gas companies need to acquire capabilities such as rig operations, teams to carry out feasibility studies, machinery rental operations and extraction of chemical supply. These tasks require geologists, geophysicists, service rig operators, engineering firms, scientists and seismic and drilling contractors. They locate and estimate reserves before any actual drilling activity commences.

The upstream oil and gas production process may be divided into the following phases:

Discovery of Oil and Gas- To start with, aerial surveys are conducted and the surface observation carried out by geologists and geophysicists to identify petroleum containing rock formations. After this seismic surveys and carried out or seismic data purchased to get a better understanding of the underground rock formations. Canada is widely recognized to have the most comprehensive data of its petroleum resources. Thus, it becomes very easy to generate new drilling prospects with the database. Besides, producing fields can be optimized and their operation scrutinized. Rigs operate throughout the day and night, all week long and crews are employed in 12 hour shifts for two weeks at a stretch, followed by a week off. To ensure smooth running of the shifts, workers are at times, housed in a temporary camp on site.

Well Drilling- To find out whether a rock formation contains oil or gas, drilling is the only way to go. Well drilling usually takes place in stages. First a surface hole is drilled up to a depth of between 60 to 400 meters, called a spudding in the well. Then a steep pipe, called surface casing, is inserted and cemented in place. Next blowout preventer (BOP) devices are installed above the casing. These are large valves made to contain fluid and gas pressure in the well. After this stage is done, drilling may continue for a couple or more days or work up to about eight months or more depending on the target depth to be achieved or the complexity of rocks underneath.

Cores and Cuttings- Small rock chips are recovered from the drilling fluid, during the drilling of a well. These are studied and examined to identify the age, chemistry, porosity, permeability, and other properties of the rock.

Logging and Testing- During the course of the drilling process, various logs are plotted to record the progress of the drilling operations. This includes the data on the type and thickness of rock layers, as estimated by the geologist on site, the speed of penetration.

Abandonment - If a well is shown to be a dry hole, during the tests, or is not capable of producing commercial quantities of oil and gas the bore is plugged with cement and the site is cleaned up.

Pipelining and Processing- Oil and gas producers are connected to processing facilities. Pipelines transporting oil and gas to wells and facilities are referred to as the “flow lines” or “gathering systems”.

Conclusion:

Upstream oil and gas production is a very crucial part of the oil and gas supply chain and comprises a very complex process requiring the expertise of several entities. Due care and diligence must be undertaken to prevent environmental damage and loss of life and resources.

Resources:

(1). https://www.psac.ca/business/industry-overview/

(2). https://www.psac.ca/business/industry-overview/

(3). https://www.investopedia.com/ask/answers/060215/what-difference-between-upstream-and-downstream-oil-and-gas-operations.asp

(4). https://www.investopedia.com/ask/answers/060215/what-difference-between-upstream-and-downstream-oil-and-gas-operations.asp