Oil and natural gas together make petroleum. Petroleum, which is Latin for rock oil, is a fossil fuel, meaning it was made naturally from decaying prehistoric plant and animal remains. It is a mixture of hundreds of different hydrocarbons molecules containing hydrogen and carbon that exist sometimes as a liquid (crude oil) and sometimes as a vapor (natural gas).
How is Petroleum Formed?
Oil and natural gas were formed from the remains of prehistoric plants and animals—that’s why they’re called fossil fuels. Hundreds of millions of years ago, prehistoric plant and animal remains settled into the seas along with sand, silt and rocks. As the rocks and silt settled, layer upon layer piled up in rivers, along coastlines and on the sea bottom trapping the organic material. Without air, the organic layers could not rot away. Over time, increasing pressure and temperature changed the mud, sand and silt into rock (known as source rock) and slowly “cooked” the organic matter into petroleum. Petroleum is held inside the rock formation, similar to how a sponge holds water.
Over millions of years, the oil and gas that formed in the source rock deep within the Earth moved upward through tiny, connected pore spaces in the rocks. Some seeped out at the Earth’s surface, but most of the petroleum hydrocarbons were trapped by nonporous rocks or other barriers. These underground traps of oil and gas are called reservoirs. Contrary to popular misconception, reservoirs are not underground “lakes” of oil; they are made up of porous and permeable rocks that can hold significant amounts of oil and gas within their pore spaces. Some reservoirs are hundreds of feet below the surface, while others are thousands of feet underground.
How is Petroleum Found?
From ancient times through the early 1900s, finding oil and gas was largely a matter of luck. Early explorers looked for oil seeps at the surface, certain types of rock outcrops and other surface signs that oil might exist below ground. This was a hit-or-miss process. But science and technology quickly developed to improve the industry’s ability to determine what lies below the ground.
Geologists study rocks on the Earth’s surface and underground. They make a map of the rocks where they think oil and gas might be found. Engineers use this geology map to drill a well under the Earth’s surface. If successful, the well will bring a steady flow of oil and gas to the surface. After the drill rig is removed, a pump is placed on the well head. An electric motor drives a gear box that moves a lever. The lever pushes and pulls, forcing the pump up and down, and creates a suction that draws up the oil.
Three factors affect the amount of oil or gas that can be recovered from a known reservoir: rock properties, technology and economics. While the industry cannot change the properties of the rock, it can develop new techniques to remove more oil from the rock. The industry has also made significant advances to enhance recovery from known reservoirs in the US and abroad, adding to the reserves base.
Where is Petroleum Found?
The oil and natural gas that power our homes, businesses and transportation are found in small spaces — called pores — between layers of rock deep within the Earth. Many offshore wells, for example, are drilled in thousands of feet of water and penetrate tens of thousands of feet into the sediments below the sea floor. The oil is then transported to refineries and distilled into fuel or base chemical products.
More than 100 countries produce petroleum. Most of those countries produce both oil and natural gas; a few produce only natural gas. Natural gas is usually found near petroleum.
Many factors can affect oil production, such as civil unrest, national or international politics, adherence to quotas, oil prices, oil demand, new discoveries and technology development or application.
The larger subsurface traps are the easiest deposits of oil and gas to locate. In mature production areas of the world, most of these large deposits of oil and gas have already been found, and many have been producing since the 1960s and 1970s. The oil and gas industry has developed new technology to better identify and access oil and gas:
- Improved seismic techniques (such as 3D seismic) have increased the odds of correctly identifying the location of smaller and more difficult to find reservoirs.
- New drilling techniques can intersect a long, thin reservoir horizontally first that then turns vertically making an “L” shape. This enables the oil or gas from the reservoir to be recovered with fewer wells.
World oil production comes from more than 800,000 oil wells. More than 500,000 of these wells are in the United States, which has some of the most mature producing basins in the world. On average, an oil well in the US produces only 10 B/D, compared with 248 B/D in Russia, 3,077 B/D in Norway, and 5,762 B/D for a well in Saudi Arabia. Comparable data for natural gas wells are not readily available.
There are still many oil and gas reserves left to be discovered and produced. Future discoveries will be in deeper basins and in more remote areas of the earth. Advanced technologies also can be used to locate small reservoirs found in existing oil and gas areas.
Largest Oil Reserves by Country – 1 January 2010
|Rank||Country||Proved Reserves (billion barrels)|
|7||United Arab Emirates||97.8|
|Top 20 Countries||1,281.5|
|Rest of the World||72.2|
|Notes: Proved reserves are estimated with reasonable certainty to be recoverable with present technology and prices.
Source: U.S. Energy Information Administration (EIA).
Natural Gas: Oil Byproduct, Valuable Resource
Natural-gas use is growing across all economic sectors. Natural gas burns cleaner than oil or coal, and this environmental benefit has encouraged its use. While decades ago natural gas was seen as an unwanted byproduct of oil and may have been wasted, its value has been recognized today. Most natural gas is distributed by pipelines, which is a limiting factor for remote resources that are not near the major consuming markets. But there is considerable development of technology to convert natural gas to liquids to enable more widespread transportation.
For more information on shale gas and horizontal drilling, see Modern Shale Gas: A Primer from the U.S. Department of Energy.
Largest Natural Gas Reserves by Country – 1 January 2009
|Country||Reserves (Trillion Cubic Feet)||Percent of World Total|
|United Arab Emirates||214.4||3.4|
|Top 20 Countries||5,674.6||90.7|
|Rest of World||579.8||9.3|
|Source: Oil & Gas Journal, Oil & Gas Journal, Vol. 106.48 (December 22, 2008).|
New Exploration Methods for Oil and Gas
In the unrelenting search for more oil and gas, innovation plays an unquestionable role. As large oil and gas fields become increasingly difficult to find, geologists, geophysicists and engineers employ new technologies, such as seismic, to uncover resources that just 10 years ago were unimaginable. Seismic is a technology that bounces sound waves off rock formations deep below the surface of the Earth to provide explorers with a picture of the subsurface, often revealing locations where oil and gas may be trapped. The technology of finding oil has even incorporated 3D visualization tools from Microsoft’s Xbox game console! The system will help geoscientists examine and interact with 3D models of the Earth.
In order to process the massive amounts of information collected from seismic surveys, mathematicians, physicists and other scientists are constantly developing new computer algorithms to find complex patterns that enhance our understanding of the land beneath us. If we are to continue finding new fields hidden deep inside the Earth, breakthroughs in computer processing power and data management are necessary.
How Do We Get to the Oil?
The oil and natural gas we use today have been trapped deep inside the Earth for millions of years. Although it is tempting to think of oil and gas reservoirs as large pools and wells with giant straws that suck the fluid to the surface, oil and gas is actually locked inside the rocks like water in a sponge. Just like the small holes in a sponge that collect and hold water, there are tiny spaces or pores in rocks that fill with oil and gas. For the past 100 years, oil and gas was extracted from rocks with small pores that were still big enough that the fluids flowed easily. If you were a tiny molecule of oil, flowing through these rocks would be like driving on a highway in the express lane. During this time period, geologists and engineers knew about other large quantities of hydrocarbons trapped in rocks with even smaller and more complex pores, but were unable to harness the resource—the oil and gas flowed too slowly or not at all from these rocks. Instead of driving on a large and fast highway, flowing through these rocks would be like driving on a small two-lane road with many stoplights and intersections. Conventional gas wells drilled into these formations were considered uneconomic since the gas locked in the rock would flow out of the tiny pores in the rock at such low rates. This picture changed, and changed in a big way, with the advent of stimulated horizontal wells.
Before the technology advances of the past few decades, the best place to put a well was directly above the anticipated location of the oil or gas reservoir. The well would then be drilled vertically to the targeted oil or gas formation. Technology now allows the industry to drill directionally from a site up to 5 miles (8 km) away from the target area. Engineers can even target an area the size of a small room more than a mile underground! This directional drilling technology means that the industry can avoid placing wells in environmentally sensitive areas or other inaccessible locations yet still access the oil or gas that lies under those areas.
In simplified terms, the drilling process uses a motor, either at the surface or downhole, to turn a string of pipe with a drill bit connected to the end. The drill bit has special “teeth” to help it crush or break up the rock it encounters to make a hole in the ground. While the well is being drilled, a fluid, called drilling mud, circulates down the inside of the drill pipe, passes through holes in the drill bit and travels back up the wellbore to the surface. The drilling mud has two purposes:
- To carry the small bits of rock, or cuttings, from the drilling process to the surface so they can be removed.
- To fill the wellbore with fluid to equalize pressure and prevent water or other fluids in underground formations from flowing into the wellbore during drilling.
Water-based drilling mud is composed primarily of clay, water and small amounts of chemical additives to address particular subsurface conditions that may be encountered. In deep wells, oil-based drilling mud is used because water-based mud cannot stand up to the higher temperatures and conditions encountered. The petroleum industry has developed technologies to minimize the environmental effects of the drilling fluids it uses, recycling as much as possible. The development of environmentally friendly fluids and additives is an important area of research of the oil and gas industry.
Even with the best technology, drilling a well does not always mean that oil or gas will be found. If oil or gas is not found in commercial quantities, the well is called a dry hole. Sometimes, the well encounters oil or gas, but the reservoir is determined to be unlikely to produce in commercial quantities.
Technology has increased the success rate of finding commercial oil or gas deposits with less waste and a smaller impact on the surface. While conventional oil and gas wells are typically vertical, contacting only a limited amount of the target reservoir rock, horizontal wells look like a large “L.” The long horizontal wellbore, sometimes more than 4,000 feet long, contacts a large portion of the productive reservoir. The surrounding rock formation is then hydraulically fractured to release the oil or gas trapped inside. In hydraulic fracturing, massive trucks pump thousands of gallons of fluid into the rock at very high pressures in order to force the rock to crack. These cracks are then propped open with sand to allow a highly conductive passage through which the oil or gas can flow.
In shale fields, as many as 15 major fractures are placed along the horizontal wellbore, serving to connect all those small two-lane roads to wide boulevards and even larger, faster highways. Currently, the limits of this technology are being pushed back every day in order to unleash giant gas resources. In the future, this technology will have to go even farther to allow more fractures and longer horizontal wells. Advances in this area will undoubtedly transform our energy landscape.
For more information on shale gas and horizontal drilling, see Modern Shale Gas: A Primer from the U.S. Department of Energy.
Once a company identifies where the oil or gas may be located, it then begins planning to drill an exploratory well. Drilling a well is expensive: Shallow offshore wells or deep onshore wells can cost more than $15 million each to drill!
Getting the Oil Out
Locating a suitable site for drilling is just the first step in extracting oil. Before drilling can begin, companies must make sure that they have the legal right to drill, and that the impact of drilling on the environment is acceptable. This can take years. Once they finally have the go ahead, drilling begins. The exact procedure varies, but the idea is first to drill down to just above where the oil is located. Then they insert a casing of concrete into the newly drilled hole to make it stronger. Next, they make little holes in the casing near the bottom, which will let oil in, and top the well with a special assembly of control and safety valves called a “Christmas tree.” Finally, they may send down acid or pressurized sand to break through the last layer of rock and start the oil flowing into the well. (Source: Oil and Natural Gas, Society of Petroleum Engineers, Richardson, TX.)
In the petroleum industry, production is the phase of operation that deals with bringing well fluids to the surface and preparing them for their trip to the refinery or processing plant. Production begins after drilling is finished.
The first step is to complete the well – that is, to perform whatever operations are necessary to start the well fluids flowing to the surface. Routine maintenance operations, such as replacing worn or malfunctioning equipment – known as servicing – are standard during the well’s producing life. Later in the life of the well, more extensive repairs – known as workovers – may also be necessary to maintain the flow of oil and gas. The fluids from a well are usually a mixture of oil, gas, and water, which must be separated after coming to the surface. Production also includes disposing of the water and installing equipment to treat, measure, and test the oil and gas before they are transported away from the well site.
So production is a combination of operations: bringing fluids to the surface; doing whatever is necessary to keep the well producing; and taking fluids through a series of steps to purify, measure, and test them. (Source: Fundamentals of Petroleum, Petroleum Extension Service, The University of Texas at Austin, Austin TX)
Ultra-deep Water Operations
A major obstacle to producing tomorrow’s oil and gas resources is operation in ultra-deep water. The frontier of oil exploration continues to be offshore, over 10,000 feet/3,048 meters below sea level. Operating in this environment requires billions of dollars and boundless technical expertise. Safely and economically bringing oil to the surface requires experts in everything from underwater vehicles that install subsea equipment to structural engineers that make sure the huge floating platforms can withstand large waves. Operators must be able to hit a seemingly tiny target that they cannot see over 30,000 feet/9,144 meters under the surface—all while floating on waves. To put this in perspective, it is a bit like a quarterback trying to throw a football to his wide receiver more than 100 football fields away! Innovation will continue to drive this frontier into new territory.
We depend on oil and gas for a host of products we use in our everyday lives, and we will continue to depend on them for years to come. And while oil and gas production may contribute to the greenhouse effect on the environment, the industry is doing its part to offset those effects while still meeting the world’s petroleum demands.
Already great strides have been made to ensure that oil and gas producers make as little impact as possible on the natural environments in which they operate. This includes drilling multiple wells from a single location or pad to minimize damages to the surface, employing environmentally sound chemicals to stimulate well production, and ensuring a seamless transition from the wellhead to the consumer. While conventional oil and gas operations have been streamlined to maximize human safety and environmental protection, development of unconventional resources like Canada’s oil sands and Colorado’s oil shale will require major technological innovations.
Exploitation of these resources will be important in meeting tomorrow’s energy demand, but current methods consume large quantities of water and depend on expansive surface operations. How can the vast potential locked in these resources be tapped in a more efficient, environmentally sound manner? Research today focuses on inserting heaters into rock formations below the surface to convert the heavy hydrocarbons into liquid that can then be drained and produced by more conventional oil wells. Such a process would dramatically reduce the impact of these unconventional sources on the surface. However, the next generation of engineers and scientists must further refine this technology or generate new ideas in order to tackle these problems.
Are We Running Out of Oil and Gas?
Countries with Largest Known Oil Reserves
- Saudi Arabia
- United Arab Emirates
No one can know for certain how much oil and gas remains to be discovered. But geologists sometimes make educated guesses.
The total amount of oil or gas in the reservoir is called original oil, or gas. For a specific reservoir, engineers estimate this amount using information about the size of the reservoir trap and properties of the rock. Some of the original oil and gas deposited millions of years ago has been discovered, while some remains undiscovered—the target of future exploration.
Discovered (or known) resources can be divided into proved reserves and prospective or unproved (probable and possible) resources.
- Proved reserves are the quantities of oil or gas from known reservoirs that are expected to be recoverable with current technology and at current economic conditions.
- Prospective resources are those that may be recoverable in the future with advanced technologies or under different economic conditions.
The Oil & Gas Journal (OGJ) estimates that at the beginning of 2009, worldwide reserves were 1.34 trillion barrels of oil and 6,254 trillion cubic feet (Tcf) of natural gas. The oil estimate is 16 billion barrels of oil higher than in 2007, reflecting additional discoveries, improving technology and changing economics.
Continental North America and much of continental Europe have already been explored heavily, and any new discoveries are likely to be small. But many areas of the globe are largely unexplored, and large new deposits are waiting to be found. Global hot spots that may house significant new oil and gas reservoirs include:
- Offshore Brazil
- The Gulf of Mexico
- Offshore western Africa
- Areas across Asia and the Pacific.
These are just a few of the current areas of growth. Most observers agree that significant deposits of oil and gas remain undiscovered in the Middle East.
The largest reserves of natural gas are found in Russia, Iran, Qatar, Saudi Arabia, the United Arab Emirates, the United States, Algeria, Nigeria, Venezuela and Iraq.
At current consumption levels, the remaining reserves represent 44.6 years of oil and 66.2 years of natural gas. Does this mean that the world will be out of fossil fuels in 50 years or so? That theory has been around since the 1970s. In fact, the figures for years of remaining reserves have remained relatively constant during the past few decades as the industry has balanced consumption with newly discovered oil and gas deposits.
History of Petroleum
280 to 345 million years ago – Carboniferous period; fossil fuel formation begins.
Around 3 million years ago – Stone Age; Vast underground oil reserves seep to the surface in sticky black pools and lumps, called bitumen. Hunters use bitumen (also called pitch or tar) to attach flint arrowheads to their arrows.
70,000 years ago – Prehistoric people discover that oil burns with a bright, steady flame. The first oil lamps are made by hollowing out a stone, filling it with moss or plant fibers and setting the moss on fire. Oil lamps remained the main source of lighting until the gas lamp invention in Victorian times. The Greeks improved lamps by putting a lid on the bowl.
6,500 years ago – People living in marshes added bitumen to bricks and cement to waterproof their houses from floods. They soon learned that it could be used to seal water tanks, waterproof boats (now known as caulking) and glue broken pots.
7th century BCE – A magnifying glass is used to concentrate the sun’s rays on a fuel and light a fire for light, warmth and cooking.
6th century BCE – Persians discover that a thinner form of bitumen, called naft, could be lethal in battle. Persian archers put it on their arrows to fire flaming missiles at their enemies.
2,000 years ago – The Chinese begin to drill wells in Sichuan. They used bamboo tipped by iron to get brine (salty water) for medicine and preserving food. They found oil and natural gas as they drilled deeper. The natural gas was burned under big pans to boil off the water and obtain the salt. The Chinese refined crude oil for use in lamps and in heating homes.
323-30 BCE – Ptolemaic period; Ancient Egyptians preserve their dead as mummies by soaking them in a brew of chemicals such as salt, beeswax, cedar tree resin, and bitumen.
146 BCE – When the Romans set the ancient city of Carthage on fire, the bitumen on the roofs ensures the flames spread rapidly and completely destroy the city.
67 CE – Middle Ages; When enemies try to scale the walls of a castle of fortified town, defenders pour boiling oil down on them. The first use of boiling oil was by Jews defending the city of Jotapata against the Romans in 67 CE. The idea was later adopted to defend castles during the Middle Ages. Oil was extremely expensive, so the technique was probably not used often.
1750 – A French military officer notes that Indians living near Fort Duquesne (now the site of Pittsburgh) set fire to an oil-slicked creek as part of a religious ceremony. As settlement by Europeans proceeded, oil was discovered in many places in northwestern Pennsylvania and western New York—to the frequent dismay of the well owners, who were drilling for salt brine.
1780s – Swiss physicist Aime Argand (1750-1803) realizes that by placing a circular wick in the middle of an oil lamp and covering it with a chimney to improve airflow, the lamp would burn 10 times brighter than a candle, and also cleanly. This was the greatest breakthrough in lighting since the time of the Greeks. It revolutionized home life, making rooms bright at night for the first time in history.
1847 – The world’s first oil well is drilled in Baku on the Caspian Sea, what is now Azerbaijan. Known as the Black City, Baku produced 90 percent of the world’s oil by the 1860s.
1853 – Polish chemist Ignancy Lukasiewicz discovers how to distil oil on an industrial scale. He set up the world’s first crude oil refinery in Poland.
1858 – James Williams (1818-90) digs a hole in Lambton County, Ontario, Canada, and found oil bubbled so rapidly he could fill bucket after bucket. This was the first oil well in the Americas. Within a few years, simple “derricks”—frames for supporting the drilling equipment—dotted the landscape.
1859 – Edwin L. Drake drills down 70 feet (21meters) in Titus, Pennsylvania, and struck oil to create the US’ first oil well. Oil was first discovered when a homemade rig drilled down 70 feet and came up coated with oil. This rig was near Titusville (in northwestern Pennsylvania) and was owned by “Colonel” Edwin L. Drake.
1896 – Henry Ford built his first automobile, the quadricycle, to run on pure ethanol.
1930s – By the 1930s, petroleum is the primary source for fuel because of more supply, better price and efficiency.
1950-present – Oil becomes our most used energy source because of automobiles.
1970 – Production of petroleum (crude oil and natural gas plant liquids) in the US lower 48 states reaches its highest level at 9.4 million barrels per day. Production in the lower 48 states has been declining ever since.
1972 – Deep-well drilling technology improvements lead to deeper reservoir drilling and to access to more resources.
1973 – Several Arab OPEC nations embargo, or stop selling, oil to the United States and Holland to protest their support of Israel in the Arab-Israeli “Yom Kippur” War. Later, the Arab OPEC nations added South Africa, Rhodesia and Portugal to the list of countries that were embargoed.
Arab OPEC production was cut by 25 percent, which caused some temporary shortages and helped oil prices to triple. Some filling stations ran out of gasoline and cars had to wait in long lines for gasoline.
Countries such as France and Japan, which had relied heavily on oil for electric generation (39% and 73%, respectively) invested in nuclear power due to the oil crisis. Today, nuclear power supplies about 80% and 30% of the electricity in those countries, respectively.
The OPEC oil embargo and the resulting supply shock suggested that the era of cheap petroleum had ended and that the world needed alternative fuels. The development of hydrogen fuel cells for conventional commercial applications began.
1988 – Ethanol begins to be added to gasoline for the purpose of reducing carbon monoxide emissions.
2003 – Ethanol begins to grow rapidly as the oxygenating factor for gasoline in the US.
Flex-fuel vehicles are introduced. These vehicles can run on straight ethanol, straight gasoline or a blend of the two. Today, the majority of new cars sold in Brazil are flex-fuel.
Today – In the future, water will replace fossil fuels as the primary resource for hydrogen. Hydrogen will be distributed via national networks of hydrogen transport pipelines and fueling stations. Hydrogen energy and fuel cell power will be clean, abundant, reliable, affordable and an integral part of all sectors of the economy in all regions of the US.
Uses for Petroleum
Where would we be without petroleum? You can kiss lipstick goodbye!
Not only does petroleum provides fuel to run our vehicles, cook our food, heat our homes and generate electricity, it is also used in plastics, medicines, food items, and countless other products, from aspirin to umbrellas, and yes—lipstick! Transportation needs use 66% of all available petroleum to fuel cars, buses, trucks and jets. That means 34% of oil is used for all the other items that make our daily lives easier. Most people have no idea how often they come in contact with things made from oil or natural gas.
Here are some of the many items made from petroleum
Soft Contact Lenses
Meeting Higher Demands for Petroleum
In areas of the world that are still developing, businesses and individuals are demanding greater mobility for themselves and their products. World vehicle ownership is projected to increase from 122 vehicles per thousand people in 1999 to 144 vehicles per thousand in 2020, with the largest growth occurring in developing nations. The total consumption of liquid fuels worldwide is expected to increase by 25% from 2006 to 2030.
World population is currently around 6 billion people but is expected to grow to approximately 7.6 billion by 2020. That will mean a huge increase in the demand for transportation fuels, electricity and many other consumer products made from oil and natural gas.
Advanced technology helps the oil and gas industry find the energy resources the world needs. Technology advances enable more accurate drilling and extraction of a higher percentage of oil and gas from each field, extending the life of each well. Advanced technology also allows engineers to tap sources that were once impossible, such as deep-sea fields and oil and gas in very deep reservoirs. Together, these new sources of oil and gas will replace production from existing wells as they decline and help to assure adequate oil and gas supplies to meet world energy needs for the foreseeable future.
Reducing the Environmental Impact of Fossil Fuel Consumption
Substantial work will be required to address the impact of oil and gas consumption, notably the emission of carbon dioxide as a major byproduct. Among the proposed solutions to this problem is the sequestration, or storage, of carbon dioxide in old oil and gas fields. Storage of carbon dioxide from power plants and other industrial facilities would require collecting and processing the gas, compressing it to high pressures, and then injecting it into the small spaces between rock grains deep below the surface. Here, the key challenge is capturing and storing the CO2 emissions on a sustainable scale in a reliable and cheap manner.