PROCESSES

Prospects

While all of the parameters mentioned above must be met before drilling for hydrocarbons can begin, a key element that has to be determined before leases and permits are obtained is deciding WHERE to drill. Anyone can drill an oil well anywhere if there is enough money, but the primary purpose is to locate hydrocarbons. Thus finding the right location, one where there is a propensity of information supporting the idea that oil exists beneath it, is of paramount importance. Oil sites have been sought using a variety of different techniques. For example, in the early days oil was found by wandering about the countryside with an open flame, a little optimism, and a lot of adventure. Others have used exploration philosophies ranging from drilling old Indian graves to putting on an old hat and galloping about the prairie until the hat comes off and drilling where it lands.

One of the earliest exploration tools was referred to as Creekology. Early drillers recognized a connection between river bottoms and the occurrence of hydrocarbons but didn't understand why. It wasn't until later that the anticlinal theory was developed which explained the phenomenon.

This random approach to hydrocarbon exploration has resulted in locating oil, but, more often than not, the culmination has been a dry hole. The application of geology to hydrocarbon exploration is a recent development.

Evaluating a prospect (a location where a well could be located to discover hydrocarbons in commercial quantities) relies upon the answers to two questions: What is the likelihood of finding hydrocarbons at this site, and are the economics such that it will create a sufficient profit margin to justify the expense of drilling? Geology is used to help answer the first question while economic projections and market analysis help answer the second. Even though geological methods are utilized in the hunt for hydrocarbons, it doesn't always provide all of the answers to all of the questions. While the scientific method is a valid approach, the results are only as good as the information that was used. And the same holds for the economic analysis. World demand for oil and gas is in a constant state of unrest. Political stability, weather (cold winters in the northeastern United States), consumer demands (increased travel during holiday periods), and supply drastically affect prices. Financial risk versus potential profitability must be established, and this requires the probability of geological success (discussed earlier) and three commercial parameters:

  1. Potential profitability of venture,
  2. Available risk to investment funds, and
  3. Aversion to risk.

The interplay of all three criteria produce a subjective evaluation of the economics of the prospect.

But one other aspect of the prospect is also important and that is whether the well in question will be drilled in an existing field (where producing wells currently exist) or is a new prospect (an area where no oil or gas wells exist). Each type carries with it a different degree of risk, but also a different degree of potential reward. So defining the prospect is a difficult and an inexact science. Exploration techniques utilizing geological methods are the primary means used to locate prospects.