OIL DRILLING 101: A STEP BY STEP BREAKDOWN For many people, the common image that comes to mind

when they think of oil drilling is the bubbling crude that rose from the soil of Jed Clampets backyard in The Beverly Hillbillies. But drilling for oil is nothing like the opening images of the popular television show. It is a highly scientific and complex process that involves a team of qualified people to harvest oil and gas that is deeply embedded in the earths surface. Oil and Gas Worldwide has been finding and drilling oil and gas for the past 20 years. They have over 200 successful wells across Texas and the Gulf Coast. To help you better understand what is actually involved in finding, preparing and drilling for oil, they offer this helpful breakdown. Oil and Gas Investment and Tax Benefits During the first year, the intangible cost of drilling which includes: mud, labor, grease and chemicals is completely tax deductible. The costs, which make up nearly eighty percent of the cost of a well, are referred to as intangible drilling costs or IDC. On the contrary, the costs of an oil and gas investment that are devoted to equipment are referred to as tangible drilling costs or TDC. Like IDC, tangible drilling costs are also 100% tax deductible during the initial year of investment. What is Oil? Oil comes from the remains of tiny plants and animals that died between 10 and 600 million years ago. After the organisms died, they sank into the sand and mud at the bottom of the seas and oceans. Over the years, the organisms decayed into carbon rich compounds that formed organic layers under the earths surface. These organic layers mixed with sediments, forming fine-grained shale, or source rock. As new layers and sediments formed, they exerted intense pressure and heat on the source rock. This heat and pressure distilled the organic material in the source rock into crude oil and natural gas. Finding Oil The task of finding oil and gas that is deeply embedded in the earth is first assigned to a geologist. Modern day oil geologists start their search for oil by examining surface rocks and terrain with the help of satellite images. They also use a variety of other high tech equipment such as gravity meters, magnometers and sand sniffers. Gravity meters measure tiny changes in the Earth's gravitational field that can indicate flowing oil. Magnetometers measure tiny changes in the Earth's magnetic field caused by flowing oil. Sniffers are sensitive electronic devices which detect the smell of hydrocarbons, which can indicate the presence of oil. Perhaps the most common method used by geologists to find oil is seismology. Seismology creates shock waves

that pass through hidden rock layers. Geologists then interpret the waves that are reflected back to the surface to determine if oil is present. Preparing the Land Once a geologist has selected a site, it must be surveyed to determine its boundaries and studies to determine any possible environmental impact must be done. Lease agreements, permits, titles and right-of way access for the land must also be obtained. For off-shore sites, legal jurisdiction must be determined. Once the legal issues have been settled, a crew goes about preparing the land. The land is cleared and leveled, and access roads are built. A well pad must be constructed to separate the wildlife, crops or residences from the well. The pad must be large enough to accommodate emergency, maintenance and construction equipment necessary for operations and repairs during the life of the well. Because water is used in drilling, there must be a source of water nearby. If there is no natural source, a well must be dug. Once the land and well pad have been prepared, several holes are made to support the rig and its 90 foot derrick or mast. Some rigs are built on ships or barges when there is no foundation to support a rig (as in marshes or lakes). Depending upon the location of the drill site and its access, ancillary equipment is then transported to the site by truck, helicopter or barge. Casings and Cementing Prior to the arrival of a big drilling rig, workers install conductor casing. Conductor casing, which is usually no more than 20 to 50 feet long, is installed to prevent the top of the well from caving in and to help in the process of circulating the drilling fluid up from the bottom of the well. The casing is usually 16 to 20 inches in diameter. The hole for the casing is usually drilled with a small auger on the back of a truck. The casing is then cemented in place. Once the conductor casing is in place and the rig has arrived, workers start drilling a 600 to 1000 foot hole to accommodate the surface casing. Surface casing is a large diameter, low -pressure pipe that is designed to protect the earths aquifer from contamination during drilling. The casing itself comes in 40-foot sections, which are threaded at both ends. Workers, or "roughnecks", attach the sections with a "collar" which also is threaded .The roughnecks then tighten the collar with a large pipe wrench. Once the surface casing has been run into the hole, special cement is pumped in. The cement seals the area between the surface casing and the side of the hole. Drilling the Well Once the surface casing is in place, workers can actually begin drilling for oil. The well is drilled by a rig rotating pipe (or drill pipe) with a bit attached to the end. Drill pipe is added in 30 foot lengths at a time. Weight is applied to the bit through the use of drill collars or thick walled tubular pieces made from solid pieces of steel. A liquid consisting of fresh water and bentonite,

also called drilling mud, is circulated in the hole during drilling to remove cuttings and maintain pressure. Blow out preventers or BOPs are installed at the surface to control any unexpected changes in pressure. Logging Once the hole reaches the desired depth, logging begins. Logging is the process of determining which of the formations between the surface and the bottom of the well contain oil and gas and which formations contain merely water. An electrical cable and a "logging tool" are lowered into the hole, and the tool sends electrical charges into the formation. The tool then sends geological information to a "logging" truck where a computer processes the information. The information which can be derived from logging includes rock type, porosity, and resistivity. The Casing Point Decision Once this information is gathered and studied, a decision is made to either plug or complete the well. This is called the "casing point decision". If a decision is made to complete the well, then more casing is lowered in to reach the bottom of the hole. Cement is once again pumped into the hole to seal the area between the surface casing and the side of the hole. However, the cement to hold this casing stops at least 500 feet below the surface to prevent natural gas leaks. Setting this casing is the final step before well stimulation can begin. Well Stimulation Well stimulation consists of various techniques used to loosen the oil that is trapped in the porous rock. Hydraulic fracing (pronounced fracking) is the most commonly used method. Fracing involves pumping water at extremely high pressure into the hole until a crack develops in the rock formation. Water and sand are then pumped into the crack. The sand holds the cracks open until all the oil escapes the rock and flows into the casing. Well Completion Well stimulation consists of various techniques used to loosen the oil that is trapped in the porous rock. Hydraulic fracing (pronounced fracking) is the most commonly used method. Fracing involves pumping water at extremely high pressure into the hole until a crack develops in the rock formation. Water and sand are then pumped into the crack. The sand holds the cracks open until all the oil escapes the rock and flows into the casing. Production Once the well has been completed, it moves to the production stage. The oil and gas streams are separated. The gas flows into a gas pipeline that carries it to processing plants and then onto the

consumer for purchase. Meters are installed from the wellhead to measure the amount of gas that is being purchased. The oil that is separated flows into tanks and is stored until it trucked or shipped via pipeline to a refinery. At Oil and Gas Worldwide we invite you to experience the excitement of oil and gas coming out of the ground. See for yourself firsthand. It could be yours. We are pleased to present accredited investors a chance to invest. For more information please call 1-800-833-0563 or log on to www.oilandgasworldwide.com

WELL PLANNING 1. OBJECTIVE

Well Planning is an orderly process which involves number of steps. The objective of well planning is to design a drilling program which includes various operations related to the drilling operation. The three major points to be considered while planning a well:

Safety of Manpower and equipment Cost Reach the target successfully flow path for Well Planning can be seen below:

The

Safety should be kept at highest priority. In oil and gas industry, safety of manpower comes before the safety of equipments. Companies have a separate department which looks over the safety issues - Health, Safety and Environment (HSE) department.

The well should be planned in such a way that the total cost incurred is minimum without compromising with safety aspects.

The objective of drilling a hole to the given target depth will not be achieved if the final well configuration is not usable. Usable means that the hole configuration (direction, inclination, diameter etc) should be as per plan and the reservoir should not get damaged due to any activity related to drilling operation.

2. ACTIVITIES BEFORE WE START DRILLING OPERATION There are list of operations to be conducted before we start the drilling operation. Below is an ordered sequence of operations/activity to be conducted before we initiate drilling:

Release of location Survey of location (surface/subsea) Civil work and foundation to be made for onshore drillsite and soil coring/ sea bed survey to be done in case of offshore well. Preparation of GTO Preparation of well plan/programme Preparation of bill of material and initiation of purchase procedure (if required). Procedure for obtaining sanction for purchase of material. Rig allocation and rig move.

3. INPUT DATA FOR WELL PLANNING Following are the information required for well planning:

Well data package consisting of - seismic data, location map, structural map, expected pore pressure, offset and correlation logs and information about formation type, top and thickness. Offset well data consisting of - bit record, mud report, logging data, drilling report, well completion report, complication report and production/injection report. Proposed logging, testing and coring programme. Government regulations Company policy

4. GEO TECHNICAL ORDER (GTO) GTO is a document consisting of following data : The data may be in form of table, chart, graph or picture. a. General Well Data

Well Name Well Number Area Location Water Depth Elevation Well Type

Category Profile Objective of the Well

b. Geological Data

Depth Age Formation Lithology Interval of Coring Electro Logging Collection of Cutting Angle of Dip Oil/Gas Shows Formation Pressure Formation Temperature Mud Loss/ Caving

c. Mud Parameters

Type of Mud Specific Gravity Viscosity pH Sand Percent Filtration Loss

d. Drilling Data

Casing policy Rise of cement Type of drilling Type and size of bit to be used for different interval Number of bits expected Meterage per bit Weight on Bit (WOB) RPM of rotary Stand Pipe Pressure (SPP) Pump Discharge Bit nozzle details

Drilling time Remarks, if any

e. Deviation Data

Well profile Kick off Point (KOP) Inclination Azimuth Surface Coordinates Target Coordinates

5. DRILLING PROGRAMME PREPARATION Drilling programme includes all th steps initiating from well design to final cost estimation. In general, a drilling programme can be broken down into 12 main sections listed below:

Well Details Well Objective Casing Policy Wellhead Selection BOP Requirement Cementing Programme Deviation Programme Survey Requirements Mud Programme Bit and Hydraulics Programme Evaluation Requirements Estimation of well Cost

Well Details: Well detail includes the following information - Location, Field/Structure, Well Name, Well Number, Well type, Location Data, Water Depth, Measured Depth (MD), True Vertical Depth (TVD), Operator, Name of Rig, Type of Rig. A typical Well Detail for a well is shown in figure below:

Well Objective: The exploration department provides information regarding the objective of the well to be drilled. The objective of the well may be to reach a certain target depth and evaluate a formation/ to exploit hydrocarbon/ any other objective. Such details are provided in this section. Example: "To test hydrocarbon prospect of fore reef facies in Oligocene, Miocene and Carbonate in Eocence section of XYZ feature." or "To exploit Kalol pay sand". Casing Policy Casing policy includes data such as how many casing strings/ liners are to be used, casing specification for different intervals, Casing seat selection, Casing design and recommended practices. Casing pipes are put into the wellbore for the following reasons:

To isolate troublesome formations like shale, lost circulation zones and flowing halites To protect fresh water zone from being contaminated To protect producing formation from mud and mud filtrate contamination

To protect caving or damage of weaker zones due to high head produced by the drilling fluid column. To provide stable seat for packers, liner hangers etc. To provide a confined flow conduit

Most of the decision pertaining to casing policy is based on formation pore pressure. For a development well the formation pore pressure can be obtained from the offset well data, but in case of exploratory well no offset well data is available. For such cases seismic data are utilized to predict formation pore pressure.

Other than formation pore pressure, formation fracture pressure is also used in casing design. Formation fracture pressure is important while determining the the accurate position of casing seat as well as designing drilling fluid for that interval. It either be obtained be offset well data or by conducting leak off test. Once leak off test is carried out, equations such as 'Danies' are used by employing values of Poisson's Ratio for a given formation to estimate probable fracture gradient at other depths in the well. In case of continuous depositional basins, we can use 'Eaton's Equation' with suitable modification to estimate fracture pressure gradient. Casing seat selection is done based on formation properties like the formation pore pressure and formation fracture pressure. For more details on Casing Seat Selection, please go through my blog post on CASING SEAT SELECTION. Casing design keeps the following four forces/pressure in consideration:

Burst Collapse Tension Other loadings (if any)

The burst pressure acts in outward direction from inside the casing and if exceeds the pressure acting inwards, the casing may burst out.

The collapse pressure acts in inward direction on the outer body of casing. If the collapse pressure exceeds the pressure acting outwards, the casing may collapse.

Tension acts in downward direction. If the tension in the casing is more, it may lead to snapping of casing from the weakest point. For more details on Casing Design, please go through my blog post on CASING DESIGN.

Well

Head

Selection

After completing the casing design, we can determine the specification of well head which suits the designed casing policy. The wellhead must be of correct pressure rating, designed for desired services like H2S and capable of accommodating all the designed and contingent casing strings. After the wellhead is selected, its specification should be clearly mentioned in the drilling programme along with other related useful data. BOP Requirement

The BOP selection for a particular well depends on the company policy and the anticipated bottom hole pressure. The BOP should never be under rated, i.e., the pressure rating of BOP should never be less than the anticipated BHP. The BOP stack data and the specification along with the safe practices should be clearly mentioned in the drilling programme.

Cementing

Programme

Completion Once a well has been drilled and tested (logged, cored and pressure data), a decision must be made whether to complete the well or plug it. Examination of the target reservoir rock porosity and permeability may indicate that the potential flow of oil and gas from the well will not justify the cost to complete the well. In these cases, the well is plugged with concrete in several places, and the well is abandoned. IIf, however, the well's test information indicates that the well will be commercially productive, the well is completed. If the well is to be completed, production casing is run down the hole and cemented. Once the casing is in place, a tool called a "perforating gun" is lowered into the well-bore to blast holes through the casing, cement and into the reservoir. These holes are made in order for there to be communication between the reservoir and the production casing. Tubing may then be lowered into the casing. A plug may then be set above the perforations as a barrier between the production casing and the tubing. This allows the earth's natural pressure to push hydrocarbons to the well-bore and to the surface through the tubing unless a pumpjack is necessary to raise the fluids to the surface. Several steps are taken at this time to cut out excessive costs from the production process. A large drilling rig will be replaced by a smaller, moveable completion rig. Also, a completion team will use a swabbing method to force the reservoir to give up fluids naturally. This natural flow rate will be measured and compared to other wells in the area. If it is not up to par, then further measures will be taken to increase the volume of production. These measures include chemically or physically treating the reservoir to stimulate the flow. Acid treatment can be used in a reservoir containing limestone. A physical method would be to pump fluid containing small beads into a reservoir under great pressure to fracture the reservoir. The beads are then used to keep the fractures open to allow the flow to increase.

When a satisfactory rate of production has been established, the well will be tested to calculate the maximum production for the well over a period of 24 hours. This is termed as a well's potential. This and other completion information may be required by the state and will aid other geologists and analysts scouting for oil and/or natural gas in the same area. If a well contains more than one zone of interest, the operator will usually begin by producing the lowest zone in the well-bore first and then work their way up the well-bore as each zone becomes depleted. When a zone is completed, a multi-valve device will be connected to the surface called a "Christmas tree." This device is placed at the top of the production casing and will allow connections to flow the oil and gas. Equipment to process the recovered oil and gas is placed near the well to make sure the oil or gas is ready for transportation. Production Production is the process of extracting petroleum from the underground reservoir and bringing it to the surface to be separated into gases and fluids that can be sold to refineries. Production begins with a high level of production and decreases through time until the well is ultimately plugged and abandoned. This decrease in production is a natural result of the inevitable decline in original pressure within the reservoir. The time period for commercial production and the rate of production depends on the reservoir. Either gas expansion and/or water encroachment provides the principal natural energy for most petroleum reservoirs to produce. Both can operate as reserves are taken from the reservoir. The reduction in pressure around the well-bore as hydrocarbons are extracted causes other hydrocarbons to move into their space. This process continues until the energy is depleted and/or the well makes too much water to be commercially productive. Engineers take the past performance of a well and use it to project the future reserves of a well. One way of predicting future production is to measure the percentage of decline in production over a given period of time and use this rate of decline to estimate future reserves. Reservoir Engineering Reservoir engineering is the application of scientific principles to develop and maintain petroleum reservoirs to maximize economic benefit. For example, carefully spacing out wells over a reservoir and restricting production rates can make a difference in the overall productivity of the reservoir. In 1904, Anthony Lucas, who had discovered Spindletop, spoke about the decline in production. He claimed that "the field had been poked with too many holes and that the cow was milked too hard." Oil operators in that day gave little thought to reservoir depletion as they completed wells. They produced a well at the highest rate they could without regard for well spacing. As a result, in the 1920's the federal government questioned the wasteful treatment

of reservoirs and decided to initiate studies. These studies consisted of applied mathematics, geology, chemistry, fluid dynamics, and physics to aid in the analysis of hydrocarbons within a reservoir. Reservoir engineering began as engineers implemented what the government learned. Recovery Initially an oil reservoir is in primary recovery. Gaseous fuels, natural gas or water are usually present, and supply the needed pressure. Depending on the reservoir, once the natural flow ceases, the reservoir will have yielded only 15 to 70 percent of the total volume of the oil it contains. The rest is trapped in unconnected rock pockets or is bound to the rock and refuses to migrate toward the wellbore. Petroleum engineers have developed a number of ways to help the reluctant oil migrate to the wellbore. The most common approach is to drill adjacent wells and use them to inject water into the reservoir to force the oil to move toward the production wells. Another is to inject gas into adjacent wells to maintain reservoir pressure or to enhance gravity drainage. Both approaches are referred to as secondary recovery processes. Even after secondary recovery steps have been taken, as much as 50 percent of the oil in the reservoir will remain. Tertiary oil recovery reduces the oil's viscosity to increase oil production.

Step 1 The Petroleum Geologist Prospects

Prospecting With Maps Prospecting is the work the geologist does to locate a place to drill a well! Most petroleum geologists work in an office, where they have access to a lot of data. This includes electric logs, core records, drilling records, scout tickets, and production data. They use

the data to construct maps, cross-sections, and databases. These tools help them locate the best places to drill wells. The geologist studies his maps and cross-sections and runs computer simulations that help him select the next best location to drill. He is always thinking about the next drilling locationor prospect! He will want to know what type of trap he is dealing with, and the composition of the sedimentary rocks he will be drilling through. He needs to estimate the porosity of his prospective pay zone. He wants to know if high pressures can be expected in t he new hole. If seismic data is involved in the prospect, he will consult with the geophysicist and get his opinion of the prospect. The geologist is interested in anything that happens in her area, particularly news of new discoveries by other companies! If she sees a promising new area, she will recommend to the land department that an attempt be made to lease the acreage; the leased land will then be available for drilling later. When the geologist has finally found the correct spot, she spends much time cross-checking to ensure she has not missed anything. She wants to make sure she is not surprised by any of the following:

Discovering the selected location was already drilled by another company 40 years ago (and was dry) Discovering that her company has no legal right to drill on the location (lease problems) Unexpected faults or other geologic problems that crop up during drilling and ruin the prospect Discovering that the hole is being drilled in the wrong place after drilling begins (it has happened!)

Step 2 The Petroleum Geologist Packages The Deal

Packaging

Once the new location is defined, and the geologist is satisfied the prospect is a good one, the work is just beginning. He has a large amount of rough data available in the form of work maps, that he used to satisfy himself of the feasibility. Now, he must condense this large data mass into a set of presentation materials that can be shown to non-geologists. To package the deal, he will prepare sets of simplified maps and cross-sections, often highlycolored and attractive to the eye. He may use Powerpoint, or other presentation software. Creativity, design sense, and art skills are important during this phase. He needs to anticipate all possible questions, and be prepared to answer each one of them. He must be very sure of himself and his facts before he moves to the next step. Step 3 The Petroleum Geologist Sells the Deal

Selling the Deal Now the geologist must step into a role that is often uncomfortable for him selling his prospect. It may be uncomfortable because geologists are scientists, with scientific backgrounds and schooling. They are used to talking to other scientists. But now the geologist must become a salesman in order to convince people who are not geology experts of the value of the prospect. These people may include managers, bankers, engineers, and oil and gas investors.

He is looking to convince his clients that

the prospect is worth drilling, investors will get a fair return for their money the provided financing will be money spent wisely

Even an inexpensive test well can cost a couple of million dollars, and some exploration tests may easily run into many tens of millions! So the geologist wants to be very sure of his facts. All his clients must believe the proposed well has a reasonable chance of being successful.

The geologist will meet with the landman (females in the business are also called landmen), who will ensure the company has the legal right to drill the well. He will consult with the engineer, who will determine the exact cost of drilling the well. Marketing personnel will ensure that the company has a market (buyer) for the oil, or a pipeline for the gas. Managers, responsible for ensuring the companys drilling budget is spent wisely, will also approve the well. If outside financing will be used, the geologist will explain the prospect to representatives of the bank or other individuals or partnerships that put up the money. When hes done, the geologist will have sold his prospect to anywhere from a few to several dozen people. Step 4 The Petroleum Geologist Monitors the Drilling of the Well

Drilling the Well Next comes the part that every geologist enjoys the most! Drilling the well! It has now been several months since the geologist started working on his prospect. Now the surface owners have been paid, permits acquired, and money raised. Roads and the drilling location have been built, pipe and supplies have been ordered. Also, the energy company has engaged a drilling contractor who owns and operates the drilling rig. The drilling contractor will drill the well in the manner specified by the company. The contractor will have leeway to select the type of drill bits to be used, hire a drilling crew, and make many other decisions concerning the actual drilling. Virtually all holes are drilled by contractors. Drilling a well is a very complex procedure involving many people. Nearly everything must go right. Dangerous machinery, bad weather, and continuous mechanical failures must be faced daily. The work goes on for weeks to months, 24 hours a day, nonstop. A slip-up at any point can ruin the very expensive hole, cost a fortune, or get people killed. The geologist will closely monitor all aspects of the drilling as it takes place. He will select an electric-logging company, and the proper wireline logging tools to evaluate the hole. He will usually hire a mud logging contractor to sit the well day and night. The mud logger will study

the well cuttings, report shows of oil and gas, and keep track of other things on the location. The geologist will monitor the formation tops as they are encountered, and discuss the progress of the drilling with the investors. The geologist will decide where and when to take cores or drill-stem tests. Finally, after the well is logged with electric logs, he will examine the logs and recommend the well be completed or plugged. Step 5 The Petroleum Geologist Works With The Engineer to Complete the Well

Completing the Well At last the hole is drilled! At this time, a decision must quickly be made to attempt a completion, or plug the well. Completion costs are extremely high, so it must be believed that the completion will be worth the money. Justifying a completion can be a grueling process. It almost always takes place in the middle of the night! The job of completing the well is mainly in the hands of the petroleum engineer. The engineer will decide what type of casing to use, and the method of cementing, He will design the completion procedure (which may involve perforating, breakdowns, acid jobs, or fracks). However, he will depend on the geologist to advise him on various topics. To start, the geologist will give the engineer a list of formation tops, and tell the engineer exactly which zones should be tested. The geologist is often the person most familiar with the technical practices of other oil companies in the area. He may suggest a certain style or method of perforation, or offer advice on cementing techniques. He may be familiar with the most successful fracturing or breakdown procedures in the area. He will relay this information to the petroleum engineer, who will usually be thankful for the help! Working as a team, the geologist and petroleum engineer will get the well completed, and put it to work providing energy for all of us!