The oil industry
An oil company is granted a permit to explore for oil within a specific area for a specific period of time by the government licensing authority, such as Gosgeonadra in Ukraine. Alternatively, the company can purchase licenses that have already been issued or partner with other oil companies for a project.
Geological and geophysical studies
The purpose of studies is to increase knowledge about the deposits as cost effectively as possible. This enables the company to identify possible oil reserves and determine the optimal drilling sites. Examples of surveys include helium studies, where the amount of helium emanating from deep layers in the earth is measured, and seismic studies, which involve creating sound waves and measuring their movement in the ground to identify potential structures.
The only way a company can confirm the existence of commercial quantities of oil and gas with 100% reliability is by drilling. During the drilling process, samples of liquids and rock are taken. An extensive log program is used to examine rock type, number of hydrocarbon zones, porosity and other factors. The characteristics and thickness of the reservoir are calculated. Tests are performed to estimate how much oil the well may be able to produce.
Reserve registration and conversion to production license
After a successful exploration program, the company registers its oil and gas reserves with the government reserves authority. The purpose of this is to convert the exploration license to a production license to have the right to extract oil from the deposit. It is standard industry practice to hire independent experts to estimate the company’s reserves and resources.
The oil company develops a field development plan, which includes details such as the number of wells to be drilled and where they should be located to achieve the best results. A design plan for storage, processing and trans- porting oil is also created. The plan is approved by the authorities of the country.
After approval, the company can start installing infrastructure and drilling production wells. The work requires specialist expertise within several disciplines. Wells have been traditionally drilled vertically through the reservoir. However, in recent years horizontal wells in combination with hydraulic fracturing (a method of fracturing the reservoir rock to increase the oil flow) has become increasingly common as it can produce higher flow quantity, although at a higher cost, and faster pay back of the investments. When drilling is complete, measures are taken to optimize the production level from existing holes and to improve results when drilling new wells.
Production, sales & improved recovery
Production and sales
The oil is extracted and then transported via pipeline, truck or railroad. Ukraine has an auction system for oil sales. The oil can also be refined at an own refinery (a vertically integrated oil company) or exported.
Work program for improved recovery
All oil wells undergo a natural decline in production. To counteract this, the company can stimulate the reservoir, optimize pump equipment and inject water to increase the reservoir pressure or take other measures, such as drilling sidetracks, repairing existing wells and drilling new wells.