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.

Test drilling

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.

Field development

Development plan

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.