With around 3,500 active rigs in operation globally we’ll start to consider a typical basin’s life-cycle of Licensing > Exploration > Development > Decline > Abandonment
Licensing
Before any exploration work can begin, oil companies need to make sure that if they discover any that they’ll have a legal right to extract and sell the oil. This is essentially a lease and they’re usually given in the UK for 25 years, or in the US for 10 years though these are regularly extended for a fee.
Exploration
From this point, exploration begins. The oil company will usually commission a seismic survey and target reservoirs are selected. Once these have been ordered by attractiveness the oil company will then enlist service companies who will provide Supply Boars, Helicopters, Mud Logging etc. The exploration process is part luck and part skill and will hopefully result in a discovery.
Development
One a discovery has been made the challenge then is to develop them. This can take a long time with up to 12 years between peak in discoveries and peak in production not being uncommon.
To develop a project, all the wells will be drilled and infrastructure such as rigs, pipelines and processing plants will be built. Whole industries can be built on the back of a discovery with huge capital expenditure available to be won by supply chain companies. These companies will tender for work and some will be contracted to go ahead with projects that could be worth billions over the lifetime of a project.
Decline
Oil and Gas production quantities over time are quite different. Oil fields will usually peak very quickly then tail off much more slowly over a period of 20 years or more. Gas meanwhile will rise steadily in production terms, level off for 20-25 years then tail off slowly.
During the decline phase the cost of extracting oil rises. Maintenance costs rise as infrastructure gets older and more advanced techniques are required to extract what remains of the oil reserves.
Abandonment
There will become a point where the cost of extracting the last remaining bits of oil will cost far more than what even specialist oil companies can sell it for. When an installation is abandoned onshore the operators will plug the wells with cement and steel plugs. Whereas offshore it’s a process referred to as “decommissioning” with large platforms being dismantled with the use of large cranes. This must be planned and paid for by the operators and could be an expensive and lengthy process.
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