Daily Earth Science Geosphere Repost

Exploring for oil, a risky business

I sat next to a guy at my local bar before the COVID crisis took hold. About halfway through my beer (Boneyard IPA), we struck up a conversation. Somewhere during the second beer, he started expounding on exploring for oil in the Gulf of Mexico.

“The problem,” he started, “ is that the Federal government gives away the oil leases. These oil companies then drill a few wells to tap into the underground lakes of oil and pump it out of the ground. They are basically getting it for almost free and selling to us chumps for $3.60 a gallon so we can drive to work each day.” 

He paused for a moment, and I thought maybe that was the end, but he continued with a bit more wisdom. “And the worst part is that sometimes they haven’t even drilled the oil on their existing leases before they are asking for more. That oil is on U.S land, and it is U.S. oil. But crooked politicians are just giving it away to their oil-buddy cronies.”

I sipped my beer and nodded. I saw that the whole process aggrieved this guy, and I also recognized that he understood absolutely nothing about oil exploration. Having worked as an exploration geologist in the Gulf of Mexico, I reflected on the public’s misunderstanding of risk. At the same time, he moved on to enlighten me about the government’s attempts at spying on him via the internet.    

Risk is the nature of the game

My drinking companion had never been on the stomach-churning side of exploring for oil. Drawing from my own experience, I sat at the bar and envisioned how most people would react to a typical exploration proposition. After paying millions of dollars for an exploration lease in the Gulf of Mexico, your geologists and geophysicists then ask for another $5 million to purchase seismic data. After you say yes, they disappear into their offices and work for the next two years. 

Then, one day your geoscientists are back, requesting $100 million to drill a single well. After a lengthy review of the technical data, you ask, “What is the chance of actually finding oil?”. They proudly tell you there is a 40 percent chance of finding commercial quantities of oil. I am sure my drinking companion would not consider that investing $100 million with only a 40% chance of success is a fabulous deal. But it is the nature of the exploration game.

The stomach-churning starts when the well begins drilling. Maybe unexpectedly high subsurface pressures create technical difficulties, and the final well cost is $120 million. Then, adding insult to injury, the well is a “dry hole,” meaning that it only discovered water, not oil. So, you debrief with the scientists, figure out lessons learned, and move on to the next lease. The geologist licks his wounds, takes some antacid tablets, and goes back to work. It’s a risky business. 

Eventually, you find oil and then invest upward of a billion dollars to build a production platform. By the time oil flows to market your sunk costs are over a billion dollars and a decade has passed since you purchased the original lease. I have been on both sides of this win-lose exploration equation, and finding nothing on a lease is more common than finding oil.   

So how do you find oi?

Exploring for oil is like engaging in the ultimate solve-a-mystery game. From the day a project starts until the day a drill bit cuts through its target, the outcome is uncertain. Some people in the business refer to the drill as the “rotary lie detector.” Drilling is ultimately the only way to confirm if oil is present at a specific location.  The objective is to eliminate as much risk as possible before drilling a well.

When a company hires a geologist, they are hiring a risk manager. His geological knowledge is the tool brought to the table for managing risk. The exploration process requires consideration of five parameters:

The source of the oil

 Oil migration from the source

The location of a reservoir quality rock formation

Geological configurations that trap the oil

Rock formations that seal the oil into a trap

An oil source starts with organic-rich rocks, buried deep underground. Temperatures increase with depth, and at about 110 degrees Celsius, the heat starts transforming organic material to oil. By 140 to 150 degrees, the source rock is at peak oil generation, and oil is flowing from the source and migrating.

Pressure and buoyancy drive the migration, and eventually, the oil finds its way into porous reservoir quality rock. Migration accelerates along porosity pathways, and oil moves as high in the rock as it can until porosity disappears, and it becomes trapped. If the rock formation over the trap lacks any porosity, it then seals in the oil, and an oil field is created.

Seems simple

It all seems so simple, except that every step of the process requires studying data that is either ambiguous or remote from the oil field. Each of the five parameters must be assessed in terms of its chance of success. Collectively the individual probabilities of success combine, determining the likelihood of finding oil at a specific location. The whole process involves scientific extrapolation of hints from the data to develop a model of where the oil treasure lies.

Oil has powered economic development for over a century. But it is also fossil fuel that helps drive climate change. So we search for ways to replace it with cleaner energy or eliminate emissions when the oil burns to generate energy. However, this doesn’t change the fact that exploring for oil is a business requiring cutting edge technology, in-depth scientific analysis, and an appetite for risk.


Shale oil companies – Victims of their own success (Source: ArcheanWeb) – https://archeanweb.com/2020/07/02/shale-oil-companies-victims-of-their-own-success/  Also:


Petroleum System (Source: AAPG WIKI) – https://wiki.aapg.org/Petroleum_system  Also:

Feature Image: Global Santa Fe Rig (Modified) – By ST33VO – Flickr: Global Santa Fe Rig 140, CC BY 2.0, https://commons.wikimedia.org/w/index.php?curid=16570871

William House
William is an earth scientist and writer with an interest in providing the science "backstory" for breaking environmental, earth science, and climate change news.