Demystifying Oil&Gas Market: Upstream
An undervalued but undoubtedly the most crucial industry. This article sheds some lights on the most criticized face of oil and gas and how does it operate. Risky but crucial to invest and innovate.
Energy has been at the center of all attention, from government to society, from big firms to small startups. Currently, the dominant source of energy is the oil and gas industry. The demand has been rising, and the industry is responsible for balancing the supply, though other energy sources suffer from immaturity and unscalable technologies. On the other hand, not only is it used for energy, but also for almost all things we need on a daily basis, our smartphones, our drugs, etc.
“Approximately 3% of petroleum production is used for pharmaceutical manufacture, but nearly 99% of pharmaceutical feedstocks and reagents are derived from petrochemicals.“
[source]
I will talk more about the products later in another article.
The Energy market is in a trilemma which puts it under pressure, and the three crucial forces are as follows:
Energy Transition, concerns around global warming require a transition to low-carbon technologies, though they are immature without sophisticated infrastructure and low return for capital.
Energy Security, a combination of three factors: low investments in spite of the high demand, pressures from investors, and uncertainties of regulation, position the industry vulnerable.
Energy Diversification, the urge to diversify revenue sources, for example, refineries, renewable energies, etc. [source]
In general, the O&G industry consists of 4 segments: Upstream, Midstream, Downstream, and Service.
The first three are mainly discussed and have a sequential correlation, while the last, Service, provides the equipment and services for all. Basically, it is a function of time, from exploring the possibility of hydrocarbons to making products out of them. In this article, we go through the first and primary sector, Upstream, and discuss the rest later.
Exploration
It involves several steps. First, geological surveys are conducted to identify potential areas where oil and gas deposits might exist, often in sedimentary rock formations. Seismic surveys are then performed, using sound waves to create detailed images of the subsurface geology.
Silixa LTD 🇬🇧 offers seismic/geophysical monitoring solutions for exploration, to monitor soft and hard rocks by providing more accurate geophysical information.
Earth Science Analytics, 🇳🇴, uses AI to optimize production and predict overlooked hydrocarbon, by automating a wide variety of tasks in this sector, including interpreting well logs and predicting the formation properties in 3D, interpreting seismic data, etc. Their Series A was in 2019 led by Saudi Aramco Energy Ventures (SAEV) and the next year series B, investors include but not exclusively, Saudi Aramco Energy Ventures, Equinor Ventures, and Wintershall Dea Technology Ventures GmbH.
Drilling
Usually, E&P companies (Exploration and Production) sign contracts with drilling companies to drill wells for them. Depending on various metrics (the field, etc.), drilling companies drill multiple types of wells: horizontal, vertical, and directional. Also depending on the stage, they would drill for multiple reasons, randomly to find the possibility of hydrocarbon existence (wildcat wells), having more than one wellbore to boost production (Multilateral wells), etc. Also, the well could be onshore and offshore, both have challenges in their own way.
During drilling, there is a circulation, specifically mud circulation, one of the goals is to provide samples of the formations which will be filtered by shale shakers. Then analysts gather cuttings data and provide valuable information. Other functions are stabilizing the wellbore (by balancing the pressure), lubricating and cooling the bit (to avoid losing it), etc.
Crude Oilfield Solutions 🇺🇸 offers tools for directional drilling and real-time monitoring for all kinds of projects.
Solitech, an American service provider, offers to handle solid industrial waste streams (cuttings) including Skip & Ship handling, transferring cuttings to the boat, providing novel tanks, known as ST-MDT, and treating cuttings. Solitech also offers cutting treatment.
Heavelock Solutions 🇳🇴 considers itself as the missing bridge between rig heave and conditions downhole, which offers well planning.
Foro Energy 🇺🇸 uses high-power lasers for drilling bits to increase the performance of drilling ultra-hard rock.
Kinetic Pressure Control, an Australian company, offers a ‘well control technology’ that designs, manufactures, and provides innovative wellhead and pressure control equipment and services.
Drilling Mud
During drilling, we have a circulation of mud for various reasons, including cooling and lubricating the bit, moving cuttings and small rocks upward, supporting the well’s stability, etc. Then by filtering cuttings and directing the mud back to the well. Depending on the operation and formation type and other factors we distort the mud’s compositions to have specific characteristics and behavior.We analyze the cuttings on the surface to gather information, like formation type, etc.
Geowellex 🇧🇷 specializes in mud analysis and offers Mud Logging and specialized Geological Consulting services, with total autonomy, responsibility, and proprietary technology
Solitech, an 🇺🇸 American service provider, offers to handle solid industrial waste streams (cuttings) including Skip & Ship handling, transferring cuttings to the boat, providing novel tanks, known as ST-MDT, and treating cuttings. Solitech also offers cutting treatmentWell Log
Another function of drilling is logging. Basically, we send a device, during drilling or afterward (depending on what and when we want), to the bottom. This device sends signals around and gets them back. This gives a lot of information about the formation, i.e. the possibility of hydrocarbon. This operation could be both during drilling or the lapse between.
Well Conveyor, 🇳🇴 produced a Slim Battery-powered Conveyor (SBC) for logging in highly deviated and horizontal wells.
GeologicAI 🇨🇦 just closed its Series A investment with $30 this year, which provides core scanning, core logging, and mineral identification. It uses AI to analyze rock scans.
Foro Energy 🇺🇸 uses high-power lasers for drilling bits to increase the performance of drilling ultra-hard rock.
Simulation
Simulation is a crucial part of the Upstream sector to indicate the total oil in place, reservoir characterizations, etc. Fundamentally it is the key to decision making.
Revo Testing Technologies 🇺🇸 offers help on reservoir and completion performance in real-time by simulating reservoirs.
Heavelock Solutions, 🇳🇴 offers a simulation technology that predicts variations in downhole pressure and flow, induced by rig heave during drilling and completion operations carried out from floating rigs.
Production
Since we have drilled a well, we start producing. Usually, it is a combination of three components, water, gas, and/or crude oil. The ultimate goal here is maximizing production, as much as we can. Ideally, we’d like to take all existing hydrocarbon and the least water, while it’s ideal and never can make it (due to some phenomena like some hydrocarbons getting trapped in porous media, or the rocks have gotten oil wet through years, and other types of damages.).
Stimulation
There are several approaches to enhance our production by distorting properties and damaging the reservoir, the most common ones are as follows:
Acidizing
There are several approaches to increase the production. The most popular and economically reasonable is acidizing. We add acid (a composition of some other acids) at the bottom hole to distort the reservoir and open more ways for hydrocarbon. Sometimes it could damage and result in reverse, aka formation damage.Hydraulic Fracturing
Also, there is a more revolutionary but costly approach, hydraulic fracturing. Here, we increase the pressure to frack (numerous, big or small) the reservoir, called cracks and fractures. Then filling them with small solid particles, called Proppant. This method was a revolutionary method and most suitable for shale oils, more available in the United States, Canada, and Mexico.Artificial Lift
A technique that is used due to the inclination of reservoir pressure after a while of production. The reservoir pressure is a big player to push hydrocarbon up to the surface, to be produced and if it gets low we need to enhance its force in a variety of ways. The artificial lift could be injecting gas at the bottomhole, or using pumps, etc.
It is one of the common ways to increase production, basically in various ways, such as injecting gas from the other side of the reservoir or bottom hole, etc.
Earth Science Analytics 🇳🇴 uses AI to optimize production and predict overlooked hydrocarbon, by automating a wide variety of tasks in this sector, including interpreting well logs and predicting the formation properties in 3D, interpreting seismic data, etc.
Soiltech 🇺🇸 uses their (emulsion of Crude oil, water, and solids, known as Slop oil) Slop Treatment Technology (STT), for slop treatment and uses the treated oil and water in the drilling process.
Target Intervention 🇳🇴 offers real-time monitoring of downhole well parameters for operation control, mainly for well testing operations.
Wellstarter 🇳🇴 developed a wireless and real-time downhole flow monitoring by considering heat pulses for effective reservoir management and consequently Solid decision-making.
Ambyint, 🇺🇸 delivers AI-driven automation and analytics solutions for artificial lift optimization that builds on traditional physics-based techniques.
(service company) Clarke Valve 🇺🇸 created a specific group of valves to decrease emissions with lesser weights for a variety of tasks, including Gas Lift, Separators, refinery valves, Tank values, etc.
This was only about the Upstream sector and soon will be published on other sectors. This article would benefit some specific segments of the audience, including prospective petroleum engineers, prospective entrepreneurs in the industry, investors who are thinking of investing in the O&G industry, and more.
Do not hesitate to contact me, you can find me on Linkedin. Moreover, I write about AI on Medium as well
2023 Oil and Gas Industry Outlook | Deloitte US
Thanks to Ali Moezzi and Armin Mansoori for revising this article.