Justin Wickett
04/06/08
World Trade in Energy

Oil & Natural Gas Production
Oil and natural gas both share a similar production cycle. Exploration of petroleum
usually results in the discovery of natural gas reserves, and vice versa. As a result, petroleum and
natural gas are extracted at the same time using similar techniques. The extraction process is
broken up into several different phases based on the economic characteristics of the given
reserve.
Oil and natural gas production begins by securing mineral rights to land thought to
contain natural resources. Energy companies negotiate a contract with the land owner to lease the
mineral rights for a fixed duration until commercial production is deemed viable. Should
commercial production become economically feasible, the lease is automatically extended until
the reservoir is abandoned.1 Once commercial production has begun, the contract usually calls
for a royalty to be paid to the landowner based on the amount of natural resources extracted.
Throughout the process, the energy company has the ability to either develop the reserve alone,
or take on a partner to hedge the risk of the reservoir being dry.2 Energy companies may also
subcontract out the mineral resources to others if they feel their time could be spent more
efficiently elsewhere.
The primary recovery is the first stage of petroleum and natural gas recovery. A
petroleum reservoir is made up of permeable rocks with porosities ranging from 5%-30% that
contain highly pressurized oil, natural gas, and water.3 During the primary phase, high-pressure
natural gas drives the extraction process by forcing the crude oil to the well bore. Primary
recovery nets both natural gas and crude oil without any additional compression to the well.
Approximately one-third of the gross gas production is derived from oil wells.4 The reservoir
pressure is vital to determining the number of hydrocarbons in the reservoir, and is directly
proportional to the amount of available natural gas.5 After the well is brought online, the
maximum efficient rate of production is calculated to determine whether or not the recovery of
petroleum and natural gas is economical. If it is not, the miners may cap the well and move on.
For the most part, primary recovery is an economical solution to attaining fossil fuels due to its
natural process. Still however, primary recovery yields only 15-17% of the well's potential
petroleum output due to oil's high viscosity, which inhibits flow.6 Primary recovery on natural
gas wells is very effective, and tends to yield 95% of the well's available resources due to gas's
extremely low viscosity.7 As petroleum reserve exploration declines while the price of fossil
fuels increases, the extraction process has become heavily dependent on secondary and tertiary
recovery to augment the output of proven reserves.