SIC 1382 Oil and Gas Field Exploration Services

Encyclopedia of American Industries | 2005 | Copyright

SIC 1382
OIL AND GAS FIELD EXPLORATION SERVICES

This category covers establishments engaged primarily in performing geophysical, geological, and other exploration services for oil and gas on a contract or fee basis.

NAICS Code(s)

541360 (Geophysical Surveying and Map Services)

213112 (Support Activities for Oil and Gas Field Exploration)

Industry Snapshot

Companies performing oil and gas exploration services are most often divisions or subsidiaries of major oil companies, although the industry also boasts several significant independent contractors. Many of the industry's leaders are known as integrated companies, which cover the entire oil and gas industry, from exploration to refining to distribution. As such, the exploration branch of the industry is affected by trends in the field as a whole.

For example, in 1998 a drop in world oil prices led to a collapse in exploration and drilling activity. During that time the number of natural gas drilling rigs fell off by 40 percent, but rebounded by 2001 to produce at record levels, and then declined again. When oil and gas prices are suppressed, companies tighten their purse strings, often cutting costs by idling explorative drilling. During 2003 the U.S. war against Iraq, as well as a workers' strike in Venezuela, pushed oil prices back up. As a result, oil companies had revenues to once again pursue increased exploration activities.

Partly because the United States is considered a mature oil region, the major American companies—Exxon/Mobil, Texaco, and Chevron (which, along with the European giants British Petroleum/Amoco/Arco and Royal Dutch/Shell, control the American market)—focused their exploration efforts elsewhere. The Energy Information Administration (EIA) reported that the increases in the U.S. majors' exploration and development expenditures have mostly been directed toward the North Sea and Southeast Asia.

Organization and Structure

Much of the exploration process is done before wells are actually drilled. Once a company obtains the mineral rights to the land it wishes to drill, three-dimensional (3-D) seismography, aboveground sonic sampling, and other methodologies are utilized to determine where oil is most likely to be found. Once seismographic data about either underground or sea floor rock is collected, it is analyzed for signs of oil or gas deposits, a process that takes several months. A likely area is then selected, and exploratory or "wildcat" wells are drilled to confirm suspicions. If the area is known to have oil, "development" wells are drilled. There are legal regulations on the number of wells that can be drilled in a given area by "infill drilling." Drilling to test the possibilities for expanding an oil field is done with "stepout" wells. Finally, wells that turn up no product, or too little to make continued drilling feasible, are called "dry holes."

While drilling, a rig (made up of a derrick and surface equipment) is set up over the target area, and a bit attached to a drill stem is lowered into the earth. In the most common setup—rotary drilling—a rotating bit connected to a hollow pipe breaks up the earth. Fluids ("mud") made up of clay, water, and other ingredients are injected through the pipe to cool the rotating bit and carry broken rock back to the surface. Often a hollow casing is placed in the well to keep the walls from caving in and to protect the contents of the well from outside influences of water or gas. Both oil and gas are removed through narrow tubing implements that bring the substances to the surface.

The crude oil that wells up without pumping is culled using primary recovery methods, during which time most of the available oil is recovered. In secondary recovery, additional effort must be expended to remove the oil. Most often, the well is flooded with water to flush out the oil. Finally, in some wells, tertiary recovery methods, such as injecting steam or gases into the well, help flush out the heaviest, most viscous oil. Wells may be "shut in," their valves closed, during the wait for a pipeline connection or even when the oil and gas market is depressed and further drilling becomes financially difficult. Once a...

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