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What Is Upstream Oil and Gas?

The early stages of the well is considered upstream oil and gas.

Upstream oil and gas refers to the early stages of a well.

Oil and gas investing is filled with terms the average investor may not be familiar with, making these investments difficult for many. One of those terms is upstream oil and gas. It may sound like it’s talking about oil and gas located upstream of a waterway; however, it has nothing to do with a stream or river. In fact, it refers to the segments of the industry that relate to oil and gas exploration and production.

Seeking Potential Oil Fields

The first step in upstream oil and gas is the exploration that results in the establishment of wells. Geologists often help oil and gas companies locate areas that are most likely to contain oil reservoirs. They use a number of advanced tools that will help measure the likelihood of finding oil and gas in a given area. These tools can include:

  • Satellite Images
  • Existing well control
  • Logs from surrounding wells
  • 2-D and 3-D seismic
  • Seismographs
  • Explosives

Once an area shows promise, the next step of the upstream process is to drill an exploratory well to confirm the presence of oil and gas.

Drilling the Exploratory Well

Exploratory wells are designed to detect the presence of oil, as well as how much oil is present, to determine if production should begin in the area. Quality is also measured. Despite the importance of these exploratory wells, oil and gas companies use them sparingly due to their cost and the risk involved. However, sometimes multiple explorations are needed to find the ideal location. Unsuccessful wells are plugged and abandoned, while those that produce positive results will be enlarged and go through the well completion process to begin production.

Oil and Gas Production

The final stage of upstream oil and gas is the production phase. After successful exploration, a permanent well setup will be completed to begin pulling the oil and gas from the well. Many oil and gas wells will continue to produce crude oil for 10 to 20 years or longer, which makes this phase important for oil and gas investing. This segment of the oil and gas industry typically overlaps with the midstream process, but the two are still different. For instance, upstream oil and gas won’t involve shipping and storage of the oil produced.

The production of oil and gas is typically segmented into three phases: upstream, midstream and downstream. It all starts with oil and gas exploration and continues through the initial production stages. For those who are interested in oil and gas investing, it can be important to understand the various phases to ensure they can make the right decisions for their investments.

If you are interested in investing in oil and gas, contact us. Hill Country Exploration offers oil and gas investment opportunities. They put their own money into these investments, helping their clients feel more comfortable.

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