# Oil, gas and coal: how they form, are found, moved and priced: Finding and producing oil and gas

Source page: https://www.materialinsights.org/learn/energy/oil-gas-coal/p2/

[Understanding Energy](https://www.materialinsights.org/learn/energy/) / [Module 6: Oil, gas and coal: how they form, are found, moved and priced](https://www.materialinsights.org/learn/energy/oil-gas-coal/) Part 2 of 5

## Finding and producing oil and gas

Finding oil has moved from following surface seeps to processing three-dimensional sound images of rock kilometres down. Producing it has moved from shallow vertical wells to horizontal bores under deep ocean and through tight shale. Yet even with all this technology, most of the oil in a reservoir stays in the ground.

### 2.1 Seismic surveys and rotary drilling turned exploration into engineering

Early oil hunters drilled near seeps or where the landscape looked promising. Geology then gave better guides: oil collects in particular kinds of structure, so mapping rock layers and folds narrowed the search. Measurements of tiny variations in gravity and magnetism helped too. The decisive tool, though, is the seismic survey.

In a seismic survey a source of sound, an explosive charge or vibrating truck on land, an air gun towed behind a ship at sea, sends waves into the ground. They bounce back from boundaries between rock layers and are recorded by thousands of sensors. Computers turn the echoes into images of buried structure. Two-dimensional lines gave way to 3D surveys in the 1980s and 1990s, and to repeated 4D surveys that show how fluids move as a field is produced.

The only way to confirm oil is still to drill. Early wells were made by percussion, repeatedly lifting and dropping a heavy bit; the Chinese had used bamboo rigs on this principle to drill brine wells centuries earlier. Rotary drilling, in which a turning bit grinds through rock while mud is pumped down to cool it and carry cuttings up, took over in the 20th century. Howard Hughes Sr's two-cone rock bit of 1909, improved to three cones in 1933, made deep rotary drilling routine.

Today's wells routinely go several kilometres deep, and the drill bit can be steered. Directional drilling lets one platform reach many targets, and horizontal drilling turns a well sideways to run along a thin reservoir for one to three kilometres or more.
 In the data

#### Better pictures, fewer dry holes

When wells were sited on surface geology and 2D seismic, many exploration wells found nothing worth producing. Sharper 3D images cut the number of dry holes. A dry offshore well can cost tens of millions of dollars, so better imaging pays for itself quickly and means fewer wells, rigs and ships per barrel found.

- Smil, Oil: A Beginner's Guide (2008) · via Smil Mastery Course, M6 'Finding and producing oil'
- Smil, Natural Gas: Fuel for the 21st Century (2015) · via Smil Mastery Course, M6 'Finding and producing oil'

### 2.2 Most oil stays in the reservoir, and a few giant fields dominate

Oil does not sit underground in a lake. It fills the tiny pores between grains of rock, held there by capillary forces and pushed by the pressure of surrounding water and gas. When a well opens the reservoir, that natural pressure drives oil to the surface. This primary recovery typically brings up only about 10 to 20% of the oil in place.

To get more, producers inject water or gas to push oil towards the wells and keep the pressure up. This secondary recovery lifts total recovery to perhaps 30 to 40%. Enhanced methods go further: injecting steam to thin heavy oil, injecting carbon dioxide which mixes with oil and helps it flow, or chemicals that loosen it from rock. Even so, a typical field abandons more than half its oil.

Oil wealth is very unevenly spread. A small number of supergiant fields hold a large share of all the oil ever found. The largest is Ghawar in Saudi Arabia, discovered in 1948, about 280 kilometres long, which alone has produced a large part of all Saudi oil. Such fields are cheap to produce because each well yields a great deal, which gives their owners low costs and staying power.

Production has also moved offshore and into deeper water. The first platforms out of sight of land appeared in the Gulf of Mexico in the late 1940s. Today floating production vessels work fields in more than 2 kilometres of water off Brazil, West Africa and the US Gulf, linked to wells on the sea floor by flexible pipes.

Data How much oil comes out

| Recovery stage | Mechanism | Cumulative share of oil in place |
|---|---|---|
| Primary | natural reservoir pressure, pumps | about 10-20% |
| Secondary | water or gas injection | about 30-40% |
| Enhanced (tertiary) | steam, CO2, chemicals | can add 5-15 percentage points |

 Source: Smil, Oil: A Beginner's Guide (2008), via Smil Mastery Course, M6 'Finding and producing oil'  Common misreading

#### An empty field is not empty

When a field is said to be depleted it usually still holds most of its original oil. What has run out is the oil that can be produced profitably with the methods in use. A higher price, cheaper carbon dioxide for injection or better reservoir models can bring old fields back. This is one reason estimates of remaining oil keep rising.

- Smil, Oil: A Beginner's Guide (2008) · via Smil Mastery Course, M6 'Finding and producing oil'
- Smil, Energy at the Crossroads: Global Perspectives and Uncertainties (2003) · via Smil Mastery Course, M6 'Finding and producing oil'

### 2.3 Shale combined two old techniques and remade American supply

Shale is the source rock itself: the fine-grained, organic-rich layer where oil and gas formed but from which they could not easily escape. Its pores are so small and poorly connected that a conventional vertical well drilled into it produces very little. For decades geologists knew the resources were vast but could not get them out at a profit.

The shale revolution came from combining two techniques. Horizontal drilling turned the well to run sideways through the shale layer for kilometres, exposing far more rock than a vertical well. Hydraulic fracturing pumped water, sand and small amounts of chemicals down at very high pressure to crack the rock in many stages along that horizontal section. The sand props the cracks open so that gas and oil can flow to the well.

US shale gas output took off after about 2007, followed by tight oil from the Bakken in North Dakota and the Permian Basin in Texas. US crude production passed its 1970 peak in the late 2010s, and the United States became the world's largest producer of both oil and gas. When it launched Oil 2025, the IEA's head credited the United States with about 90% of the growth in world oil supply over the previous ten years.

Shale wells behave differently from conventional ones. Output falls steeply, often by more than half in the first year, so producers must keep drilling to hold output steady. That makes shale responsive to price: drilling rises when prices are high and falls quickly when they drop. Smil reviewed the concerns, including water use, possible groundwater contamination, small induced earthquakes and methane leaks, and judged them manageable with good regulation, but not trivial.

Process flowchart How a shale well produces Inputs **Shale source rock**organic-rich, very low permeability, 2-4 km down Process steps 1 **Vertical then horizontal drilling**

lateral of about 2-3 km within the shale layer
 2 **Multi-stage hydraulic fracturing**

water, sand and additives at high pressure crack the rock
 3 **Flowback and production**

gas and oil flow through propped fractures; steep early decline
 Outputs **Tight oil and shale gas**plus produced water to treat or reinject Source: Smil, Natural Gas: Fuel for the 21st Century (2015), via Smil Mastery Course, M6 'Shale gas, coal and the fossil future'  In the data

#### The treadmill of a shale well

A typical shale oil well might start at several hundred barrels a day, lose 60 to 70% of that in its first year and then decline more slowly for years. To keep a basin's output flat, operators must replace that lost production with new wells continuously. The IEA's Oil 2025 report found US supply growth slowing as companies cut spending, a sign of how quickly shale responds to lower prices.

- Smil, Natural Gas: Fuel for the 21st Century (2015) · via Smil Mastery Course, M6 'Shale gas, coal and the fossil future'
- [IEA (2025). Oil 2025: Analysis and forecast to 2030. Paris: International Energy Agency, June 2025.](https://www.iea.org/news/amid-rising-geopolitical-strains-oil-markets-face-new-uncertainties-as-the-drivers-of-supply-and-demand-growth-shift) · web

### See it in the table
[H₂O Water](https://www.materialinsights.org/commodities/water/)[CO2 Carbon dioxide](https://www.materialinsights.org/chemicals/carbon_dioxide/)

### Check your understanding

What is the main tool for imaging buried rock structures in oil exploration?
 Reflected sound waves, processed by computer, reveal the layers and traps.

Roughly what share of the oil in place do primary and secondary recovery together bring up?
 More than half usually remains, so better recovery adds reserves.

Why must shale producers keep drilling to hold output steady?
 Steep decline creates a treadmill, which also makes shale output respond quickly to price.

[← Part 1: How fossil fuels form](https://www.materialinsights.org/learn/energy/oil-gas-coal/p1/)[Mark read · Part 3: Moving and refining oil →](https://www.materialinsights.org/learn/energy/oil-gas-coal/p3/)

## Other sections

- [Module overview](https://www.materialinsights.org/learn/energy/oil-gas-coal/index.md)
- [How fossil fuels form](https://www.materialinsights.org/learn/energy/oil-gas-coal/p1/index.md)
- [Moving and refining oil](https://www.materialinsights.org/learn/energy/oil-gas-coal/p3/index.md)
- [How long will oil last, and why does its price swing?](https://www.materialinsights.org/learn/energy/oil-gas-coal/p4/index.md)
- [Natural gas, LNG, shale and coal's future](https://www.materialinsights.org/learn/energy/oil-gas-coal/p5/index.md)
- [Key terms, quiz and sources](https://www.materialinsights.org/learn/energy/oil-gas-coal/review/index.md)