Petroleum industry fundamentals
Expert-defined terms from the Professional Certificate in Petroleum Economics course at London School of Business and Administration. Free to read, free to share, paired with a globally recognised certification pathway.
Abandonment #
The process of permanently sealing an oil or gas well that is no longer productive or economical to operate. Abandonment typically involves the removal of equipment and infrastructure from the site and plugging the well to prevent any leakage of fluids.
Acidizing #
A well stimulation technique used to improve the flow of hydrocarbons by injecting acid into the formation to dissolve minerals and widen the pore spaces, allowing oil or gas to flow more freely.
API Gravity #
A measure of the density of petroleum liquids compared to water. The American Petroleum Institute (API) gravity scale is used to classify crude oil based on its density, with higher API gravity indicating lighter and more valuable crude oil.
Barrel #
A unit of measurement for oil and other petroleum products, equal to 42 US gallons or 159 liters. Barrels are used to quantify production, consumption, and reserves in the petroleum industry.
Blowout #
A sudden and uncontrolled release of oil or gas from a well due to pressure buildup. Blowouts can result in a loss of well control, posing safety risks to workers and environmental hazards.
Bottomhole Pressure #
The pressure at the bottom of a wellbore, exerted by the weight of the column of fluids above it. Bottomhole pressure is a critical parameter in well design and production operations.
Carbon Capture and Storage (CCS) #
A technology that captures carbon dioxide emissions from industrial processes or power plants and stores them underground to prevent their release into the atmosphere. CCS is a key strategy for reducing greenhouse gas emissions in the petroleum industry.
Completion #
The final stage of drilling a well, where equipment is installed to enable the production of oil or gas. Completion involves perforating the casing, setting production tubing, and installing artificial lift systems.
Crude Oil #
A naturally occurring liquid mixture of hydrocarbons extracted from underground reservoirs. Crude oil is refined into various products such as gasoline, diesel, and jet fuel.
Drilling #
The process of creating a wellbore to access underground oil and gas reservoirs. Drilling operations involve the use of drilling rigs, drill bits, and drilling fluids to penetrate the earth's surface.
Economic Rent #
The surplus profit earned by a producer above the cost of production. Economic rent in the petroleum industry is influenced by factors such as market demand, production costs, and government regulations.
Exploration #
The process of searching for new oil and gas reserves through geological surveys, seismic data analysis, and drilling. Exploration plays a crucial role in identifying potential reserves and expanding production.
Field Development #
The planning and execution of activities to commercialize an oil or gas discovery. Field development involves designing production facilities, drilling wells, and implementing infrastructure to extract and process hydrocarbons.
Fracturing #
A well stimulation technique that involves injecting high-pressure fluids into the formation to create fractures and enhance oil or gas production. Hydraulic fracturing, or fracking, is commonly used in unconventional reservoirs.
Gas Condensate #
A mixture of hydrocarbons that exists in a gaseous state underground but condenses into a liquid at surface conditions. Gas condensate is a valuable source of light hydrocarbons such as ethane and propane.
Host Government #
The government of a country where oil and gas operations are conducted. Host governments play a key role in regulating the industry, negotiating contracts with operators, and collecting revenues.
Hydrocarbon #
A compound made up of hydrogen and carbon atoms, found in petroleum reservoirs as oil and gas. Hydrocarbons are the primary source of energy in the global economy.
Infrastructure #
The physical facilities and structures used to transport, process, and store oil and gas. Infrastructure includes pipelines, refineries, storage tanks, and terminals that support the petroleum industry.
Joint Venture #
A partnership between two or more companies to collaborate on a specific oil and gas project. Joint ventures allow companies to share risks, resources, and expertise in exploration and production activities.
Kerosene #
A refined petroleum product used as a fuel for heating, lighting, and aviation. Kerosene is derived from crude oil through a distillation process in refineries.
License #
A legal permission granted by a government to a company to explore for and produce oil and gas in a specific area. Licenses are subject to terms and conditions set by regulatory authorities.
Midstream #
The segment of the oil and gas industry that focuses on transportation, storage, and marketing of petroleum products. Midstream activities include pipeline operations, terminals, and logistics services.
Natural Gas #
A gaseous fossil fuel composed primarily of methane, extracted from underground reservoirs. Natural gas is used for heating, electricity generation, and industrial processes.
Offshore #
Oil and gas operations conducted in marine environments, typically beyond the coastline. Offshore drilling platforms are used to access offshore reservoirs and produce hydrocarbons.
Peak Oil #
The point at which global oil production reaches its maximum level and begins to decline. Peak oil is a concept that has implications for energy security, economic growth, and environmental sustainability.
Production Sharing Agreement (PSA) #
A contract between a host government and an oil company that governs the exploration and production of oil and gas reserves. PSAs define the rights, obligations, and revenue-sharing arrangements between parties.
Reservoir #
An underground rock formation that contains oil and gas deposits. Reservoirs are characterized by their porosity, permeability, and fluid properties that determine the flow of hydrocarbons.
Seismic Survey #
A method of geophysical exploration that uses sound waves to image subsurface rock formations. Seismic surveys help identify potential oil and gas reservoirs before drilling.
Shale Gas #
Natural gas trapped in shale rock formations, extracted through hydraulic fracturing techniques. Shale gas has transformed the global energy landscape by unlocking vast reserves previously considered uneconomical.
Stranded Assets #
Oil and gas reserves that cannot be developed or produced due to economic, environmental, or regulatory constraints. Stranded assets pose financial risks to companies and investors in the petroleum industry.
Tar Sands #
Geological formations containing bitumen, a heavy and viscous form of petroleum. Tar sands are mined or extracted through in-situ methods to produce synthetic crude oil.
Unconventional Resources #
Oil and gas reserves that require advanced extraction techniques beyond traditional drilling methods. Unconventional resources include shale gas, tight oil, and oil sands.
Valuation #
The process of determining the economic worth of oil and gas assets based on factors such as reserves, production rates, and market conditions. Valuation is crucial for investment decisions, acquisitions, and financial reporting in the petroleum industry.
Well Testing #
The process of evaluating the performance of a well by measuring flow rates, pressure, and fluid properties. Well testing provides valuable data to optimize production and reservoir management.