As we’ve seen in our previous blogs, the oil industry has its fair share of rhetoric and jargon. ‘Upstream’, ‘BOEPD’ and ‘Christmas Tree’ are all terms which wouldn’t necessarily have your mind instantly jumping to ‘oil’, and yet there we are!
One of the other word pairings most commonly used throughout the O&G sector is ‘conventional’ and ‘unconventional’. But what do they mean? The team here at TriStone Holdings, a fast-growing UK oil and gas investment company, wanted to examine the terms in more detail with the hope of demystifying them, somewhat!
The Major Difference
The major difference lies in the method of extraction. Conventional oil, as the name suggests, is the more common of the two. It revolves around extraction through a vertical borehole. Unconventional extraction, on the other hand, due to reasons which we’ll delve into, cannot be extracted in this way. It most commonly requires horizontal wells to be bored. Alternatively, hydraulic fracturing (fracking) is also used.
Conventional oil extraction is what most of us will be familiar with when we think of drilling for oil. Drilling down vertically, letting the resources flow up to us, hopefully in a nice and easy way. Of course, this depends on the degree of homogeneity within the reservoir; the more faults or fractures in the reservoir, the less efficient the recovery of crude oil. Conventional extraction leads to quicker production, cheaper extraction, and to the production of oil which needs relatively little refining/processing beyond extraction (relative to unconventional). This form of oil production takes place both onshore and offshore. Our oil and gas investment company is predominantly interested in conventional plays.
Unconventional oil extraction, as previously alluded to, is much more complex than conventional, with output diminishing much more rapidly than its conventional counterpart. Producing from these low permeability gas and oil reservoirs requires multistage horizontal and fracking technologies. It’s no surprise, then, when you look at the intricacies of this extraction method, paired with a large production drop-off, that unconventional (as you might expect) produces much less oil, annually, than conventional extraction.
According to some findings, in fact, conventional oil makes up as much as 90% of oil produced, with unconventional oil only contributing a relatively small 8% (with the other 2% stemming from biofuels). It isn’t just the production cost that’s the issue, it’s the oil itself. Whilst by no means unuseful, the form that unconventional oil comes in (such as light tight oil and bitumen) is only really worth producing when oil prices are high; in this way, it’s less economically sustainable in the long-term when compared with conventional extraction.
Whilst not as easy to extract as conventional oil, one benefit of unconventional oil is that it can massively extend an oil field’s overall life cycle. The main benefit, resource-wise however, doesn’t actually pertain to oil, it’s to revolves around natural gas. What unconventional techniques have done, more than anything else, is revolutionise the natural gas (shale gas) industry. Unconventional techniques may only account for a small proportion of global oil supply, the same, however, can’t be said for natural gas. In fact, as it stands, over 60% of the US’ natural gas comes from unconventional extraction.
Over the past couple of decades, much more stringent regulation has been put into place surrounding onshore unconventional operations. The debate surrounding fracking has always been contentious. Public opinion swings this way and that more than a little frequently, with the UK Government even u-turning at one point recently over their stance on the issue.
Issues Surrounding Fracking
But why exactly is hydraulic fracturing so keenly contested an issue? Well, for most of its critics, it has a lot to do with potential environmental impacts. The main sticking points include:
- The risk of earthquakes and tremors caused by the fracking process.
- Water contamination. The chemicals used in fracking are potentially hazardous. There are concerns that this may be leak into the surrounding water table.
- High water consumption. This is a problem that’s as much an issue to the entire O&G sector, however fracking is a particularly bad offender in this regard.
The conversation around fracking continues to rage on (and will no doubt continue to do so for years to come). There are those who say it can never be made safe. At the same time, however, there are those equally learned who maintain that the benefits of fracking far outweigh any potential drawbacks. It’s a huge issue in its own right, and there’s a wealth of information about it online, if you want to find out more!
Another blog, another piece of jargon busted (we hope!). The more you can break down the myriad collection of terms used in the oil industry, the easier the sector becomes to understand, as a whole. So, if you’d like to find out more about our oil and gas investment company, then get in touch! Contact TriStone Holdings today on 0800 055 7079. Why not visit our Facebook page here, as well!