In the early days, geologists usually guessed at where significant reservoirs of petroleum lay beneath the earth. Natural oil seeps were usually a good indication that much more of the petroleum lay beneath the surface. Through a lot of luck, and probably more good hunches than science, these geologists were able to find petroleum in those early years. They accomplished this by studying exposed creek beds, railroad rights-of-way cuts, and canyons for clues of what might lay beneath the surface.
Fortunately, however, as the methods of drilling for oil improved, so did the methods of finding it become more scientific. Today's geologists, while still performing basically the same function, have at their disposal a wide range of tools and instruments used to accurately study and map underground rock formations.
Geologists use many sources of information to interpret their findings, including the analyzing of core samples, computers, seismic data, paleontology, and geochemistry. But no matter how advanced the method and equipment, this earth detective still must learn to accurately interpret data that have been compiled and correlated on certain types of formations. And, because of the value of the information, a geologist must keep any findings confidential until the employing company can secure the lease to drill for petroleum.
After a geologist completes the basic research on a potential oil field, a petroleum, or exploration, geophysicist is consulted to get a more detailed picture of subsurface formations.
While today's geophysicists have at their disposal a wide range of sophisticated tools, many are derived from the early days of the oil field. The first instruments used by early geophysicists included the surface magnetometer, refraction seismograph, and torsion balance for gravimetric surveying. Later tools were the reflection seismographs, gravimeters, and airborne magnetometers.
The most common method used in today's oil patch is seismology, the study of the earth's tremors. This procedure involves making sound waves, called seismic waves, on the surface of the earth. The waves may be made by controlled explosives; vibrators; weight dropping, where heavy weights are dropped to create the waves; or compressed gases, which produce bursts of energy using compressed air or propane. Once the waves penetrate the earth's crust, they reflect from subsurface rock layers back to the surface, where they are recorded. Instruments such as a seismometer pick up the signals and record the waves on magnetic tape and on sensitized paper.
Newer equipment includes the seismometer group recorder, which records the information on tape and helps eliminate noise and distortions that earlier methods could not possibly overcome. Most of the seismic data also are recorded for use on computers, which is helpful for constructing various types of maps and cross sections. Radar also is used to examine potential oil-bearing areas where the land is covered by forests or clouds.
Another popular method is the stratigraphic test well. This means that an area that may hold promise for oil explorers is drilled for a core sample. This bore hole sample is studied by geologists and paleontologists for traces of oil and gas and for fossils that might indicate the ages of the various rock strata.
While the methods used in searching for petroleum have vastly improved, oil companies continue to develop new and better techniques, including the increasing use of satellite imagery, and, of course, computers.
One of the largest advances in the past decade is the development and use of computers to visually enhance seismic data that previously were pictured as squiggly lines and varying shades of darkness. With a few clicks of the mouse, underground formations now can be manipulated to add color, and specific target zones can be magnified for closer inspection.
While most oil companies use this 3-D technology, Texaco was the first oil company to construct a special visualization center where underground formations can be viewed simultaneously by decision makers responsible for determining prospects. This new technology allows executives to determine exactly where a well should be drilled. Or, in the case of some old oil fields, pockets of oil that were missed using other technology now can be drilled because the technology can pinpoint exactly where they are located.
Three-D technology means that companies can make a quicker, more strategic decision about whether to drill a new oil field, or whether there is more oil to be recovered in an old oil field.
OPPORTUNITIES IN PETROLEUM EXPLORATION
There are many job opportunities within the exploration field in both the private and government sectors. Petroleum companies are primarily interested in persons whose backgrounds are in sedimentation, paleontology, stratigraphy, geophysics, structural geology, or a related discipline.
Geologists and Geophysicists
Geologists and geophysicists, also known as geological scientists or geoscientists, study the physical aspects and history of the earth. They identify and examine rocks, study information collected by remote sensing instruments in satellites, conduct geological surveys, construct maps, and use instruments to measure the earth's gravity and magnetic field. They also analyze information collected through seismic studies, which involves bouncing energy waves off buried rock layers. Many geologists and geophysicists search for oil, natural gas, minerals, and groundwater.
Geologists and geophysicists examine chemical and physical properties of specimens in laboratories. They study fossil remains of animal and plant life or experiment with the flow of water and oil through rocks. Some geoscientists use two- or three-dimensional computer modeling to portray water layers and the flow of water or other fluids through rock cracks and porous materials. They use a variety of sophisticated laboratory instruments, including x-ray diffractometers, which determine the crystal structure of minerals, and petrographic microscopes, which are used in studying rock and sediment samples.
Geoscientists working in the oil and gas industry sometimes process and interpret the maps produced by remote sensing satellites to help identify potential new oil or gas deposits. Seismic technology is also an important exploration tool. Seismic waves are used to develop three-dimensional computer models of underground or underwater rock formations. Some geoscientists administer and manage research and exploration programs; others become general managers in petroleum and mining companies.
Geology and geophysics are closely related fields, but there are major differences. Geologists study the composition, structure, and history of the earth's crust. They try to find out how rocks were formed and what has happened to them since their formation. Geo-physicists use the principles of physics and mathematics to study not only the earth's surface but also its internal composition, ground and surface waters, atmosphere, and oceans as well as its magnetic, electrical, and gravitational forces. Both, however, commonly apply their skills to the search for natural resources and to solve environmental problems.
There are numerous sub-disciplines or specialties that fall under the two major disciplines of geology and geophysics that further differentiate the kind of work geoscientists do. For example, petroleum geologists explore for oil and gas deposits by studying and mapping the subsurface of the ocean or land. They use sophisticated geophysical instrumentation, well log data, and computers to collect information. Paleontologists study fossils found in geological formations to trace the evolution of plant and animal life and the geologic history of the earth. Stratigraphers help to locate minerals by studying the distribution and arrangement of sedimentary rock layers and by examining the fossil and mineral content of such layers. Those who study marine geology usually are called oceanographers or marine geologists. They study and map the ocean floor and collect information using remote sensing devices aboard surface ships or underwater research craft.
Some geoscientists spend the majority of their time in an office; others divide their time between fieldwork and office or laboratory work, according to the 1996-97 U.S. Department of Labor's Occupational Outlook Handbook. Geologists often travel to remote field sites by helicopter or four-wheel drive vehicles and cover large areas on foot. Exploration geologists and geophysicists often work overseas or in remote areas, and job relocation is not unusual. Marine geologists and oceanographers may spend considerable time at sea.
According to the 1996-97 Occupational Outlook Handbook, geologists and geophysicists held about 46,000 jobs in 1994. Many more individuals held geology, geophysics, and oceanography faculty positions in colleges and universities, but they are counted as college and university faculty, not geologists, geophysicists, or oceanographers.
About one in five were employed in oil and gas companies or oil and gas field service firms. Many other geologists worked for consulting firms and business services, especially engineering services. About one geologist in seven was self-employed, and most were consultants to industry or government.
The federal government employed about 6,100 geologists, geophysicists, oceanographers, and hydrologists in 1994. Over one-half worked for the Department of the Interior, mostly within the U.S. Geological Survey. Others worked for the Departments of Defense, Agriculture, Commerce, Energy, and the Environmental Protection Agency. Some worked for state agencies such as state geological surveys and state departments of conservation. Geologists and geophysicists also worked for nonprofit research institutions.
TRAINING, OTHER QUALIFICATIONS, AND ADVANCEMENT
Because so many millions of dollars are at stake, a petroleum company must have access to the best geologic and geophysical data. More importantly, it must have qualified geologists and geophysicists who are able to perform their primary function, which is to properly interpret those data.
A bachelor's degree in geology or geophysics is adequate for entry into some lower-level geology jobs, but better jobs with good advancement potential usually require at least a master's degree in geology or geophysics. Persons with strong backgrounds in physics, chemistry, mathematics, or computer science also may qualify for some geophysics or geology jobs. A Ph.D. degree is required for most research positions in colleges and universities, and it is also important for work in federal agencies and some state geological surveys that involve basic research.
Hundreds of colleges and universities offer a bachelor's degree in geology, geophysics, oceanography, or some other geo-science. Other programs offering related training for beginning geological scientists include geophysical technology, geophysical engineering, geophysical prospecting, engineering geology, petroleum geology, hydrology, and geochemistry. In addition, several hundred more universities award advanced degrees in geology or geophysics.
Geologists and geophysicists need to be able to work as part of a team. Computer modeling, data processing, and effective oral and written communication skills are important, as well as the ability to think independently and creatively. Those involved in field-work must have physical stamina.
Traditional geoscience courses emphasizing classical geologic methods and topics (such as mineralogy, paleontology, stratigraphy, and structural geology) are important for all geoscientists. However, those students interested in working in the environmental or regulatory fields should take courses in hydrology, hazardous waste management, environmental legislation, chemistry, fluid mechanics, and geologic logging. Also, some employers seek applicants with field experience, so a summer internship or employment in an environmentally related area may be beneficial to prospective geoscientists.
Geologists and geophysicists often begin their careers in field exploration or as research assistants in laboratories. They are given more difficult assignments as they gain experience. Eventually they may be promoted to project leader, program manager, or another management and research position.
Many jobs for geologists and geophysicists are in, or related to, the petroleum industry, especially the exploration for oil and gas. This industry is subject to cyclical fluctuations. Low oil prices, higher production costs, improvements in energy efficiency, shrinking oil reserves, and restrictions on potential drilling sites have caused exploration activities to be curtailed in the United States. If these conditions continue, there will be limited openings in the petroleum industry for geoscientists working in the United States.
As a result of generally poor job prospects in the past few years, the number of students enrolling in geology and geophysics has dropped considerably. Although enrollments are rising again, the number of students trained in petroleum geology is likely to be so low that even a small increase in openings in the oil industry will be greater than the number of petroleum geologists and geophysicists available to fill them, creating good employment opportunities if exploration activities increase significantly. Employment prospects will be best for job seekers who hold a master's degree and are familiar with the advanced technologies, such as computer modeling, that are increasingly used to locate new oil and gas fields or pinpoint hidden deposits in existing fields. Because of the cyclical nature of the oil and gas industry, hiring on a contractual basis is common.
Despite the generally poor job prospects encountered by geoscientists in recent years in the petroleum industry, employment of geologists and geophysicists is expected to grow about as fast as the average for all occupations through the year 2005. Recent setbacks have been offset by increased demand for these professionals in environmental protection and reclamation. Geologists and geophysicists will continue to be needed to help clean up contaminated sites in the United States and to help private companies and government comply with more numerous and complex environmental regulations. In particular, jobs requiring training in engineering geology, hydrology, and geochemistry should be in demand. However, the number of geoscientists obtaining training in these areas has been increasing, so they may experience competition despite the increasing number of available jobs.
Many geologists and geophysicists work in the petroleum and natural gas industry. This industry also employs many other workers in the scientific and technical aspects of petroleum and natural gas exploration and extraction, including engineering technicians, science technicians, petroleum engineers, and surveyors. Also, some life scientists, physicists, chemists, and meteorologists, as well as mathematicians, computer scientists, soil scientists, and mapping scientists, perform related work in both petroleum and natural gas exploration and extraction and in environment-related activities.
Companies that provide equipment and support services to those looking for petroleum also offer an abundance of opportunities. Needed are personnel to read the core samples, operate the seismic equipment, and punch the computers. Most of these opportunities will be covered in Chapter 8.
Before any drilling, exploration, or production can take place on any land suspected of being a good oil prospect, the mineral rights must be secured from the property owner. This often complex but critical job is known as leasing, and is the duty of a landman. (The job is not exclusive to men. See page 28 for a brief explanation of the term.) This negotiator of lands must learn not only oil field terminology, but also federal, state, and local laws in order to execute a legal, binding contract. He or she also must be something of a social scientist who can convince a reluctant landowner of the benefits of having his or her property explored and, with luck, produced.
Landmen, who are specifically concerned with the legal rights to any hydrocarbons found beneath the subsoil, must deal primarily with two kinds of properties: public (owned by the government) and private (owned by an individual or corporation). A third type of property are those lands owned by Native Americans.
However, no matter who owns the property, a landman must be knowledgeable in the particular laws of the land, as well as adept in negotiating a contract satisfactory to all parties involved.
Leasing Private Lands
While a private landowner has the right to search for and remove any minerals from his or her own property, most, obviously, have neither the finances nor the expertise to do so. Therefore, a landowner might decide to lease or sell all or part of his or her land rights to someone else. The primary function of a landman, then, is to search the title of the property, review the company's anticipated operations with the owners, negotiate signatures to the mineral lease, and have the contract recorded with the correct legal entity.
Most of the time the landman will begin negotiations with property owners after the geological work has been done. However, in some instances, the leasing process begins prior to beginning the geophysical work. This usually happens when property is located in an extremely promising area where successful, producing wells have been drilled.
In either case, the landman stays in constant contact and continues to work closely with the geologist and/or geophysicist.
A landman can offer a private landowner three options on his or her land: a lease interest, mineral interest, or royalty interest.
In an oil and gas lease, a written agreement is made between the landowner and the oil or gas company. This contract, usually written for a specific number of years, gives the company exclusive rights to enter the land, prospect for petroleum, and drill and remove any petroleum found there. In return, the landowner is given an initial bonus for agreeing to lease the land. Additionally, he or she gets a yearly rental fee based on how much acreage was leased. And, if the land does produce oil and gas, the landowner shares in the production. This is called a royalty payment and is usually 12V2 percent-or one-eighth-of the value of oil and gas produced on the lease. All the while, the property owner can continue to use the surface of the land, as long as it does not interfere with the company's operations.
In a mineral interest option, a property owner can either sell the rights to some or all of his or her minerals, or sell the land and keep some or all of the mineral interests. This is where the job of a landman becomes more specialized and complicated, as the rights of either property owner may vary from state to state.
The last option a landman can offer a property owner is called royalty interest. This means a landowner agrees to transfer only the rights to the proceeds from the minerals.
As you can see, the job of a landman is not only extremely important, but very involved as well. There are many variations of lease options to negotiate and federal, state, and local laws to follow. A landman must be well versed in all of them.
Leasing Federal Lands
The federal government and Native American tribes own land in the United States that contain some of the country's most abundant oil and gas resources. This land is located onshore, as well as offshore in U.S. waters on the Outer-Continental Shelf (OCS). In fact, one-third of the natural gas and more than one-fifth of the oil produced in the United States comes from federal offshore, federal onshore, and Native American mineral leases, according to the American Petroleum Institute.
The U.S. Department of Interior's Minerals Management Service (MMS) is responsible for these resources and handles leasing the rights to private companies for the purpose of exploring and developing oil and gas. In return, the companies pay the federal government for the lease, as well as a royalty on the oil and gas they produce from the lease. Since 1954, the federal government has received revenues of more than $100 billion from offshore oil and gas production alone.
The American Petroleum Institute describes four types of mineral lease revenues:
- Bonuses. Leases are awarded through a competitive bidding process and bonuses are the cash amount successfully bid to win the rights to a lease.
- Rents. At the time a lease is issued, a rent schedule is established. Rents are annual payments, normally a fixed dollar amount per acre, required to preserve the rights to a lease.
- Minimum royalties. A federal lease may contain a minimum royalty provision, which is an annual payment on a per-acre basis, required to preserve the rights to a lease until production-and royalties from it-exceed a minimum value. Once this level is reached, minimum royalty payments cease.
- Royalties. A royalty is due when production begins. Royalty payments represent a stated percentage of the oil and gas produced and can be paid either in value or in kind.
Lands owned by the federal government or state governments are usually acquired through a competitive bidding process involving numerous and specific rules and regulations. Federal onshore leasing is conducted through both competitive and noncompetitive methods. Competitive leases of up to 640 acres and five years are granted on acreage located on a known geological structure. If the land is not located on a known geological structure, terms for noncompetitive leases include granting a company acreage up to 2,560 acres and ten years.
Prior to the date of the sale, companies submit sealed bids for the tracts, which normally have a five-year term. If the company whose bid was accepted does not conduct initial exploration operations as specified in the lease, the acreage reverts to the federal government, and the company loses the money paid to purchase the tracts.
Petroleum companies that do not own acreage in a certain offshore tract may try to participate in a farm-in. This means that the company would share an existing lease held by another company and be responsible for some or all of the cost of drilling a well. In return, the company would get a specified interest in the acreage. The opposite of a farm-in is a farm-out. In this type of leasing arrangement, a company already holding acreage would take on and pay drilling partners to explore certain portions of its holdings.
Whatever type of leasing arrangement is used, companies bid only on tracts where extensive geological tests have been conducted and analyzed and the prospects for a large find is possible.
Even with the downturn in the industry over the past few years, the cost of drilling one offshore well continues to be in the millions of dollars. And, as the petroleum industry continues its quest for new oil frontiers, new technology is being applied to wells that are being drilled deeper, further from land, and in even more remote locations far from the comforts of civilization.
WHERE DOES THE MONEY GO?
Since 1954, more than $58 billion in bonuses have been collected from the awarding of offshore oil and gas leases, notes the American Petroleum Institute. Lease sales have been a significant source of revenue over the past few years as a result of record offshore leasing activity.
In 1996, three offshore lease sales-in the central Gulf of Mexico, the western Gulf of Mexico, and Alaska-resulted in the leasing of 1,537 oil and gas tracts and bonus payments of $878.2 million for the three sales. To date, the largest sale of offshore oil and natural gas leases was in March 1997, when 81 companies bid $824.1 million. In August 1997, companies bid on 804 tracts totaling $616.2 million.
From 1986 through 1995, the mineral leasing program collected revenues of more than $40 billion. The money received from the leasing of federal lands is given to the U.S. Treasury Department to help offset the national deficit. In 1995, $1.5 billion was applied to the deficit, 42 percent of the total.
API says mineral-producing states-other than Alaska-receive half the revenues collected within their boundaries. Alaska receives 90 percent. Seven states receive a share of revenues generated from oil and gas leases within three miles of their coastline. In 1995, the state share of onshore and offshore revenues was $553 million-15 percent of the total.
Additionally, $367 million, or 10 percent of the total revenues, went to furthering the work of the Bureau of Reclamation in seventeen western states. Native American tribes receive all the revenues collected on their lands. In 1995, that amounted to $153 million. The remaining funds are applied to the Land and Water Conservation Fund and the National Historic Preservation Fund.
OPPORTUNITIES FOR LANDMEN/LEASING AGENTS
The term landman is most likely a throwback to the early days in the oil field when few women, if any, were employed in the fledgling business. However, in today's oil patch (and in this book), the term is applicable to either gender.
Getting property owners to agree to have their land drilled and produced was, in fact, one of the first career opportunities in the petroleum industry that became available to women. Today, it continues to be a source of employment for women who have learned the art of negotiating and closing a deal.
Landmen who work for major oil companies are sometimes called land agents. But whatever their title, their ultimate responsibility remains the same: to secure the rights to explore, drill, and produce on tracts of land or the ocean bottom that earth scientists believe to be promising.
Training, Other Qualifications, and Advancement
Some colleges, primarily in the energy producing states of Texas, Louisiana, and Oklahoma, offer degrees in petroleum land management. Most companies prefer an employee with a law degree since some land agents also are used to negotiate exploration or development contracts with other producers. Or, they arrange farm-in or farm-out agreements.
A natural step from a land agent's job is a career in the company's legal affairs or general management departments.
Some landmen and geologists may be interested in the challenge of owning their own company, where they can do reasonably well. However, it would probably be a good idea first to get hands-on experience by working for several years with a company. This would not only provide on-the-job training, but an opportunity to build up the nest egg necessary for opening your own office.
Before setting out on your own, however, it would be wise to check with other professionals in the field in your particular part of the country. Because of the cyclical nature of the petroleum industry, it may be more prudent at a certain point in your career to remain in the security of a company, rather than taking the risk of going out on your own.
Trends in your particular area of specialization also may be checked out with the associations, schools, and organizations listed in the back of the book.