How Oil Is Produced

The naturally occurring pressure in the underground reservoir is an important determinant of whether the reservoir is economically viable or not. The pressure varies with the characteristics of the trap, the reservoir rock and the production history. Most oil, initially, is produced by "natural lift" production methods: the pressure underground is high enough to force the oil to the surface. Reservoirs in the Middle East tend to be long-lived on "natural lift," that is, the reservoir pressure continues over time to be great enough to force the oil out. The underground pressure in older reservoirs, however, eventually dissipates, and oil no longer flows to the surface naturally. It must be pumped out by means of an "artificial lift" -- a pump powered by gas or electricity. The majority of the oil reservoirs in the United States are produced using some kind of artificial lift.

Over time, these "primary" production methods become ineffective, and continued production requires the use of additional "secondary" production methods. One common method uses water to displace oil, using a method called “waterflood,” which forces the oil to the drilled shaft or "wellbore."

Finally, producers may need to turn to "tertiary" or "enhanced" oil recovery methods. These techniques are often centered on increasing the oil's flow characteristics through the use of steam, carbon dioxide and other gases or chemicals. In the United States, primary production methods account for less than 40 percent of the oil produced on a daily basis, secondary methods account for about half, and tertiary recovery the remaining 10 percent.

Both the varying reservoir characteristics and the physical characteristics of the crude oil are important components of the cost of producing oil. These costs can range from as little as $2 per barrel in the Middle East to more than $15 per barrel in some fields in the United States, including capital recovery. It is interesting to note that technological advances in finding and producing oil have made it possible to bring once-expensive deepwater Gulf of Mexico oil into production for less than $10 per barrel.