Oil and Gas 101: General Terminology

There is a wide range of terminology specific to the oil and gas industry, and if you’re new to the industry, acclimating to the terminology can be a bit of a learning curve. The following are common terms that can help individuals new to the oil and gas industry, as well as serve as a refresher for those already familiar.

Conventional reservoir – A reservoir in which buoyant forces keep hydrocarbons in place below a sealing caprock. Reservoir and fluid characteristics of conventional reservoirs typically permit oil or natural gas to flow readily into wellbores. (Source: Schlumberger Oilfield Glossary)

Unconventional reservoir – A reservoir in which alternative methods of drilling and stimulants are used to extract oil and gas from tight sands or formations that cannot otherwise be retrieved through conventional drilling methods. 

Upstream – Industry sector that is involved with the identification and extraction of oil and gas minerals and the resulting delivery of those oil and gas minerals to a transportation provider. Also known as exploration and production (E&P). 

Midstream – Industry sector that processes, transports, stores and markets oil and gas from the upstream sector and delivers it to the downstream sector.

Downstream – Industry sector that includes refineries, processing plants or distribution companies that process oil and gas minerals into consumer products, such as fuel, or use in other manufacturing processes of products.

Operator – An exploration and production (E&P) joint venture participant that manages the venture, pays venture costs and bills non-operators for their share of venture costs.

Non-operator (non-op) – A well participant that does not manage the well, referred to as “non-op.”

Acquisition costs – Costs incurred to purchase, lease or acquire a property or mineral, which may include lease bonuses, options to purchase or lease properties, broker’s fees, recording fees, legal costs and other costs in obtaining mineral rights. (Source: FASB SFAS No. 19)

Exploration costs – Costs incurred in identifying areas that may warrant examination and possibly contain oil and gas reserves, including exploratory wells and exploratory-type stratigraphic test wells. (Source: FASB SFAS No. 19)

Geological & geophysical costs (G&G) – Costs incurred for the exploration of properties and identification of potential oil and gas deposits. Exploratory costs of topographical, geological and geophysical surveys, along with costs incurred to obtain the rights to make these surveys.

Stay tuned for additional Oil and Gas 101 terminology updates.