Gas Investing Basics from the Experts


Are you looking to become a gas investor? The following information will allow you to make wiser gas investments as you begin oil investing. Like oil or coal, natural gas is a fossil fuel. It is colorless, odorless and emits fewer pollutants than other fossil fuels. The main component of natural gas is methane, which has an array of uses, from generating electricity to incineration to manufacturing chemicals, plastics, pharmaceuticals and so much more.

 

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Natural gas is a naturally occurring substances present in rock. The origin of natural gas is organic material compressed in the sedimentary rock formations such as sandstone, limestone and shale. Sedimentary rock is a product of sediment deposits in ancient oceans and other bodies of water. As layers of sediment were deposited on the ocean floor, decaying remains of plants and animals were integrated into the forming rock. This organic material eventually transformed into hydrocarbons, including natural gas, after being exposed to a specific temperature and pressure range deep within the earth's crust.

 

Since natural gas is less dense than water, which occurs in huge quantities in the earth's sub-surface, gas migrates through relatively porous sedimentary source rock toward the earth's surface. When hydrocarbons are trapped beneath relatively less porous cap rock, a natural gas reservoir may be formed. Reservoirs, which are simply layers of rock containing large quantities of hydrocarbons, are the source of natural gas. Gas investors should keep in mind that in order to bring natural gas to the surface, a well must be drilled through the cap rock and into the reservoir.

 

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Generally, in order to drill, an Exploration & Production company (an E&P) will reserve the right to drill by securing leases. Under US law, the ownership of land includes surfaces rights and mineral rights for any minerals that may be below ground. Mineral rights may be reserved from the surface rights. As a consequence, the owner of a piece of land might have the surface rights but not own the right to minerals below ground or the mineral rights. The owner of the mineral rights has the right to explore for, and to produce (remove) any minerals (oil, gas, etc.) from their property even though they do not own the surface rights. They also have the right to access the surface of the land in order to explore and produce the minerals. Once an area has been selected, the right to drill must be secured by the producer. The right to drill usually involves leasing the mineral rights of the desired property.

 

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After leasing, then the drilling can begin. One of the most common methods of drilling is the rotary method. With rotary drilling, a hole is drilled by the continuous turning of a drill bit. The bit is hollow and is attached to a the drill stem a hollow pipe that is lowered down the well by adding lengths of pipe. Drilling fluid, typically called mud, is circulated down the center of the pipe, through the bit and goes back up towards the surface. The mud removes the cuttings from the hole and lubricates and cools the drill bit.

 

After drilling, the well is evaluated to determine if hydrocarbons are present. Typically at least one of the following techniques is used:

 

  • Well logging a device is run down the hole which is able to measure the formations that it passes. This creates a record of the formation that can be examined by a geologist to determine the presence of hydrocarbons
  • Examining the cuttings a technique which examines the cuttings which flow back up the well pipe
  • Coring obtaining core samples from the well and examining the presence of hydrocarbons.

 

After carefully examining the data, the producer or operator makes a decision to complete the well or abandon the well. If the operator does proceed he will set casing. A string of casing is run down the well beyond the targeted pay zones or formations towards the bottom of the well. After the casing is set it is cemented into place.

 

gas rig

 

Since the payzone is sealed off by the production casing and cement, perforations must be made in order for the gas to flow into the wellbore. A perforating gun is lowered into the well down to the targeted payzones. The gun is detonated from the surface which shoots a few dozen holes that penetrate the casing and the surrounding cement.

 

When the gas in contained in a sandstone and shale, a process called fracturing may be used to increase the permeability of the formation. To fracture a formation, a specially blended fluid is run down the well and in the formation under great pressure. Pumping continues until the formation cracks open. At the same time, sand or other small beads ("proppants") are mixed into the fracturing fluid. The proppants enter the fractures in the formation, and, when the pumping is stopped and the pressure drops, the proppants remain in the fractures and hold then open. At this point gas, which is compressed in the formation, expands as it flows to the surface.

 

In order to sell the gas a pipeline must be run from the well into larger pipelines ("transmission lines") for the area. Gas is generally purchased by larger utilities and in some cases the final user. Due to the fact that natural gas requires pipelines for delivery and distribution, the transportation costs for natural gas are typically higher than oil.Let us know if you have any other oil gas investing questions. We would also like to hear from experienced gas investors about their oil investing history to see if you have ever encountered oil investment scams. Page last updated on 11/14/2013.

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