[MUSIC PLAYING]

PRESENTER: What drives our cars, buses and planes? Powers our electricity and allows us to cook our food and heat our water? Most of today's energy needs are met by fossil fuels like coal, oil, and gas.

These unique high-energy fuels are non-renewable resources that took millions of years to form. About two billion years ago, marine organisms like algae and microscopic animals and plants died and settled on the ocean floor.

Beneath other sediments in the ocean, and in the absence of oxygen, these fossils changed into a substance called kerogen. Under heat and pressure, kerogen gradually changes into oil, or gas. The whole process usually takes at least a million years.

At the molecular level, oil and gas are hydrocarbons made up of hydrogen and carbon atoms. The constant pressure and movement of the Earth's crust squeezes oil and gas through the pores or spaces within rocks. Some oil and gas reaches the Earth's surface and seeps out naturally into land or water. Often it is trapped beneath the surface by impermeable layers or rock structures like faults and folds.

Within the crust, oil or gas deposits build up and form reservoirs. Reservoirs are like vast sponges filled with oil and gas. They can be as large as a city.

To find oil and gas deposits, geologists use a number of different survey techniques, including seismic surveys, gravitational surveys, and geological mapping. Seismic surveys use reflected sound waves to produce a 3-D view of the Earth's interior.

New technologies such as four-dimensional projections and sophisticated graphic renderings of rock structures are improving the way we find conventional oil and gas deposits. Energy resources that are currently difficult or expensive to extract are called unconventional oil and gas.

In a world with limited energy resources, people are looking at more efficient ways of tapping into unconventional oil and gas or an alternative and renewable sources of energy from biofuels or the sun. What do you think will be the energy sources of the future?

[MACHINERY OPERATING]

PRESENTER: When your job is drilling for oil, you lead a nomadic kind of existence. You're rarely in one place for long. And every time you move to a new location, you take your drilling rig with you. 800 tons of machinery, and a few thousand horsepower to drive it. Setting it all up can take anything from a few days to a couple of weeks.

The choice of site for drilling an exploration well isn't ours. It's made by the geologist and geophysicist from their knowledge of the rocks that lie below, 10,000 feet or more. A classic choice would be over a dome-shaped fold in the rock layers, revealed by seismic survey.

But in this business, that choice is a gamble. The chance you're counting on is that oil and gas, formed somewhere in the vicinity millions of years ago, could have migrated into the dome through layers of permeable rock and have accumulated there, hemmed in by an impermeable layer above. Once there, they would have separated-- the gas on top of the oil, with groundwater round the flanks, all of them at high pressure. That's what we hope has happened. But it could take eight weeks or more to prove it.

We start with a relatively large bit to drill through the soft surface layers, down to 1,000 feet or so. When your target is over 10,000 feet down, you don't just sink a deep hole. You build it carefully, stage by stage.

[CRANE OPERATING]

The drill is driven from the surface, turned by a rotary table on the platform, The drill spring suspended from the derrick. Down below, the teeth of the drilling bit break the rock into fragments. They'd soon choke the hole unless we had a way of flushing them out. What we use is a special drilling fluid, pumped down the drill pipe to cool the bit and carry the cuttings away back to the surface.

The mud, as we call it, is channeled out over fine mesh screens-- the shakers-- to remove the coarse cuttings, and then passed through separators and settling pits to get rid of the finer material before it's recycled back down the hole. As long as the drill is turning, the mud must be kept circulating. But every 30 feet, drilling has to stop to add another section of pipe.

[WORKER YELLING]

[WORKER YELLING]

[WORKER YELLING]

It's a tough job, and it calls for some slick coordination from the floor group. But they all get plenty of practice. On an average well, they'll add pipe over 300 times before they reach the bottom of the hole.

Everything's done to a schedule, supervised by the tool pusher. Nowadays, he doesn't push anything but the drilling program. He's responsible, among other things, for ordering supplies of materials as they're needed, and making sure they arrive on time.

This steel casing, for instance, will be run into the hole when the drill has reached 1,000 feet. It's essential to stabilize the well at this stage to prevent the softer rocks found at shallow depths from caving in. This will be the next job coming up in his program, within the next few hours.

The casing, like drill pipe, is assembled section by section. And each of them weighs a ton or so. These centralizers are fitted at regular intervals to keep the casing central in the hole as it goes down. The casing is lowered in until it reaches a point just above the bottom of the hole. The next job is to cement it home.

The cement is a wet slurry, pumped down the inside of the casing under pressure. Downhole, it flows through the end of the casing and is circulated around the outside and back to the surface, displacing the drilling mud ahead of it. The cement is followed by drilling mud to the bottom of the casing. The pumps are stopped, and the cement is given time to set.

Now we can cap the top of the casing with a set of safety valves, known for obvious reasons as the blowout preventers. If further drilling were to encounter extremely high pressure gas, oil, or water, we could have a problem. To contain it, we need a means of sealing off the hole of the surface. It's done by hydraulic rams that close off the gap between the drill string and the inside walls of the casing.

As we go deeper, heavier wellhead equipment will be installed to control the higher pressures. Once the blowout preventers are fitted, drilling can continue safely to greater depths.

But what if we were drilling not on land, but way out at sea? Our rig might be on a floating platform, anchored 500 feet or more above the drill hole. But we'd still have to follow the same procedures. On a marine well, blowout preventers are every bit as vital, but they have to be put by remote control, sent down on guide wires and locked onto the casing under the watchful eye of a television camera.

[WATER BUBBLING]

On top goes a marine riser, a conductor tube to connect the rig directly to the blowout preventers and the drill hole down below. This gives us the closed system we need for running pipe and circulating mud, just as if we were working on land.

As drilling goes on, the mud return shows the succession of different rock layers we're passing through. Some of them could contaminate the mud and prevent it from functioning properly, so we need to keep a constant check on its composition. The mud must also be maintained at a given viscosity and density. We don't want it altered too much by the rocks we're drilling through.

Frequent checks are also made for any changes in the chemical composition. If we were to hit a layer of salt, for instance, we could be in deep trouble. The mud would cease to do its job, causing the hole to collapse and prevent drilling. We might have to replace the mud with a new supply of an entirely different composition to neutralize the salt.

Up on the platform, an equally close eye is kept on the performance of the drill bit. Cutting through hard rock, its life is usually less than 12 hours. Loss of cutting power occurs when the bit becomes dull, and it makes a distinctive noise. Now it's time to pull the whole string, 90 feet at a time, and stack it in the derrick.

[CRANE OPERATING]

[WORKER CHATTER]

[CRANE OPERATING]

We can easily have 100 strands of pipe in the rack before we reach the bit. Maybe four hours to recover it, another four to run the new one in again. Changing a bit is time consuming, but part of the normal program.

But drilling can sometimes encounter problems that are unpredictable. Conditions downhole might suddenly change and affect the consistency of the mud. If it got too thick, it could bind the drill pipe and stop further drilling. If it happens, you just pull out what you can. Then you go fishing, and with luck, you make contact.

But if the hole itself collapses, you abandon the jammed-in section, and recover the rest by breaking the pipe. You can't drill back down through the blockage. You have to bypass it, using special deviation equipment, offsetting a new hole at a pre-determined angle.

Mechanical troubles don't happen all that often. But on every well, you have to be prepared for hazards of another kind that may lie buried in the rocks below. A sudden increase in mud flow from the well. Stop drilling, and close the blowout preventers. Everything's shut down. The pressures are measured, and the pumps are restarted slowly while the cause cause of the flow increase is identified.

We've encountered high-pressure gas trapped in a shallow sandstone. It's flowing into the well and forcing out the mud. Before we can drill on, we have to contain the formation pressure by pumping down a heavier mud. This is usually kept in the storage tanks, ready for just such an emergency.

At 3,500 feet below, the gas is flowing into the hole. But as the new, heavier mud begins to circulate, the pressure is gradually overcome, and the flow stops. As the pressure returns to normal, the emergency is over. With the mud weight increased, We can now drill the rest of the gas zone. Then the hole can be lined with steel casing. Then with a smaller bit, on towards the target, still a long way to go.

As the drill bites through the cap rock and approaches the target zone, its progress is monitored foot by foot. Inspection of the cuttings will give us the first indication of what really lies below the cap rock, whether or not the choice of drill site was correct. It's sandstone all right, and it could contain oil.

Under the microscope, the sample certainly looks promising. Coarse-grained sand, with a definite dark stain. If it's oil, it will glow yellow under ultraviolet light. It's there all right, but so far only a trace. Not until we've drilled all the way through the formation can we begin to assess its significance.

To find out more about what's down there, we run a special instrument probe. The probe contains devices which measure certain electrical, acoustical, and radioactive properties of the different rock layers and transmits them back to the surface, where they are recorded. As it passes back up through the formations, the nature of the rocks penetrated by the drill, and how much oil and gas they contain, can be determined by the recorded measurements.

Shale. Porous sandstone saturated with oil. Even more porous here. Limestone, nothing much in this case. Then the gas layer. And finally, the impermeable shale of the cap rock.

We know there's oil and gas down there. But there's a lot to do yet before we've any idea of how much can be produced. It certainly looks promising-- encouraging enough to justify a flow test. The hole has been cased right down to the bottom and cemented in. A flow tube is now run into the oil zone.

To get at the oil, we have to perforate both the casing and the cement. We do it by firing a string of specially designed charges. The oil begins to flow as the pressure in the well is reduced. The flare-off of gas that comes up with the oil signals a successful test. To get this far has cost anywhere from $600,000 on land to $4 million offshore, yet all we've managed to assess is the potential of the area immediately around a single drill hole.

What interests us now is the rest of the structure. To find out the full extent of the oil reservoir, we have to drill more wells. The first out-step has found water-bearing sands, and we can now reduce the profile of the reservoir in this direction. Next we drill a third well, in line with the other two. This again finds water-bearing sands, and completes the profile-- the shape of the structure, and the position of the oil, gas, and water contacts.

But the profile is still only a narrow band of information in one direction across the structure. To round out the picture, we now need to drill further out-step wells at right angles to the first three. Even with a classic dome-shaped structure, out-stepping can have its disappointments. Nothing but water, and much lower down than expected. The rocks have slipped along a fault line, blocking off the reservoir. This is what's called a dry hole. But its information was vitally important.

We've now probed the limits of the structure, and at last we have a three-dimensional impression of the reservoir. We can now begin to plan its further development. To bring the oil field into full production, further wells will be needed. These are drilled into the oil-bearing zone beyond the edge of the gas, so we get the maximum assistance from both gas and water pressures in driving the oil to the surface.

As more and more oil is withdrawn, we can inject water back into the structure to maintain the pressure, by drilling more wells outside the limits of the oil accumulation. An oil field may extend over an area the size of a town, with a network of pipelines for gathering the oil and maintaining pressures downhole. If

The oil field were offshore, the whole installation, complete with treating facilities and pumps, would have to be concentrated into a very small area. To be economic offshore, drilling and producing facilities need to be located at a central point from a permanent platform. The oil reservoir is then developed to the same pattern as on land by using the technique of deviation drilling.

Oil reserves are much harder to find nowadays, but when they are, it's most often in locations that are very difficult to develop. But wherever they exist, and however complex the development becomes, it is our job to reach them using every human and environmental safeguard possible, then to recover as much as we can for as long as we can.

[MUSIC PLAYING]

PRESENTER: Geologists have known for years that substantial deposits of oil and natural gas are trapped in deep shale formations. These shale reservoirs were created tens of millions of years ago. Around the world today, with modern horizontal drilling techniques and hydraulic fracturing, the trapped oil and natural gas in these shale reservoirs is being safely and efficiently produced, gathered, and distributed to customers.

Let's look at the drilling and completion process of a typical oil and natural gas well. Shale reservoirs are usually 1 mile or more below the surface-- well below any underground source of drinking water, which is typically no more than 300 to 1,000 feet below the surface. Additionally, steel pipes-- called casing-- cemented in place provide a multilayered barrier to protect freshwater aquifers.

During the past 60 years, the oil and gas industry has conducted fracture stimulations in over 1 million wells worldwide. The initial steps are the same as for any conventional well. A hole is drilled straight down using fresh water-based fluids, which cools the drill bit, carries the rock cuttings back to the surface, and stabilizes the wall of the wellbore.

Once the hole extends below the deepest freshwater aquifer, the drill pipe is removed and replaced with steel pipe, called surface casing. Next, cement is pumped down the casing. When it reaches the bottom, it is pumped down and then back up between the casing and the borehole wall, creating an impermeable, additional protective barrier between the wellbore and any fresh water sources.

In some cases, depending on the geology of the area and the depth of the well, additional casing sections may be run, and like surface casing, are then cemented in place to ensure no movement of fluids or gas between those layers and the groundwater sources. What makes drilling for hydrocarbons in a shale formation unique is the necessity to drill horizontally.

Vertical drilling continues to a depth called the kick-off point. This is where the wellbore begins curving to become horizontal. One of the advantages of horizontal drilling is that it's possible to drill several wells from only one drilling pad, minimizing the impact to the surface environment.

When the targeted distance is reached, the drill pipe is removed, and additional steel casing is inserted through the full length of the wellbore. Once again, the casing is cemented in place. For some horizontal developments, new technology in the form of sliding sleeves and mechanical isolation devices replace cement in the creation of isolations along the wellbore.

Once the drilling is finished and the final casing has been installed, the drilling rig is removed, and preparations are made for the next steps-- well completion. The first step in completing a well is the creation of a connection between the final casing and the reservoir rock. This consists of lowering a specialized tool called a perforating gun, which is equipped with shaped explosive charges, down to the rock layer containing oil or natural gas.

This perforating gun is then fired, which creates holes through the casing, cement, and into the target rock. These perforating holes connect the reservoir and the wellbore. Since these perforations are only a few inches long and are performed more than a mile underground, the entire process is imperceptible on the surface.

The perforation gun is then removed in preparation for the next step-- hydraulic fracturing. The process consists of pumping a mixture of mostly water and sand-- plus a few chemicals-- under controlled conditions, into deep underground reservoir formations. The chemicals are generally for lubrication, to keep bacteria from forming, and to help carry the sand. These chemicals typically range in concentrations from 0.1% to 0.5% by volume, and help to improve the performance of the stimulation.

This stimulation fluid is sent to trucks that pump the fluid into the wellbore and out through the perforations that were noted earlier. This process creates fractures in the oil and gas reservoir rock. The sand and the frack fluid remains in these fractures in the rock and keeps them open when the pump pressure is relieved. This allows the previously-trapped oil or natural gas to flow to the wellbore more easily.

This initial stimulation segment is then isolated with a specially-designed plug, and the perforating guns are used to perforate the next stage. This stage is then hydraulically fractured in the same manner. This process is repeated along the entire horizontal section of the well, which can extend several miles.

Once the stimulation is complete, the isolation plugs are drilled out, and production begins. Initially water, and then natural gas or oil, flows into the horizontal casing and up the wellbore. In the course of initial production of the well, approximately 15% to 50% of the fracturing fluid is recovered. This fluid is either recycled to be used on other fracturing operations, or safely disposed of according to government regulations.

The whole process of developing a well typically takes from three to five months-- a few weeks to prepare the site, four to six weeks to drill the well, and then one to three months of completion activities, which includes one to seven days of stimulation. But this three to five month investment can result in a well that will produce oil or natural gas for 20 to 40 years or more.

When all of the oil or natural gas that can be recovered economically from a reservoir has been produced, work begins to return the land to the way it was before the drilling operations commenced. Wells will be filled with cement, and pipes cut off 3 to 6 feet below ground level. All surface equipment will be removed, and all pads will be filled in with dirt or replanted. The land can then be used again by the landowner for other activities, and there will be virtually no visual signs that a well was once there.

Today, hydraulic fracturing has become an increasingly important technique for producing oil and natural gas in places where the hydrocarbons were previously inaccessible. Technology will continue to be developed to improve the safe and economic development of oil and gas resources.

[MUSIC PLAYING]

ADDISON ANDERSON: Deep underground lie stores of once-inaccessible natural gas. This gas was likely formed over millions of years, as layers of decaying organisms were exposed to intense heat and pressure under the earth's crust. There's a technology called hydraulic fracturing, or fracking, that can extract this natural gas, potentially powering us for decades to come.

So how does fracking work? And why is it a source of such heated controversy? A fracking site can be anywhere with natural gas, from a remote desert to several hundred feet from your backyard.

It starts out with a long vertical hole, known as a wellbore, drilled down through layers of sediment. When the well reaches 2,500 to 3,000 meters, it's at its kickoff point, where it can begin the process of horizontal drilling. It turns 90 degrees and extends horizontally for about 1.5 kilometers through a compressed, black layer called the shale rock formation. A specialized perforating gun is then lowered and fired, creating a series of small inch-long holes that burst through the well's casing into the rock layer.

About three to four months after the initial drilling, the well is ready for fracking to begin. Fracking fluid is pumped down into the well at a pressure so high it cracks the shale rock, creating fractures through which the trapped gas and oil can escape. The fluid itself is more than 90% water. The rest is made up of concentrated chemical additives.

These vary depending on the specific characteristics of the fracking site, but usually fall into three categories-- acids for clearing debris and dissolving minerals, friction-reducing compounds to create a slippery form of water known as slickwater, and disinfectant to prevent bacteria growth. Sand or clay is also mixed into the water to prop open the fissures so the gas and oil can keep leaking out even after the pressure is released.

It's estimated that all of fracking's intense pumping and flushing uses an average of three to six million gallons of water per well. That's actually not a lot compared to agriculture, power plants, or even golf-course maintenance. But it can have a notable impact on local water supply.

And disposing of used fracking water is also an issue. Along with the trapped gas that's pumped up to the surface, millions of gallons of flowback liquid come gushing up. This liquid containing contaminants like radioactive material, salts, heavy metals, and hydrocarbons needs to be stored and disposed of. That's usually done in pits on site in deep wells or off-site at water treatment facilities.

Another option is to recycle the flowback liquid. But the recycling process can actually increase levels of contamination since the water is more toxic with each use. Wells are typically encased in steel and cement to prevent contaminants from leaking into groundwater. But any negligence or fracking-related accidents can have devastating effects. Fracturing directly into underground water, hazardous underground seepage and leakage, and inadequate treatment and disposal of highly toxic wastewater can potentially contaminate drinking water around a fracking site.

There's also concern about the threat of earthquakes and damage to infrastructure from pressure and wastewater injection. Links between fracking and increased seismic activity leave unresolved questions about long-term pressure imbalances that might be happening beneath our feet.

Fracking's biggest controversy, though, is happening above the ground. The general consensus is that burning natural gas is better for the environment than burning coal since the gas collected from fracking emits only half the carbon dioxide as coal per unit of energy. The pollution caused by the fracking itself, though, isn't negligible. Methane that leaks out during the drilling and pumping process is many times more potent than carbon dioxide as a greenhouse gas. Some scientists argue that methane eventually dissipates, so has a relatively low long-term impact.

But a greater question hangs in the air. Does fracking take time, money, and research away from the development of cleaner, renewable energy sources? Natural gas is nonrenewable. And the short-run economic interests supporting fracking may fall short in the face of global climate change. Experts are still examining fracking's overarching effects.

Although modern fracking has been around since the 1940s, it's boomed in the last few decades. As other sources of natural gas decrease, the costs of nonrenewable energies rise. And cutting-edge technologies make it so accessible. But many countries and regions have already banned fracking in response to environmental concerns. It's undeniable that fracking has reshaped the energy landscape around the world. But for what long term benefit and at what cost?

So as I explained in previous video, value of the US dollar or US dollar exchange rate versus foreign currencies is one of the factors that affects the crude oil price. As we know, crude oil is a global commodity that is traded globally, but in US dollars. So any fluctuations in the exchange rate between US dollar and foreign currencies can affect the crude oil price.

I'm going to explain that in a very simple example. Let's assume there are two traders who trade crude oil futures contracts. So one is Trader A is in the United States and Trader B is in Europe. Trader A has $1,000, and Trader B has 1,000 euros.

So first, let's assume that the exchange rate between US dollar and euro is 1-to-1 so meaning that $1 is equivalent to 1 euro. And let's assume that crude oil price is $50 per barrel. OK, let's see what happens for Trader A.

Trader A has $1,000 and can buy 20 barrels of crude oil or can buy futures contract equivalent to 20 barrels of crude oil. So $1,000 divided by 50 leaves 20 barrels of crude oil.

Let's see what happens to the trader in Europe. So Trader B has 1,000 euros. The first thing that Trader B has to do is going to the exchange and convert the 1,000 euros to the equivalent dollar amount, which is $1,000. Then with that amount, Trader B can buy crude oil. So Trader B can also buy 20 barrels of crude oil.

So the total demand will be 20 from inside the United States and 20 internationally, assuming there only two traders. So there will be 40 barrels of crude oil demand, total demand.

OK, now let's assume the case that US dollar loses its value. So again, same traders, two traders, Trader A is located in the United States and has $1,000. Trader B is in Europe and has 1,000 euros.

And now let's assume US dollar has lost its value. Now $1 is equivalent to 0.8 euros. Or with 1 euro, you can get $1.25. And let's assume the crude oil price has stayed the same, $50 per barrel. And let's see what happens.

OK, trader A still has $1,000. Crude oil price is still $50 per barrel. So Trader A inside the United States can still get that 20 barrels of crude oil.

And let's see what happens to Trader B. Trader B has 1,000 euros. Trader B has to go and exchange that 1,000 euros to equivalent dollar. And as we can see, because dollar has lost its value, that 1,000 euros will be converted to $1,250 because, with 1 euros, Trader B will get $1.25. So Trader B has $1,250, which can buy five more contracts. So Trader B would end up buying 25 barrels of crude oil or futures contract equivalent to 25 barrels of crude oil.

So 20 barrels demand from Trader A inside the United States and 25 barrels of crude oil demand from Trader B outside the United States-- so total demand will be 20 plus 25, 45 barrels. So we can see the demand increase from 40 barrels to 45 barrels when the dollar has lost its value. So it means that demand has increased. So demand curve shifted to the left-hand side, which changes the market equilibrium price for crude oil. And it potentially increases the crude oil price.