Vertical Well

What is a Vertical Well?

A vertical well is a type of borehole that is aimed at a target directly underneath it. Although it is aimed straight down at a reservoir of oil or gas, it does not include a completely vertical borehole. It is also different from other boreholes that are turned horizontally towards the extraction site at a designated point.

Vertical wells also differ from directional wells, such as horizontal wells, since directional boring is not used. Vertical drilling is not typically used in unconventional, tight oil and gas formations, like shale.

Shortcomings of Vertical Drilling

A vertical well can access only those reserves that are located directly beneath it. Due to this fact, making a large field productive requires the drilling of multiple vertical wells at different points on the surface of the formation. The process is extremely capital-intensive and requires a large surface area to function effectively.

On the other hand, a horizontal well can access the same amount of oil by being turned to run along the depth of the formation. The process is much simpler and more efficient. Efficiently extracting one reservoir with a single well generates huge cost savings in the long term and creates maximum returns on capital investments. It also drastically reduces the number of drill sites and derricks required, which minimizes surface level disruption.

With the depletion of conventional sources of oil and easy-to-tap reserves, vertical wells, as the sole method of oil and gas extraction, are becoming rare. However, even horizontal wells start with the drilling of a vertical well. They are extremely important in the exploration process.

Pilot holes and test holes are first drilled vertically so that engineers and scientists can examine the rock fragments at different layers. This is important, as it enables them to determine the locations where the richest reserves can be found and model the reservoir accordingly.

Case Study

In 2008, Djibouti, a strategically located country on the Horn of Africa’s northeast coast, planned to drill geothermal wells in its Lava Lake. The production plans included a thorough cost-benefit analysis of the drilling plans and the kind of survey tools and equipment needed. This is necessary because the financial viability of directional drilling must be calculated.

Detailed geological and geophysical analyses about whether or not new permits will be required are also part of the pre-feasibility test. The actual drilling process, however, is very different because it is next to impossible to precisely match the actual trajectory with the predetermined well path.

This is why an important aspect of the actual drilling process was monitoring the trajectory of the wells and simultaneously taking corrective actions. It requires reliable survey measurement tools to determine inclination and azimuth at different points along the well’s trajectory.

Additional Resources

CFI offers the Financial Modeling & Valuation Analyst (FMVA)™ certification program for those looking to take their careers to the next level. To keep learning and advancing your career, the following CFI resources will be helpful:

• Basic Material Sector
• Crude Oil Overview
• Oil and Gas Company Balance Sheets
• Guide to Commodity Trading
• Estimated Ultimate Recovery (EUR)
• See all valuation resources