# Exploration & Production (E&P) in Oil & Gas: Key Phases and Impact

![Exploration & Production](https://www.investopedia.com/thmb/YmApM1AUGrgm9Sbj2J-Y7apsBOY=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/Exploration--Production-resized-668cec75be5b4579abfe9fd30cb91695.jpg)

*— Matthew Collins / Investopedia*

## What Is Exploration & Production (E&P)?

Exploration & production (E&P) refers to an important part of the [oil and gas industry](https://www.investopedia.com/investing/oil-gas-industry-overview/) that focuses on finding and extracting oil and natural gas. It is part of the industry's upstream phase and includes searching for resources, building wells, extraction, and closing wells. E&P is crucial for keeping the energy supply flowing and plays a major role in the economy by providing fuel and supporting jobs in the energy sector.

### Key Takeaways

*   Exploration and Production (E&P) is the upstream segment of the oil and gas industry, focusing on locating and extracting raw materials.
*   E&P involves four main phases: search and exploration, well construction, extraction, and abandonment of wells.
*   During search and exploration, geologists use techniques like seismology to identify potential oil and gas reserves.
*   If a site is no longer productive, wells are plugged or sealed, and attempts are made to restore the environment.
*   The midstream and downstream phases follow E&P, involving transportation, refining, and distribution of oil and gas products.  
    

## Exploring the Upstream Process in E&P

E&P is known as the [upstream](https://www.investopedia.com/terms/u/upstream.asp) segment of the oil and gas industry, which consists of the search, exploration, drilling, and extraction phases. The E&P segment is the earliest portion of the oil and gas production process. Companies within this segment are primarily focused on locating and extracting commodities from the Earth.

The resource owners and operators of E&P work with a variety of contractors, such as engineering [procurement](https://www.investopedia.com/terms/p/procurement.asp) and construction (EPC) contractors, [joint venture](https://www.investopedia.com/terms/j/jointventure.asp) partners, and oil field service companies. In locating and extracting oil and gas, E&P companies also build infrastructure and collect massive amounts of analytical data.

## Critical Phases in E&P: From Exploration to Extraction

The process of oil and gas exploration and production typically consists of four stages, which are outlined below:

### Search and Exploration

The search and exploration stage involves the search for [hydrocarbons](https://www.investopedia.com/terms/h/hydrocarbon.asp), which are the primary components of petroleum and natural gas. Land surveys are performed to help identify the areas that are the most promising. The goal is to locate specific minerals underground, to [estimate the amount of oil and gas reserves](https://www.investopedia.com/terms/o/oil-initially-in-place.asp) before drilling. Geologists study rock formations and layers of sediment within the soil to identify if oil or natural gas is present.

The process can involve seismology, which uses substantial vibrations as a result of machinery or explosives to create seismic waves. How the seismic waves interact with a reservoir containing oil and gas helps to pinpoint the reservoir’s location. Once it has been determined that there appear to be reserves beneath the ground, the test drilling process can begin.

### Well Construction

After identifying potentially viable fields, a well is drilled to test the findings and determine whether there are enough reserves to be commercially viable for sale. The process involves making a hole by drilling or grinding through the rock beneath the surface. A steel pipe is inserted into the hole so that the drill can be inserted into the pipe, allowing for exploration at a deeper level.

Core samples are taken and [studied by geologists, engineers, and paleontologists](https://www.investopedia.com/articles/professionals/122915/4-degrees-most-oil-companies-are-looking.asp) to determine if there is the proper quality of [natural gas](https://www.investopedia.com/terms/n/natural-gas-etf.asp#:~:text=Natural%20gas%20is%20a%20commodity,plastics%20and%20other%20organic%20chemicals.) or [petroleum](https://www.investopedia.com/terms/p/petroleum.asp) in the underground reserve. If the process shows that there are both the quality and quantity needed to produce and sell commercially, the production of oil wells begins.

Engineers estimate how many wells are needed and the best extraction method. The estimated cost of the number of wells is determined. Then, they start building the platform, which may be on land or [offshore](https://www.investopedia.com/terms/o/offshore.asp). The necessary environmental protections are also implemented at this stage.

> **Fast Fact**
>
> There have been significant advances in drilling technologies over the years. Companies can drill horizontally, tapping into vertical wells to search for natural gas pockets, which can produce far more natural gas than a typical vertical well.

### Extraction

The oil and gas deposits are extracted from the wells. Sometimes, natural gas can be processed at the same site as the well. Usually, petroleum is extracted on-site, stored temporarily, and then shipped by pipeline to a [refinery](https://www.investopedia.com/terms/o/oil-refinery.asp).

### Abandonment of Wells

Once a site is no longer productive, meaning all reserves have been extracted and all opportunities have been exhausted, the wells are plugged or sealed. Efforts are made to restore the area to help the environment.

## Transitioning from Upstream to Midstream and Downstream

After extracting crude oil and natural gas reserves, the midstream production process starts. [Midstream](https://www.investopedia.com/terms/m/midstream.asp) companies focus on the storage and transportation of oil and natural gas through pipelines. They deliver the reserves to companies involved in the final stage of production, called [downstream](https://www.investopedia.com/terms/d/downstream.asp).

In the downstream process, refineries turn oil into products like gasoline. Finished products from crude oil and natural gas are then sent to distributors and retail outlets, like energy providers and gas stations.

## What Does E&P Stand for in Oil and Gas?

E&P is short for exploration and production, which is the early stage of energy production that consists of looking for oil and gas and then extracting it.

## What Is the Difference Between Exploration and Production?

Exploration is the process of examining places where abundant oil and natural gas resources potentially exist under the Earth’s surface. Once these places have been identified, production commences to collect and extract.

## What Are the 3 Stages of Oil and Gas?

The oil and gas industry is generally broken down into three segments: upstream, midstream, and downstream. The first phase is upstream, which is when companies initially explore and then start drilling and extracting oil and natural gas. It is then followed by midstream, which refers to the transportation of crude or refined petroleum products, and finally downstream, which is the final stage and consists of processing the oil into usable products and marketing them.  

## Is Exploration and Production (E&P) Upstream?

Yes, exploration and production (E&P) is considered part of the upstream phase, which is the initial part of the oil and gas process that consists of exploration, drilling, and extraction.

## The Bottom Line

E&P is a key part of the oil and gas industry, focusing on finding and extracting raw materials. It involves four main phases: search and exploration, well construction, extraction, and abandonment. It is part of the upstream segment, which sets the foundation for the midstream and downstream parts of the supply chain. The process is very collaborative, involving work with contractors, joint ventures, and oil field service companies. E&P is essential for providing the oil and gas that power the global economy and support modern life.

> **Article Sources**
>
> 1.  Library of Congress Research Guides. “[Oil and Gas Industry: A Research Guide: Upstream: Production and Exploration](https://guides.loc.gov/oil-and-gas-industry/upstream).”
>     
> 2.  U.S. Energy Information Administration. “[Horizontally Drilled Wells Dominate U.S. Tight Formation Production](https://www.eia.gov/todayinenergy/detail.php?id=39752).”
>     
> 3.  U.S. Energy Information Administration. “[Oil and Petroleum Products Explained: Refining Crude Oil](https://www.eia.gov/energyexplained/oil-and-petroleum-products/refining-crude-oil-the-refining-process.php).”
>     
> 4.  Library of Congress Research Guides. “[Oil and Gas Industry: A Research Guide: Introduction](https://guides.loc.gov/oil-and-gas-industry/introduction).”