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Petroleum is derived from organic material under conditions that were met only rarely in the Earth's long history and then only in a few places. Oil comes primarily from algal material, and gas comes from vegetal remains. Such organic debris settled to the floor of the lake or sea in which it lived, and in most cases was oxidized by bottom dwelling organisms or currents, but in certain stagnant environments has been preserved and buried beneath other sediments. On deeper burial, it was heated by the Earth's heat flow, and chemical reactions converted it into petroleum. Oil on very deep burial is cracked into gas. Once formed oil and gas migrate upwards through minute fractures and pores in the rocks, until they find a porous and permeable layer through which they can move. They then flow through this conduit until they are trapped in a fold, against a fault or where the conduit pinches out. Much is dissipated or held in the many constrictions encountered during its migration, so that only about one percent of what was formed is trapped in accumulations large enough to be exploited.
The world has now been very thoroughly explored so that nearly all of the oil provinces have been found. Oilfields are clustered together in discrete trends where the remarkable and very exceptional geological conditions needed for generation and entrapment were met. They are separated by huge barren tracts that are barren for reasons that are well understood. For obvious reasons, the more prolific trends were found first, as were the larger fields within them. Most of what remains to be found will come from ever smaller fields in mature areas.
Much of the world's oil was found long ago with fairly primitive technology. There have been considerable technological advances such as the semisubmersible rig that opened the offshore to routine drilling. Modern seismic surveys can map the oil zones with a very high resolution, and geochemistry can explain where and when the oil moved. These tools are sufficient to efficiently find and produce the world's endowment of conventional oil, as discussed below. Further technological advances can be expected and will be needed to find and develop ever smaller accumulations that have progressively less impact on world supply. This year's Buick is better than last year's model, but that was still good enough for most purposes. So there is no technological solution to the impending shortfall: it is not a technological problem.
Much of the confusion about the world's endowment of oil stems from a failure to distinguish these two categories. Almost all the oil produced so far can be classed as conventional as will the bulk of what will be produced over the next twenty years or so. But when that supply dwindles, attention will turn to what may be termed non-conventional oil made up of:
The important distinction is that the unfettered production of conventional oil rises rapidly to a peak and then declines exponentially; whereas the production of non-conventional oil rises only slowly to a long low plateau, before in turn declining. The resources of heavy oil and tar sands are considerable, but the constraint to production is cost and the sheer scale of the undertaking. Non-conventional production is unlikely to make an impact until the tail end of conventional depletion and then only in a high or very high price environment. It is no substitute for conventional oil as has fueled the Twentieth Century economy.
Oil occurs in the pore space of the reservoir rock where it is subject to capillary pressures. Production falls when the wells have to draw on oil farther and farther from the wellbore. Eventually a point is reached when no more can be produced. The percentage recoverable ranges from about 20 to 60% depending primarily on the gravity of the oil. Recovery factors depend on the amount of oil-in-place which is often not exactly known. It is often claimed that technology can improve recovery. In fact, the apparent improvements may reflect initial underestimate or understatement of the amount of oil-in-place rather than any technological breakthrough.