State of Current Research
The weight of evidence currently shows that petroleum is derived from ancient biomass. However, it still has to be established conclusively, which means that alternative theories like abiogenic petroleum can't be dismissed for now. The initial evidence was based on the isolation of molecules from petroleum that closely resemble known biomolecules (Figure).
Petroleum geologists agree that oil originates from to vast quantities of dead marine plankton or plant material that sank into the mud of shallow seas. Under the resulting anaerobic conditions, organic compounds remained in a reduced state where anaerobic bacteria converted the lipids (fats, oils and waxes) into a waxy substance called kerogen.
As the source rock was buried deeper, overburden pressure raised temperatures into the oil window, between 80 and 180 °C. Most of the organic compounds degraded into the straight-chain hydrocarbons that comprise most of petroleum. This process is called the generation kitchen. Once crude oil formed, it became very fluid and migrated upward through the rock strata. This process is called oil expulsion. Eventually it was either trapped in an oil reservoir or oil escaped to the surface and was biodegraded by soil bacteria.
Oil buried deeper entered the "gas window" of more than 160 °C and was converted into natural gas by thermal cracking. This gives the prediction that only unassociated gas and not oil will be found below a certain depth. At greater depths, even natural gas would be pyrolyzed.
A 2006 review article by Glasby presented arguments against the abiogenic origin of petroleum on a number of counts.
Read more about this topic: Abiogenic Petroleum Origin
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