16 Jul How to Develop an Oilfield
How to Develop and Oil Field
Step 2 Capture.
Oil and gas is a treasure hunt. The first to put the stake in the ground and extract the oil gets the valuables. And much like sports teams “acquire rights” for a new teammate, oil and gas companies acquire the rights to drill, test, and (hopefully) produce valuable resources of oil and gas from landowners. Most companies that explore and produce oil and gas are “leasing” or borrowing the land that they use. After the well is finished producing. Operators seal off the well, remove the equipment from the oil field and return the land to its original state.
Landman is a job in the oil and gas industry where a person negotiates, researches, and completes land use and leasing deals. Land in the United States can be owned privately by citizens and there are many different types of ownership. The most commonly leased types of land:
- Fee acreage = Privately owned land by citizens negotiated privately between land owner and operator
- State acreage = land owned by the state and leased in public auctions
- Federal acreage = land owned by the federal government, managed by the Bureau of Land Management (BLM) and leased in public auctions
The negotiation of a lease involves giving owners a one-time payment (lease bonus) and a piece of the production, called a royalty, in exchange for a set of time (usually 3-5 years) to explore for oil. In most instances (exception: “continuous drilling clause”), as long as there are 1 well-producing hydrocarbons, then that 1 well will hold larger amounts of acreage and leases. This is called “held by production” or HBP. So the goal when exploring for petroleum-bearing reservoirs is to acquire the rights to land, drill a well, and hold the acreage while you plan your full development or master plan.
Remember, these companies are often taking big risks (money and time) to acquire and test for oil. In order to reduce the risk of drilling wells that do not payback, there is a systematic approach before deciding to drill many wells in an unknown area. And that’s step 3. Click to continue.
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