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Know What Happens After a Oil and Gas Lease Agreement

Once both the parties, say the owner of the land and the oil company which owned the mineral rights of the so called property are in agreement with each other then there is no rule which states that the production should take place immediately. It is the interest of the company which can start production at any point of time between the lease period. Now let us see the further process if the company decides to start drilling.

Whenever the company wants to start the production on your surface, they will propose a drill site, notify you and also offer for the damages related to the surface use. Once they start drilling the whole procedure will vary from a short span of 10 to a very long period of 90 days. At first they will drill a well which includes procedures such as perforating, hydraulic fracturing, installing production equipment and so on.

After performing all these procedures a well is constructed to drill the oil. The oil and gas are produced from reservoirs. In fact the quantity of oil produced during the initial stages is much low when compared to the later stages. Three types of drive mechanics are used to drill hydro carbons from the reservoirs. They are the water drive, depletion drive and the solution drive.

Finally the produced mineral will be marketed and sold along with the working interest owner’s portion. The quality of the hydrocarbons produced directly impacts the value of the mineral. When it comes to natural gas MMBTU content and the amount of impurities have the most impact on the value of the gas.

According to the law the produced oil and gas is measured before leaving the well. The royalty share of the land lord will be calculated based on this measurement. Proper product measurement is quite necessary to measure the exact quantity of the oil or gas, so that the land lord will not be cheated.

Updated: December 5, 2011 — 9:22 am

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