Chapter 1 Upstream Oil and Gas Operations - Vocabulary Flashcards

Vocabulary flashcards covering key terms from the lecture notes on upstream oil and gas operations, ownership interests, drilling, completion, offshore operations, recovery, and production.

Upstream (oil and gas)

Activities including exploration, acquisition, drilling, development, and production; collectively called exploration and production (E&P).

Downstream

Refining, marketing, and distribution of processed oil and gas products.

Midstream

Shipping and storage of oil and gas away from the production site.

E&P activities

Abbreviation for exploration and production activities within upstream oil and gas operations.

Reg. S-X Rule 4-10

SEC rule governing upstream oil and gas financial accounting and reporting for public companies.

Oil and gas reserves (Rule 4-10 context)

Reportable quantities of extractable hydrocarbons from resources; allows reporting from nonconventional and conventional sources.

Nonconventional sources

Oil and gas resources from shale, oil sands, coal beds, and similar nontraditional reservoirs.

Conventional sources

Traditional oil and gas reservoirs with permeable rock and standard production methods.

Hydrocarbons

Compounds composed of hydrogen and carbon formed from organic material; basis of oil and gas.

Organic material

Historically deposited material that is transformed into hydrocarbons over time.

Sedimentary rock

Rock formed from compressed layers where organic material becomes hydrocarbons.

Migration

Movement of petroleum upward through rock pores toward the surface.

Trap

Impervious rock layer that prevents further movement of oil/gas, creating a reservoir.

Caprock

Impervious rock that helps trap hydrocarbons in a reservoir.

Porosity

Volume of pore space in rock where hydrocarbons can reside; higher porosity means more storage.

Permeability

Ability of fluids to flow between connected pore spaces; governs flow of hydrocarbons.

Hydraulic fracturing (fracking)

Process of pumping water, chemicals, and sand to fracture reservoir rock and enhance flow; sand keeps cracks open.

Fracking (fracing)

Informal term for hydraulic fracturing.

Proppant

Sand or similar material used to keep fractures open in fracturing.

Conventional operations

Oil/gas development from permeable reservoirs using standard recovery methods.

Unconventional operations

Production from shale plays, coalbed methane, tar sands, etc., using specialized techniques.

Mineral interests

Right to explore, develop, and produce minerals beneath a property and share in proceeds.

Mineral rights

Ownership of minerals beneath the surface, conveyed by deed.

Fee interest

Ownership of both surface and mineral rights.

Surface owner

Owner of the surface; may use surface in legal ways.

Royalty interest (RI)

Nonworking interest; receives a portion of minerals or gross revenue, free of exploration/development/operating costs.

Working interest (WI)

Interest created by lease; bears 100% of exploration, development, and production costs; receives remaining revenue after royalties.

Undivided interest

Multiple WI owners share the same type of interest proportional to ownership.

Divided interest

Specific parties own specific acreage/minerals; interests are not shared proportionally.

Overriding Royalty Interest (ORI)

Nonworking interest carved from WI; receives a stated percentage of WI revenue; does not bear costs.

Production Payment Interest (PPI)

Nonworking interest limited to a specified amount/time; may revert if limits reached; may be paid in oil, gas, or money.

Net Profits Interest (NPI)

Nonworking interest based on net profits from the property; may be carved out or retained.

Carved-out ORI

An ORI created by carving out from a WI.

Carved-out PPI

A PPI created by carving out from a WI.

Joint Working Interest

WI owned by two or more parties who operate the property together; one party is the operator.

Pooling

Combining undrilled tracts to form a drilling unit for efficiency and risk sharing.

Unitization

Combining larger property units (field/reservoir) for enhanced oil and gas recovery.

Pooled or Unitized Working Interest

WI arrangement where multiple owners operate a combined unit.

Landman

Individual who searches for and secures mineral leases.

Lease bonus

Initial payment to mineral rights owner for exploration, drilling, and production rights.

Royalty provision

Lease clause granting a specified portion of production or revenue to the royalty owner.

Minimum royalty

Guaranteed minimum payment to the lessor regardless of production.

Primary term

Maximum period for a lessee to begin drilling or production.

Delay rentals

Annual payments to extend the lease term and delay drilling.

Paid-up lease

Lease paid in full at signing, including bonus and delay rentals.

Shut-in payments

Payments when a well is capable of production but is temporarily not producing.

Option payment

Payment to obtain a preleasing option for a future lease.

Right to assign

Rights to transfer interests in whole or in part without the other party’s approval.

Free use of resources

Operator’s right to use produced oil/gas on the lease for operations without charge.

Pooling provisions

Lease terms that combine small tracts into a single drilling unit.

Offset clause

Requires drilling an offset well to prevent drainage from neighboring leases.

Spud date

Date when the rotary drilling bit first touches the ground.

Mud

Drilling fluid circulated in the well to carry cuttings and lubricate the bit.

Mousehole

Early joint of drill pipe added as the hole is deepened.

Tripping in/out

In: lowering pipe into the hole; Out: removing pipe due to wear or damage.

Stand

Three joints of drill pipe assembled as a unit.

Derrick/Mast

Support structure for the drilling rig.

Casing

Steel pipe cemented into the wellbore to stabilize the well.

Production casing

Casing installed to enable production from the well.

Tubing

Steel pipe inside the well through which oil/gas is produced.

Perforate

Charges set to create holes in casing to connect formation fluids to the well.

Christmas tree

Valves and hardware at the wellhead controlling production.

Production facilities

Equipment such as separators, heater-treaters, tanks, and flow lines.

Acidizing

Chemical stimulation by injecting acid to dissolve buildup in the well.

Stimulation (abandonment-related)

Activities to plug and abandon a well, including cementing the wellbore.

Multiple completion

A well capable of producing from more than one zone.

Offshore drilling

Drilling from mobile rigs, jack-up platforms, barges, semisubmersibles, submersibles, or fixed platforms.

Mobile rig

A transportable offshore drilling unit used to drill wells.

Jack-up rig

A mobile offshore platform supported by legs that rest on the sea floor.

Submersible/semisubmersible

Floating offshore rigs stabilized by ballast or pontoons.

Fixed platform

Permanent offshore drilling structures built on steel or concrete.

Primary recovery

Natural reservoir drive or pumping to move oil/gas to the well.

Secondary recovery

Artificial drive (e.g., waterflood) to replace natural drive.

Tertiary recovery

Enhanced oil/gas recovery using chemicals, gas, or heat to modify fluids.

BS&W

Basic Sediment and Water; impurities in produced fluids.

Separators

Equipment to separate oil, gas, and water.

Heater-treaters

Equipment to treat produced liquids and remove BS&W.

Stock tanks

Storage tanks for crude oil prior to sale.

Gas settlement statement

Record of gas production and sale transactions.

Run ticket

Document recording the amount of oil transferred from storage tanks.

US EIA

U.S. Energy Information Administration; agency tracking energy data.

Energy independence

U.S. objective to reduce reliance on foreign energy through domestic production.

Spacing and density rules

Regulatory limits on the number and arrangement of wells in a reservoir.

Permit application

Application to a government agency detailing well location, depth, etc.