Oil

[Stewy]

(03-05-2022, 01:54 PM)GMDino Wrote: I was reading yesterday that many of the permits that have been allowed are not be used.  I'm sure there is a myriad of reasons for that.

Also saw a chart saying we aren't even close to the highest prices adjusted for inflation.

Most companies want optionality.  The permitting process can take weeks to months depending on the type of well (exploration (long time) vs. Production (short time)).  

Also the longer you rent a drilling rig the bigger discount you get from the rig company.  So a company would prefer to have multiple wells to drill on the same rig contract for cost savings and synergies with the rig crew (the more of the same type of well and geology a rig crew drills, the more efficient they are and drill faster).

Also a company will permit multiple sites on the surface for several reasons.  
Safety and Environmental Concerns
#1 - Safety:  If something happens with the well or the rig and the current wellbore or surface location needs to be plugged and abandoned, then instead of having to submit a brand new drill permit and wait months and waste a rig contract, they can just skid over to one of the other approved drill sites and try again immediately.
#2 - Environmental:  Drilling in the US onshore and offshore is highly regulated to protect land owners, the rig crews and the environment.  However, even with all our preparations, permits and environmental impact documents, we still drill into the Earth and get surprises.  There can be shallow water flows from unknown aquifers or super charged (can explain this if anyone really wants to know) known aquifers, which damage the well, but more importantly needs to be cemented to protect the aquifer and then the rig moved to hopefully not encounter the same problem.

Finally, because permitting takes so long for offshore deep water wells (>800 feet water depth), companies may submit for drilling permits before the prospect is fully mature.  However, if something happens during prospect evaluation and the company no longer wants to drill it, the permits do not go away.  So a company could submit 2 - 4 - 8 permits and never drill a well.  This happens all the time in the Deep Water Gulf of Mexico.

I hope this explains the issue.  

/salute