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Explaining Exploration and Production Timelines (Onshore)
Oil and natural gas companies are in the business of supplying energy. Given the volatility oftoday’s marketplace, companies have every incentive to produce as much oil and gas aspossible today.Over the past five years, the industry has paid millions of dollars into the U.S. treasury to obtainfederal onshore leases. A lease is only a rental agreement with
no guarantee that the leased area contains any oil or natural gas
. In fact, most leases do not contain oil and gas incommercial quantities and are returned to the government. The bonus bids and rental fees paidfor these leases are not returned to the companiesThe risk a company takes when acquiring a lease is substantial, and exploration anddevelopment take significant time. In order to explore and develop a lease in anenvironmentally responsible way,
operators must take many steps
to address governmentalregulatory compliance requirements as well as public expectations.
. These steps includeobtaining the necessary permits so that the exploration phase can begin. This phase includesconducting seismic surveys, processing that information and developing a detailed geologicevaluation that identifies prospects for drilling; if a well is planned to be drilled, operators mustconduct environmental analyses under the National Environmental Policy Act (NEPA); obtaindrilling and rights of way permits; and a rig to drill the well. Should the well prove to beproductive; an operator must undertake additional drilling; building pipelines, gas plants, andother infrastructure; and finally producing the oil or natural gas. The entire process can take aslittle as a few years, and in some cases as much as almost ten years.At every step of the process, the operator is subject to administrative or legal challenges fromgroups that seek to block lease exploration and development. Protests of leases in the Rockieshave risen from 27% of all leases in 2001 to 81% in 2007. In some cases this may mean thatmany acres may sit idle while a company works to overcome these lease protests and acquiresufficient acreage in a particular area to commence drilling.In general, it can take:
As much as two years for pre-lease geological evaluation prior to nominating acreageduring a Bureau of Land Management (BLM) lease sale.
Six months to one year for BLM administration and execution of lease sales.
One to two years for additional geologic evaluation, seismic data acquisition andprocessing of data, leading to identification of drillable prospects.
One to two years for preparation of applications for permits to drill, which can includeenvironmental, wildlife, water resource, cultural/anthropological resource and siteengineering studies to support applications