Wednesday, March 27, 2013

Cycling Operations

I'm going to start today's post with a word for word restatement of the first sentence in the Cycling Operations section of Texas Law of Oil and Gas, Second Edition (by Ernest E. Smith and Jacqueline Lang Weaver):

From an operational standpoint cycling operations are somewhat similar to pressure maintenance and, like pressure maintenance, are typically undertaken early in the life of a reservoir.

Companies use cycling when we have reservoirs with both condensate ("wet gas") and  law-condensate gas ("dry gas") - note this is a very cursory overview of the difference between wet and dry gas.  For a better description, look here.  If the operator allows the internal pressure of a reservoir to decline too much, then the heavier hydrocarbons could liquefy, which would make them unrecoverable.  In order to help prevent this from happening, companies will produce the wet gas, take out the heavy hydrocarbons, and then re-inject the dry gas left over back into the reservoir to help maintain pressure, and push the remaining wet gas toward the wells which allows for a longer life of the reservoir. 

The authors note that a loss of title case for cycling operations is not as strong as that for pressure maintenance.  Chemically, dry gas is different than wet gas, so one can argue an earlier in time reduction to possession.  Additionally, the authors report that there is often some expectation that the dry gas will be produced at a later time (this would be part of why they participate in cycling operations). 

There is still a problem inherent in injecting dry gas into a reservoir with multiple operators with multiple producing wells. 

The authors cite Corzelius v. Harrell (Tex. 509, 186 S. W. 2d, 961) as a related, though not on point, case - where the courts and the parties appeared to assume that the rule of capture applied to reinjected dry gas.

That's the end of Chapter 1.  Next time, we'll move on to Chapter 2 - Types of Interests.

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