Defining Commercial Field (Oil and Gas): Legal Insights and Implications
Definition & Meaning
A commercial field in the oil and gas industry refers to an oil field that has been assessed and determined to be capable of generating sufficient net income to justify its development. This means that the potential revenue from extracting oil or gas exceeds the costs associated with the development and operation of the field. In contrast, a marginal field may not currently meet these financial thresholds but could become a commercial field if there are changes in technical or economic conditions that improve its viability.
Legal Use & context
The term "commercial field" is primarily used in the context of oil and gas law, which governs the exploration, extraction, and management of oil and gas resources. Legal professionals may encounter this term in various scenarios, including:
- Negotiating leases and contracts for exploration and production.
- Assessing the financial viability of oil and gas projects.
- Determining regulatory compliance for development activities.
Users can manage some aspects of these legal processes themselves using templates available through US Legal Forms, which are drafted by experienced attorneys.
Real-world examples
Here are a couple of examples of abatement:
Here are a couple of examples to illustrate the concept of commercial fields:
- Example 1: An oil field located in Texas has been evaluated and found to have sufficient reserves and favorable extraction costs. As a result, it is classified as a commercial field, and drilling operations commence.
- Example 2: A previously marginal field in North Dakota becomes commercial after advancements in extraction technology reduce costs, making it profitable to develop (hypothetical example).