Oil and gas jargon - making it clear
19/01/2015
The oil and gas industry is truly global, with those who work in the sector frequently tasked with monitoring developments across a multitude of levels across several different timezones, and the role is made exponentially more difficult due to communication barriers.
While communicating with someone in a different language will always present challenges, the most testing element can often be translating the vast wealth of jargon that exists within the sector and ensuring that instructions and information passed to someone on the other side of the world are not misinterpreted in an industry where time equals money.
Often, colloquialisms can stand in the way of proper understanding, particularly in electronic correspondence such as email where tone of voice fails to fully convey a message, but some terms in particular crop up more often than not and are worth knowing and understanding:
Scout tickets
Effectively a written report of wells drilling in an area, which contains all relevant information that can be found out by the oil scout; namely the operator, location, lease, drilling contractor, depth of well, formations encountered, and results of drillstem tests. There are various scouts in operation, ranging from those who operate incognito to gather information, to those who estimate the cost and length of potential setbacks.
Blind pool
This comprises the money allocated to a drilling fund that is held by the fund managers until likely prospects for drilling are found. The principle reason for its existence is the notion that, with ready money, fund managers can act quickly when attractive opportunities for investment arise.
Gravity
API gravity is the most widely used indicator of crude oil's worth to the producer, and determines the price that a producer receives for the oil, with those that are less dense (ie. of higher API gravity) being the most valuable, and the price schedule based on the premise that the lighter oil contains higher percentages of more valuable products such as petrol.
Basket price
A common yet confusing term, which refers predominantly to the average price of crude oil on the world market. It combines the price of oil from several key markets, which would vary significantly if viewed independently due to their differing gravity, sulphur content and sweetness. As such, the basket price provides a more general average value which can then be benchmarked against crude from other nations.
Squeezing
The term for this technique belies its sensitive nature, which involves sealing off a section of a well bore where a leak or incursion of water or gas has occured. This is subsequently forced to the bottom of the casing and up the annular space between the casing and the wall of the borehole to seal off a formation or plug a leak in the casing; something that can be extremely costly, if not identified early.
Turnkey arrangement
In principle, a contract in which an operator or drilling contractor agrees to furnish all labour and materials required to drill a well to a specific depth or stage of completion for a set amount. The operator or contractor assumes all of the responsibility and risks involved in completing the operation, thereby affecting liability.
Working interest
In contrast to a turnkey arrangement, a working interest is generally shared and covers the cost of development and operation of an oil and gas property. This can include sharing the responsibility of expenses relating to drilling completion or operating a property, according to working or operating mineral interest in any tract or parcel of land. In this instance, working interests do not refer to rights to overriding royalties and production payments, as they are not burdened with the responsibility to share expenses of drilling, completing or operating a property. Similarly, working interests do not extend to contract rights to extract or share in oil and gas, or in the profits from extraction, without liability to share in the costs of production.
Well logging
Despite being a term used in several industries, including sailing, in the oil and gas sector it references the collection, recording and storage of details such as surface formation, and the nature and extent of the various downhole rock layers. It additionally covers records of cuttings, as well as core analysis drillstem tests and electric, acoustic, and radioactivity logs.
When a simple mistake can result in significant project downtime and millions of dollars lost, being able to differentiate between and decrypt jargon could prove to be invaluable in correspondence in the oil and gas industry, and break down some of the most common barriers affecting those working within it.
