The Purpose of an Oil Field -- The Bakken, North Dakota, USA

Elsewhere they are talking about the purpose of designating an area as a specifically named oil field. The question being asked is what benefits does having a lease inside a designated field have over a lease in an area that is not designated as a field..

A field designation from my point of view is simply an administrative exercise, but a very important one. When oil is discovered in a geographic area, and there is a great likelihood of more oil being produced from that geographic area, a producer will ask the agency with jurisdiction to designate it a named field (or to include the new geographic area in a neighboring existing field).

A designated field has rules by which producers must comply, for example, but not limited to specific well location, spacing, production, and flaring. If a well is drilled outside a field, generally called a "wildcat," the producer must ask for rules, such as spacing, for that individual well. As long as a field is not designated, the producer would have to come back to the regulator to request rules for each new well.

If the well is inside a designated field, the producer knows the spacing and other rules, such as where the well can be located.

On a completely different note, but part of the same discussion: if an geographic area has been designated a field, it has been de-risked. That is, folks know there is recoverable oil there. It is easier for a producer to raise capital to drill a well in a de-risked area than it is to drill a wildcat.

Bottom line: if one has a lease, but no well, inside a designated field, it is more likely that a well will be drilled there than if it was a wildcat. But, if the well is already there, or about to be placed there, it probably makes little or no difference to the average mineral rights owner whether that area has been designated a field.