Lease Line Well Agreements

CAIRO UNIVERSITY, FACULTY OF ENGINEERING

4th Year of Petroleum Engineering

Reservoir Simulation PET 4010

Presented to:
Dr. Helmy Sayyoh
presented by:
Ahmed Mohamed Shaaban Hassan

October 17, 2022

 Lease Line Well Agreements

What happens when two different oil companies have two adjacent
lands but are shared in the same reservoir? How should they act?
And how will they produce oil and develop the field?

The answer of these questions is “LEASE LINE WELL

AGREEMENT”. So, what is lease line agreement? lease line
agreement is a production sharing agreement where the allocation is
agreed upon based on a formula. We have different types of
agreements like production sharing agreement and pooling
agreement.

Production Sharing Agreement is an agreement between the

lessee and lessor as to how production will be shared among leases
crossed by a production sharing well. Most (but not all) production
sharing agreements provide for allocation based on the percentage
of the “productive lateral” crossing each lease. The productive
lateral is measured from the first to last “take point” in a horizontal
well. A take point is a perforation in the well – a hole in the well’s
casing – through which production flows from the formation into
the well.
 A pooling agreement, production is almost always allocated
among the tracts included in the unit based on each tract’s
percentage of the total acres in the unit. Participation in the pool
does not depend on the location of the well. In a production sharing
agreement, production is generally allocated based on lateral length,
and only those tracts crossed by the wellbore are allocated a share
of production from the well.

One of the most famous fields is Al-Khafji Field Development,

Saudi-Kuwaiti Neutral Zone.

References

[1] Maribel Aguilera, “Understanding Lease Line Well Agreements”, kirksimas website, Dec 1, 2019.

https://kirksimas.com/understanding-lease-line-well-agreements/

[2] John McFarland, “Production Sharing Agreements”, Oil and Gas Layer Blog, FEBRUARY 20, 2018.
https://www.oilandgaslawyerblog.com/production-sharing-agreements/

[3] NS Energy, “Al-Khafji Field Development, Saudi-Kuwaiti Neutral Zone”, NS Energy website.
https://www.nsenergybusiness.com/projects/khafji-field-saudi-kuwaiti-neutral-zone/