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GonzOil,Inc. 5260 Fulton Drive, NW Canton, Ohio 44718 Phone: (330)497-5888 Fax: (330)497-8010 Email: GonzOil1@aol.com

 

 

 

 

 

 

 

 

 

 

 

Where are Oil and Gas Found?

Oil and natural gas have been discovered in most areas of the world. However, the oil and gas must be in sufficient quantity and reasonably accessible to be commercially viable. In Ohio, most of the oil and gas has been found in the eastern half of the state. At one time, Ohio was the largest producer of oil in the world. The most frequent production zone in Ohio is the Clinton Sandstone Formation.

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How are Oil and Gas Created?

The origins of oil and gas are believed to be the remains of organic material from millions of years ago that have been buried and subjected to intense heat and pressure. About 500 million years ago, a large inland sea covered most of Ohio. It was filled with marine vegetation and small marine creatures. As they died and fell to the ocean floor, they created a bed of organic material hundreds and thousands of feet thick in some areas.

Over eons of time the inland sea dried up and was filled with sand and gravel washed westward from the erosion of the Appalachian Mountains. These sands were later buried by mud and were compressed into sandstone—the Clinton Sandstone Formation.

The organic matter continued to decompose as it was subject to even greater pressure and heat. The lighter oils and gasses migrated into the pores of the overlying sandstone. In some areas, the sandstone is thick and porous; in other areas, it is thin and not very porous. The oil and gas was trapped in the sandstone by less porous shale formations that prevented the oil and gas from migrating further upward. In Ohio, these trapping rocks are often shale formations.

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How are Oil and Gas Produced?

Oil and gas is extracted by drilling oil and gas wells. The well bore provides a path for the oil and gas to escape the formation they are trapped in. Most oil and gas wells in Ohio are between 2,000’ and 5,000’ deep. The overlying rocks exert strong pressure on the producing formation; this pressure can be used to drive oil and gas up and into the surface production facilitates. If the natural pressure is not sufficient, oil and gas may be pumped from the ground.

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Will a Well Discover Oil or Gas?

Most wells produce both oil and natural gas as well as brine which is a by-product of oil and gas production. All three products come up the well bore and into a piece of equipment called a separator. The separator uses gravity to separate the heavier fluids (crude oil and brine) from the much lighter natural gas. The gas is moved to market by a pipeline to a nearby utility. The crude oil and brine flow together into a holding tank. Crude oil is lighter than brine and tends to float to the top. Again, gravity is used to separate crude oil from brine into separate tanks. Crude oil is sold to oil refineries, and brine is hauled away and re-injected into a state-authorized and regulated injection well.

The ratio between crude oil, natural gas and brine is unknown until actual production begins. However, most wells tend to produce similarly to other wells in the vicinity that were drilled to the same target formation. Just as gravity sorts oil, gas and brine in the surface facilities, it also does so to the oil, gas and brine that remain in the producing formations. Consequently, a well that drills into a high point of a formation may produce mostly gas, and a well drilled into a low point may encounter mostly brine. Oil lies somewhere in between. GonzOil employs professional geologists to identify and target well locations that are most likely to be strong producers of oil or gas.

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Who Owns the Oil and Gas?

Under English law, a property owner owns from the surface to the center of the earth; this is called “fee simple” title. However, landowners are allowed to sell or lease their property, including “mineral rights” below the surface of the earth. An oil and gas lease assigns ownership of the oil and gas underlying a property to an oil and gas producing company that is willing to invest in developing the oil and gas potential.

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Why Would a Property Owner Sign

The property owner wants to convert the oil and gas that may lie under their property into cash, but doesn’t have the expertise or the capital to drill their own well. By executing an oil and gas lease, the property owner enables an oil and gas company that does have the expertise and capital to explore for oil and gas. If the well is successful, the property owner will receive a royalty, typically a proportional share of one eighth (12.5%) of the revenue from the well and does not have to bear the costs of drilling or operating the well. In the event that the well is on the landowner’s property, then that property owner is usually entitled to free gas from the well.

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What Happens at the end of the Well?

A well can produce for up to thirty years. As long as the well can be operated profitably, it will continue to produce oil and/or gas. The current prices for oil and natural gas have a strong influence on well profitability.

Production of oil and gas reduces or depletes the amount of oil and gas remaining in the formation. Consequently, over time the amount of oil and/or gas diminishes. Eventually, the well cannot produce enough oil and gas to be profitable and becomes a candidate for plugging.

When a well is plugged, all surface equipment is removed and the site is restored. As much pipe as possible is removed from the well (pipe that is not cemented in place) and the well bore is cemented. A State Oil and Gas Inspector is involved when the actual plugging takes place. Usually, after the well is plugged the oil and gas lease expires.

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How Long Does a Well Last?

Good wells last a long time; bad wells do not. Clinton Sandstone wells have a typical life of 15 to 20 years. However, there are some Clinton wells in Ohio that are more than 50 years old. Because oil and gas production is a business, it continues as long as the well is profitable. After a well has been drilled and placed in production, profitability is mostly determined by the amount of oil and gas produced and the prices received for crude oil and natural gas. Today’s high prices have extended the life times of many old wells.

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How are Oil and Gas Regulated in Ohio?

The Ohio Department of Natural Resources, Division of Oil and Gas Resources Management, is the exclusive regulator of oil and gas in Ohio. They are headquartered in Columbus and maintain field offices throughout Ohio. The Division of Oil and Gas Resources Management approves drilling permits and establishes special permit conditions to assure the safe and efficient production of oil and gas. The Division has Oil and Gas Inspectors who monitor and approve the drilling of new wells, the operation of existing wells, and the plugging and abandonment of old wells. The Division also employs geologists and hydrologists to protect potable water from oil and gas activities.

The Division of Oil and Gas Resources Management has developed Best Practices for Oil and Gas Well Site Construction (23 pages). GonzOil believes and adheres to those best practices. In the event a company fails to follow those Best Practices, the Division of Oil and Gas Resources Management steps in to enforce Ohio’s rules and regulations. Most companies respond quickly when notified of a potential problem by an Ohio Oil and Gas Inspector. However, if necessary, the Division of Oil and Gas Resources Management has legal means to assure compliance.

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How Many Acres Does It Take for a Well?

The Ohio Department of Natural Resources, Division of Oil and Gas Resources Management, requires that wells deeper than 4,000 feet contain at least 40 acres of surface land. If the well will be greater than 2,000’ but less than 4,000’, Ohio requires at least 20 acres.

The drilling of a traditional well requires about 0.5 to 0.75 acres of land during drilling and completion of the well. Afterwards, the well will take about one-half acre of land.

Newer horizontal shale wells have a large footprint (4-6 acres), but less than 200 were drilled in Ohio in 2012.

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How Closely Spaced Are Wells Allowed to Be?

The minimum spacing of wells is determined by the Ohio Department of Natural Resources, Division of Oil and Gas Resources Management. Wells that target the same producing formation must be at least 1,000’ from each other if they are more than 4,000’ deep. If the wells are between 2,000’ and 4,000’ deep, they must be at least 600’ apart. However, most oil and gas companies believe in greater spacing than the state minimum. GonzOil tries to stay at least 1,750’ from existing gas wells and 1,250’ from existing oil wells.

The Division of Oil and Gas Resources Management also regulates the spacing of wells from the property lines around the well. The wellhead cannot be closer than 300’ from a property that is not part of the drilling unit acreage if the well is between 2,000’ and 4,000’ deep. In the case of a directional well, the wellhead must be at least 150' from a property not in the drilling unit. For wells deeper than 4,000’, the setback from the property line must be at least 500’. Surface equipment and wellheads must also be at least 50' from the traveled portion of any road or railroad.

The Division requires that wells and tank batteries be at least 100’ from any existing, inhabitated dwelling. However, once a well has been drilled, there is no requirement (other than common sense) that prohibits new construction from being built right next to a pre-existing well.

A well plat, signed by a registered surveyor, must be submitted with the drilling permit application.

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In 2010, Ohio wells produced nearly 4.7 million barrels of oil and more than 78 billion cubic feet of natural gas.
 
 
 
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