Pima Arizona Amendment to Oil and Gas Lease to Add Shut-In Provision For Oil Wells
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FAQ
The shut-in clause specifies the conditions under which a well can be temporarily stopped from producing oil or gas. This clause protects the lessee’s interests during periods of market downturns or operational issues, preserving the lease's viability. Including a shut-in clause, such as in the Pima Arizona Amendment to Oil and Gas Lease to Add Shut-In Provision For Oil Wells, is essential for mitigating risks.
HOUSTON (Bloomberg) -- Shutting an oil well in 2020 is relatively easy, and can even be done with a few taps on an iPhone in some cases. Figuring out which to shut, and for how long, is the hard part.
1. n. Well Testing A well with a valve closed to halt production. Wells are often closed in for a period of time to allow stabilization prior to beginning a drawdown-buildup test sequence.
The temporary shutting in of wells is the one thing that oil companies are trying to avoid at all costs. That's because restarting production is expensive and wells are not guaranteed to return to their flow rate.
In times of a low natural gas prices and reduced drilling, Lease Amendments, Modifications and Ratifications may become common. Gas companies may attempt to revive or restore a expired lease by presenting the royalty owner with a Lease Modification and Amendment.
in clause (or shutin royalty clause) traditionally allows the lessee to maintain the lease by making shutin payments on a well capable of producing oil or gas in paying quantities where the oil or gas cannot be marketed, whether due to a lack of pipeline connection or otherwise.
(a) (1) Any lease of oil or natural gas rights or any other conveyance of any kind separating such rights from the freehold estate of land shall expire at the end of ten (10) years from the date executed, unless, at the end of such ten (10) years, natural gas or oil is being produced from such land for commercial
Essentially, the shut-in royalty provision allows a lessee to temporarily cease production (i.e., shut-in a well) and pay a shut-in royalty to the lessor in place of the royalty on production that is not occurring during the shut-in period.
An oil or gas lease is a legal document where a landowner grants an individual or company the right to extract oil or gas from beneath the landowner's property. Courts generally find leases to be legally binding, so it is very important that you understand all the terms of a lease before you sign it.
Definition of 'shut in a well' The company had to shut in a well that began producing water in order to prevent contamination of the dry oil from other wells when production was commingled. To shut in a well is to close off a well so that it stops producing.
