Oil And Gas Lease
Definition - What does Oil And Gas Lease mean?
Oil And Gas Lease is an agreement between two parties to allow oil and gas exploration and a production organization (a Lessee) along with the crew and drilling equipment to access the property and minerals which a Lessor owns. An Oil And Gas Lease can also be defined as an area of land allotted to an Exploration and Production organization for drilling activities. The piece of land is usually spread in large acres.
Petropedia explains Oil And Gas Lease
In order to drill a well, the operator must have an approval or permit from the governing authority of the State or Country to drill the well. Any agreement signed between a Lessee and Lessor for oil and gas production from a lease is on a legal contractual terms. There’s a certain period of time for which a Lessee pays rentals and the oil and gas lease remains effective. This period is called the primary term. In case the drilling is delayed by the operator (Lessee), the lessee has to pay penalties for the time period defaulted as per the approval for permit to drill by the authorities. However, once the production of oil and gas starts, the lease remains effective till the abandonment of the well.