Guide to Geological Evaluation of Zones in Earning Wells for Lease Selection from Drilling Licences

Refer to the Petroleum and Natural Gas Drilling Licence Regulation for specific governing authority.

The conversion of petroleum and natural gas tenure in the form of a Drilling Licence into Lease form requires the drilling of “earning well(s)”. 

Total depth drilled determines lease geographical size, and the Lease will contain rights down to the base of the deepest geological zone contained in the Drilling Licence that is “evaluated” by the drilling of the earning well. 

The Drilling Licence is a form of tenure designed for hydrocarbon exploration and delineation by drilling.  Therefore, the requirement to evaluate zones is applied in a broad, exploratory sense. 

If an earning well drills into and finds significant or substantial new geological information about a zone, then that well is credited with evaluating that zone. 

It is not necessary to completely penetrate a zone in order to evaluate it.  For example, if a zone is drilled into and, through the recording of well logs, mud logs, chip samples and other well data, significant new information is obtained regarding the zone, then the zone is considered to be evaluated. 

Examples of such evaluation include the determination of the existence of a hydrocarbon-bearing reservoir, a wet reservoir, a tight reservoir or the definitive absence of a reservoir, or the sedimentalogical characterization of a zone in a new area. 

The existing state of exploration of a zone is an important factor:  if drilling takes place in a remote or wildcat exploratory area, or if little is known about the zone of interest, then smaller amounts of new information will be considered significant in the evaluation of the zone. 

Similarly, a zone known to have a great degree of local geological variability will require only a small amount of new significant drilling information in order to be considered evaluated. 

Conversely, a thick but geologically uniform zone will require a substantial penetration in order to be evaluated.