Unit Operation of Oil Pool - Unit Operation in Foreign Fields

Oil companies operating in foreign countries have made increased use during 1930 of cooperative agreements in prospecting unproven territory and in developing proven territory. A considerable proportion of the existing foreign fields are held under single ownership and have been developed as units. The operating companies seek to maintain this condition by acquiring land in large blocks or by merging smaller concessions under unit operating agreements. Your committee has secured a number of reports on foreign non-competitive operations and a valuable formal paper which deals with the Golden Lane of Mexico.l 0. B. Knight has drawn some valuable comparisons concerning costs of development and ultimate production between a certain competitive area and another noncompetitive area along that strip of rich producing territory. After discussing details of production, numbers of wells and cost of drilling and production, he concludes that the 93,700,000 bbl. of competitive oil will have cost $0.193 per barrel as compared to 85,700,000 bbl. of noncompetitive oil at $0.059 per barrel. The saving of $0.134 per barrel amounts in round figures to $11,500,000, which is 21/2 times the total cost of developing the non-competitive block. The cost for drilling and development of the two areas of 3550 acres which Mr. Knight compares was $18,150,000 under competitive and $4,760,000 under noncompetitive conditions. The estimated ultimate production of the competitive 3550 acres is expected to reach 93,700,000 bbl., or 8,000,000 bbl. above the noncompetitive block. Under ordinary production methods it is to be expected that a noncompetitive area will yield less oil per unit area than will a similar competitive area, because of closer spacing and more rapid extraction in the latter case. The advantage of noncompetitive conditions, in this regard, is that the undivided ownership makes it possible to apply repressuring as a production method fairly early in the life of the field and thus, in the end, to vastly increase the yield. In the particular region described by Mr. Knight, repressuring is not thought to be a factor of