Legal Definitions - casinghead gas

Casinghead gas refers to natural gas that is dissolved within crude oil when it is extracted from an oil well. This gas emerges along with the oil at the wellhead (the top of the well, often referred to as the casinghead) and naturally separates from the liquid crude oil either immediately upon reaching the surface or very soon after.

• Example 1: Initial Production from a New Well

  An energy company, "Prairie Peak Petroleum," drills a new well in West Texas. When they begin pumping, a mixture of crude oil and gas flows to the surface. At the wellhead, as the pressure drops, the gas bubbles out of the liquid oil and is captured separately for processing or sale.

  This illustrates casinghead gas because it is natural gas that was dissolved in the crude oil underground, emerged at the "casinghead" (wellhead) along with the oil, and then separated from the oil upon production due to changes in pressure and temperature.

• Example 2: Processing at a Production Facility

  At a central processing facility that handles crude oil from several wells, the incoming oil stream passes through large separators. These separators are designed to remove any remaining dissolved gases that came out of solution as the oil traveled from the well to the facility. These gases are then collected, compressed, and sent to a gas processing plant.

  Here, the gas being separated from the crude oil, even if slightly downstream from the immediate wellhead, still originates as casinghead gas. It was dissolved in the crude oil when it was produced and separated shortly after, requiring further processing to fully isolate it from the liquid hydrocarbons.

• Example 3: Royalty Agreements and Measurement

  A rancher, Ms. Elena Rodriguez, owns land where an oil company operates. Her lease agreement specifies separate royalty payments for crude oil and for natural gas. When the company extracts oil from a well on her property, the casinghead gas that separates from the crude oil at the well site is measured and sold separately from the liquid crude. Ms. Rodriguez then receives a distinct royalty payment based on the volume of this gas.

  This demonstrates casinghead gas because it highlights its distinct nature from crude oil. Although produced together, it is a separate commodity (natural gas) that dissolves in the oil, separates at the wellhead, and is measured and valued independently for purposes like royalty calculations, even though it originates from the same well as the crude oil.