Legal Definitions - lifting costs

In the oil and gas industry, lifting costs refer to the ongoing expenses incurred to bring oil or natural gas to the surface and prepare it for removal from the production site. These costs begin after the initial drilling and well completion phases are finished, and they continue until the extracted hydrocarbons are ready to be transported off the property. Essentially, they cover the day-to-day operational expenses of getting the product out of the ground, including labor, energy, maintenance, on-site transportation, and certain taxes and royalties directly tied to the volume produced.

• Operating a Mature Oil Well: Imagine an energy company managing an oil well that has been producing for several years. The costs associated with running the pumpjack to continuously extract crude oil, the electricity required to power the on-site separation equipment that removes water and gas from the oil, the wages for the technicians who monitor the well's performance and perform routine maintenance, and the state's gross-production tax levied on each barrel of oil brought to the surface, all fall under lifting costs.
  This illustrates lifting costs because these are all expenses incurred post-drilling to actively extract and prepare the oil on the property before it leaves the site for refining or sale.
• Natural Gas Processing at the Wellhead: Consider a company operating a natural gas field. After the wells are drilled, the gas needs to be processed at the wellhead to remove impurities like water vapor and heavier hydrocarbons before it can enter a pipeline. The expenses for running the compressors that maintain pressure, the chemicals used in the gas dehydration units, the salaries of the engineers overseeing the on-site processing plant, and the portion of the royalty paid to the landowner based on the volume of gas produced, are all considered lifting costs.
  These are lifting costs because they are the operational expenses to make the natural gas marketable and ready for transport, occurring entirely on the production site after drilling is complete.
• Offshore Oil Platform Operations: Picture an offshore platform extracting crude oil from beneath the seabed. The daily costs include the fuel for the generators that power the platform's extraction machinery, the salaries for the crew members who operate the pumps and maintain the complex systems, the regular repairs to the subsea production equipment, and the depreciation of the specialized machinery used for continuous extraction.
  These expenses are lifting costs because they represent the continuous operational outlay to bring the oil to the surface and prepare it for offloading onto tankers or transfer via subsea pipelines, all occurring on the production facility.