Revisiting Oil Wells

by Nelson Cole

The insurance journal is doing a three part series regarding the current state of hydraulic fracking. In this first article they describe how due to the improvements in fracking technology, companies are able to revisit previously fractured wells and reach further oil. However, the risks involved with wells that are completed using hydraulic fracturing are significantly higher and different than conventional wells.

As companies revisit these old wells it reminds us of the age and risks of these wells. Oil and gas wells do not have an infinite life span. A well can blowout at any phase of its life whether producing, shut-in, or plugged and abandoned wells. With older wells that stretch back to 1859, the casing and cementing deteriorate with time and the risk of a blowout significantly increases. Re-fracturing these wells with new technologies is similar to a kid playing with fire. Everything is fine until a blowout occurs and pollutes a whole community’s groundwater and air. We saw this happen in the Gulf of Mexico in 2010 and later Los Angeles in 2015. (Insurance Journal)

Again, the likelihood of a blowout increases with these older wells being revisited which create a problem with insurance cost. Companies look to dodge paying higher insurance cost but what is most important in this process is that companies should be pressed to ensure that the proper casing is applied to the older wells when fractured again. (Insurance Journal)

In previous post I have discussed how the people lose in terms of royalties as land is handed back and forth within companies. The people lose big when land is handed back and forth and companies are not pressed to ensure the highest quality casing is implemented as new companies reopen wells.

A well drilled in one policy period, where coverage for the well completion was paid for, may not be completed via fracking until several years later, and possibly with a different carrier. Fracking risks have evolved to the point where the idea of creating a separate insurance coverage for hydraulic fracking and separating it from drilling exposures has come up and must be applied. (Insurance Journal)

 

Insurance Journal

http://www.insurancejournal.com/magazines/features/2016/01/11/394051.htm

 

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