Glossary for oil and natural gas

The information provided here is explanatory. 

Where there is a conflict between this information and the Petroleum and Natural Gas Act or the Petroleum and Natural Gas Royalty and Freehold Production Tax Regulation, the Act and Regulation shall prevail.

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A

Administrator: The administrator is the person appointed at the Ministry of Energy, Mines and Low Carbon Innovation as the royalty administrator. The administrator establishes the method to determine producer prices for natural gas as well as administering the regulatory framework and policy for royalty administration.

B

Base royalty rate: Base royalty rate is the classification of gas that determines which formula is used to calculate the royalties for each well event. 

Base 5: Base 5 is a classification for new gas wells with a spud date on or after September 1, 2022. A flat 5 percent royalty rate is payable for the initial production period (8,760 production hours) following the spud date. Once the well has produced 8,760 production hours, it will revert to Base 9, 12 or 15. 

Base 9: Base 9 is a classification of non-conservation gas that is produced from wells spudded on Crown land after May 31, 1998, where oil and natural gas rights were issued after May 31, 1998 and which were completed within 60 months of the date that the rights were issued. Base 9 classification does not include revenue sharing gas or gas produced from freehold land.

Base 12: Base 12 is a classification of non-conservation gas that is produced from wells spudded on Crown land after May 31, 1998, unless they meet the criteria for Base 9 or Base 15. Base 12 classification does not include revenue sharing gas or gas produced from freehold land.

Base 15: Base 15 is a classification of non-conservation gas that is produced from wells spudded on Crown land or freehold land before June 1, 1998, or is revenue sharing gas.

Business Associate ID (BAID): This is an unique five-digit number that identifies a corporate entity. This may be a royalty payor, facility operator, gas plant operator, purchaser of oil, or transporter of gas or oil. The corporate entity will need a Business Associate ID when paying royalties or taxes to the Crown, or when providing information about royalties or taxes. 

C

Collector: The Collector is the person appointed at the Ministry of Finance as the royalty collector and oversees the reporting and collecting of oil and natural gas royalties and taxes.

Commingled production product: This product is made from two or more  zones in the same well bore. It is reported as one production volume and must be the same type of product. 

Completed well: A well that has its productive formation open and equipment installed to allow the well to produce oil or gas. 

Conservation gas: Conservation gas is natural gas produced from an oil well where the gas is being conserved or marketed, rather than flared or vented into the atmosphere. Conservation gas does not include concurrent gas.

Concurrent gas: Concurrent gas is natural gas produced from an oil well that is part of an approved concurrent production scheme under section 65 of the Drilling and Production Regulation per section 75 of the Energy Resource Activities Act.

Crown land: Crown land is land on which the surface rights are publicly owned, but the underlying oil and natural gas is owned and managed by the Province on behalf of B.C. citizens. Most of the land in B.C. is Crown land. 

Crown invoice: An invoice for the amount of royalty, tax, interest and penalty payable to the government.

Cubic metre: A volume of oil or natural gas measuring one metre by one metre by one metre at 101.325 kPa and 15° C. 

Custody transfer point: Custody transfer refers to the transactions involving transporting physical substance from one operator to another. Custody transfer point in fluid measurement is defined as a metering point (location) where fluid is being measured for sale from one party to another. When transferring a material and during custody transfer, accuracy is important to both the company delivering the material and the recipient. 

Custom processing fee: A fee for processing gas that is charged by processing plant owners to a party that does not own an interest in the facility, or whole throughput at the facility exceeds its percentage ownership in that facility. 

D

Deemed royalty: See Royalty for an unaccounted quantity

Development well: A well is classified as a development well if, at the time the permit is issued, the well is to be located in a spacing area that is in or connected to a designated oil or natural gas pool and the target formation is not a deeper geological formation than the designated oil or natural gas pool.

Discovery oil: Oil discovered in a new pool discovery well completed after June 30, 1974.

Discovery well: A well or portion of a well may be designated by the British Columbia Energy Regulator as a discovery well if it is the first well to demonstrate or prove the existence of a new oil or natural gas pool using data obtained from the well.

Disposition: The movement of product, such as the sale of delivery of product, flaring or venting of gas, or the disposal of water to pits. 

Direct operating costs: For the purpose of the Gas Cost Allowance (GCA), direct operating costs are expenses incurred during the year that are related specifically to operations and include an overhead allowance of 10 percent of total direct operating costs, but not actual overhead or indirect charges. 

E

Exempt well: A well in which production is exempt from assessment of Crown royalty for a limited period (months or periods). 

Exploration well: An exploration well may be an exploratory outpost well or an exploratory wildcat well.

Exploratory outpost well: A well is classified as an exploratory outpost well if it is to be located 7 km from an oil or natural gas pool at the time the permit was issued and it is not a development well.

Exploratory wildcat well: A well is classified as an exploratory wildcat well if, at the time the permit is issued, it is to be located more than 7km from an oil or natural gas pool or if the well has been designated as a discovery well.

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Facility: A facility is a system of vessels and equipment that accommodates the production, disposition or processing of petroleum and natural gas products.

Field: When an area has, or appears to have, one or more pools below the surface, the surface area is referred to as a field.

Field sales: Oil or raw gas that is sold by the producer for use in the field. 

Formation: A geological formation is a distinctive rock unit that can be classified and mapped. The formation must be distinctive enough that a geologic mapper can tell it apart from surrounding rock layers, and it must also be thick and extensive enough to plot on a map.

Freehold land: Freehold land is land where petroleum and natural gas rights are not owned by the Province.

Freehold oil: Freehold oil is oil produced from a Stream ID located on freehold land. Freehold oil is subject to a freehold production tax, which producers are responsible for reporting and paying.

Freehold gas: Freehold gas is gas produced from a Stream ID located on freehold land. Freehold gas is subject to a freehold production tax, which producers are responsible for reporting and paying. 

Freehold production tax: When oil, natural gas or natural gas by-products are produced from freehold land, the producer will pay Freehold Production Tax.

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Gas royalty rate: See Royalty Rate.

Gas royalty share: See Royalty Share.

Gas well event: A gas well event means all completions in a zone for a well with a primary product of natural gas. See the Petroleum and Natural Gas Royalty and Freehold Production Tax Regulation for a complete explanation.

Gathering system: This is a pipeline system that collects fluids and transports them to a processing system. 

Gigajoule: A GJ is a unit that measures energy. GJ are also a measure of how rich the gas product is. This information factors into the price of the product. 

Gross royalty: See Royalty (Gross).

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Heavy oil: Heavy oil is oil with a density of at least 890 kilograms per cubic meter.

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Incremental oil: This is oil that the administrator determines would not have been recovered without the following:

• A new pressure maintenance scheme
• Improved pressure maintenance scheme, or 
• Other enhanced recovery scheme methods

This does not include heavy oil. 

Infrastructure credits: The Infrastructure Royalty Credit program encourages new capital investment in oil and natural gas infrastructure. Oil and gas companies can apply to the Ministry of Energy, Mines and Low Carbon Innovation for a deduction to the royalties they would otherwise pay to the Province.

Injected gas: This is gas that has been introduced into a reservoir for the purpose of maintaining reservoir pressure, displacing liquids or for storage. 

Injection scheme: A strategy to inject volumes of product or other substance into a reservoir for pressure maintenance, storage, or for secondary/enhanced recovery purposes. 

In kind: The taking by an owner of their share of oil, natural gas or liquids for separate marketing or disposition, rather than permitting the share to be disposed of jointly with others. 

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Joule: A metric unit of energy or work, equivalent to 1 watt per second or .239 calories. 

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Levy: A fee that funds the British Columbia Energy Regulator, as well as industry-related research conducted by the BC Oil and Gas Research and Innovation Society.

Location: Location refers to the land described in a permit, licence or lease.

Low productivity well: When a well event produces an average daily natural gas production volume of less than 5000 cubic metres in a production month. The well producing the well event must not be part of a coalbed methane project. 

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Marketable gas: Marketable gas is natural gas that is available for sale for direct consumption as domestic, commercial or industrial fuel, or as industrial raw material, whether it occurs naturally or results from the processing of natural gas. Raw gas that is sold in the field falls within this definition.

Metering difference: This is the difference between volumes as determined by different meters measuring the same gas stream. This difference exists because gas volumes are not precisely determinable. 

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Natural gas: Natural gas is gas that is produced from an oil or gas well and is classified for royalty purposes as conservation gas, non-conservation gas or concurrent gas.

Natural gas by-product: Natural gas by-product is natural gas liquids, sulphur and substances other than marketable gas, which are recovered from raw natural gas that has been produced from a well event by processing or normal 2-phase field separation.

Netback price: The effective wellhead price to the producer of natural gas, based on the downstream market price for the natural gas less the charges for delivering the natural gas to market. 

New oil: New oil is mainly oil, other than oil that qualifies as heavy oil or third tier oil, that is produced from a pool that had no completed well on October 31, 1975. New oil is also incremental oil that does not qualify as third tier oil. See the royalty regulation for a complete description.

Non-conservation gas: Non-conservation gas is all natural gas not classified as conservation gas or concurrent gas. Non-conservation gas is gas produced from a gas well and makes up most natural gas production in B.C. There are three royalty categories of non-conservation gas: (base 15, base 12 and base 9), which depend on the date the title was acquired from the Province and the date the well was spudded and completed.

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Oil (heavy): See Heavy Oil.

Oil (new): See New Oil.

Oil (old): See Old Oil.

Oil (third tier): See Third Tier Oil.

Oil well event: An oil well event means all completions in a zone for a well with a primary product of oil.

Old oil: Old oil is oil produced from an oil well event other than new oil, third tier oil or heavy oil.

Operator: An operator is a person or company that is responsible for the drilling, completion, production and abandonment of a well, or for the construction, operation and reclamation of a production facility, processing plant, pipeline or storage facility.

Operator of a reporting facility: The person who is identified as the operator of a reporting facility in information provided to the Collector.

Owner: For a well, the term owner refers to a person entitled to produce and dispose of petroleum and natural gas from the well. 

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Pipeline: A pipeline in B.C. carries petroleum, natural gas or water for use in the drilling or production of petroleum or natural gas. It doesn't include pipelines used to distribute natural gas to a community or consumers.

Plant: A plant is a facility where natural gas is processed or reprocessed.

Plant operator: An operator of a gas processing or reprocessing plant. 

Pool: A pool means an underground reservoir containing an accumulation of oil, natural gas or both, that is separate from, or appears to be separate from, another such accumulation.

Posted minimum price: This is the minimum value for the reference price. The Ministry of Energy, Mines and Low Carbon Innovation calculates and publishes a posted minimum price each month for gas processing plant groups. 

Prod+X: The month the product is produced, plus X months. For example, Prod+2 means the production month plus two months.

Producer: A producer is a person or company that takes ownership of oil or natural gas production as it is produced. Producers are direct recipients of proceeds from the first sale of the oil or natural gas and are responsible for paying royalties on oil or natural gas production.

Producer price: The producer price is calculated by the Ministry of Energy, Mines and Low Carbon Innovation as an average monthly natural gas sales price for each producer at the inlet of each producing plant where you have production. 

Production month: Production month refers to a calendar month where any quantity of oil, natural gas or water is produced from a well event.

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Raw gas: Raw gas is natural gas as it first releases from a well. Raw gas may contain methane, other paraffinic hydrocarbons, nitrogen, carbon dioxide, hydrogen sulphide, helium or minor impurities that is recovered or is recoverable at a well from an underground reservoir and is gaseous at the conditions under which its volume is measured or estimated.

Reference price: The reference price is used to calculate gross royalties for marketable gas. It is the greater of the producer price and the posted minimum price, and is determined at each plant inlet where you have production. Both the producer price and the PMP are based on current market prices. For example, if your producer price at a plant is less than the PMP for that plant, the PMP will be used for the reference price. 

Reporting facility:  A building, structure, installation, equipment or appurtenance that is connected to or associated with the recovery, development, production, storage, handling, processing, treatment or disposal of oil, natural gas, natural gas by-products, water or other substances that are produced from or injected into a well and, for certainty, includes a battery, gathering system, natural gas processing plant, meter station, pipeline, injection facility, terminal and treating plant.

Residue gas: Residue gas is marketable gas that results from the processing of natural gas.

Revenue sharing gas: Revenue sharing gas is natural gas produced from a gas well event where royalties are to be shared under the terms of a revenue sharing agreement applicable to that gas. See the Petroleum and Natural Gas Royalty and Freehold Tax Production Regulation. 

Revenue sharing oil: Revenue sharing oil is oil produced from an oil well event where royalties are to be shared under the terms of a revenue sharing agreement applicable to that oil. See the Petroleum and Natural Gas Royalty and Freehold Tax Production Regulation. 

Royalty: In the case of resources, a royalty is a portion of the resulting resource profits earned by a producer and paid to the Province. Most land in B.C. is Crown land, for which the undersurface rights are owned and managed by the Province and the Province collects royalties from oil and natural gas production on those lands. Producers who develop resources on freehold land pay freehold production tax.

Royalty taxpayer: A producer of oil or gas production.

Royalty (gross): The Province's gross royalty is equal to the marketable gas or by-product royalty share multiplied by the reference price prior to the deduction of any allowances or the value of exempt volumes.

Royalty for an unaccounted quantity: The royalty payable to the government in respect of an unaccounted quantity of oil, marketable gas or natural gas by-products, the amount of which royalty is calculated under the regulations (also known as a deemed royalty).

Royalty rate: The marketable gas royalty rate is a ratio used in determining the Province’s royalty share and its valuation.  See section 6 of the royalty regulation for detailed formulas for royalty rates.

Royalty share: The royalty share is the share of production of oil, natural gas or natural gas by-products from Crown lands for which the Province has the right to receive compensation. The royalty share is equal to the sales volume multiplied by the royalty rate. The value of the royalty share is calculated by multiplying the royalty rate by the gas reference price or wellhead price.

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Sales line: A sales line is a pipeline that transports marketable gas products such as natural gas, natural gas liquids or oil to the marketplace for the purpose of being sold.

Select price: The select price is a price for natural gas established for each calendar year by order of the administrator. The select price is also used to determine when the reference price can be adjusted for inflation.

Spudding: Spudding means the very start of drilling on a new well. The spud date is the day when the drill bit penetrates the surface using a drilling rig capable of drilling the well to the authorized depth.

Stream ID: A stream ID is a well event or unit agreement. 

Storage facility: A storage facility is a storage system to move natural gas volumes into and out of storage reservoirs.

Sulphur: Sulphur is market grade elemental sulphur, which is obtained from processing natural gas that has been produced from a well event.

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Third tier oil: Third tier oil is mainly oil produced from a pool that had no completed well on June 1, 1998, with the exception of revenue sharing oil and heavy oil.  

Threshold price: The threshold price for a class of oil is established by order of the administrator under section 2 (10) of the Petroleum and Natural Gas Royalty and Freehold Production Regulation. This price is used in royalty calculations for heavy oil and third-tier oil. 

Throughput: Throughput is the volume of raw gas received at the inlet of each gas processing facility.

Tract: A tract is a parcel of land in a unitized operation to which production of petroleum is allocated in accordance with the terms of a unit agreement.

True vertical depth: True vertical depth means, for any point on the wellbore of a well, the distance between the wellbore point and the point directly above the wellbore point that is the same elevation as the kelly bushing used in drilling that well. The kelly is connected to the top most joint of the drill pipe.

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Unit agreement: A unit agreement is an agreement between the Province and all holders of locations in an area for unitized operation. A unit agreement specifies how production and costs of development and operations will be allocated to holders of locations.

Unitized operation: Unitized operation refers to management, development, production and conservation of oil and natural gas in an area by all owners of interests in an area.

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Vintage: The classification of oil as either old oil or new oil. 

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Weighted average royalty rate: The weighted average royalty rate is the average of all marketable gas and by-product royalty rates weighted in accordance with their sales values. It is equal to the combined gross royalties for all marketable natural gas and natural gas by-products, divided by the combined reference price values for those products.

Well event: A well event can be an oil well event or a gas well event.

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Zone: A zone is a stratum or strata designated by the Minister as a zone generally or for a designated area of a specific well.