History of unitisation

Production was not regulated by demand or opportunities for rational exploitation. Anti-trust legislation also prevented producers from joining forces to exploit a reservoir jointly. This could be perceived as an illegal cartel.

The rule of capture meant that far more wells than necessary were drilled, wasting both financial and physical resources as well as causing pollution. In addition, maximum production meant that the natural forces which drove the oil to the surface became depleted too rapidly. Large volumes of crude remained in the reservoir, while the gas was either released directly to the air or flared.

Research was pursued during the First World War on the composition of petroleum reservoirs in order to find better methods for exploiting oil reserves. Crude supplies were too small to meet the increased market demand created by the fighting, and certain oil magnates and government representatives maintained that something had to be done to curb the waste. However, the industry showed little interest.

Demands for better utilisation of oil resources resurfaced in the 1920s, and the Federal Oil Conservation Board was established in 1924. Towards the end of the decade, awareness grew that gas dissolved in the crude was the most important natural driver for oil production. This meant that if the owners of a reservoir chose to develop and operate it as unit they would be able to benefit more from this natural force.

The term “unitisation” was coined to describe joint production of petroleum resources, and the world’s first agreement of this kind was signed in Texas in 1929. It demonstrated substantial cost savings on operations.

But small and independent oil producers fought hard to retain the rule of capture, and unitisation failed to make progress. The strong position of the small oil companies made it politically impossible to impose unitisation, and millions of barrels of oil have been lost. The desire for personal profit often runs counter to socio-economic interests.