Estimated quantities of crude oil, natural gas, and natural gas liquids that geological and engineering data demonstrate with certainty to be commercially recoverable, from a given date forward, from known reservoirs, and under current economic conditions, operating methods, and government regulations. Proved reserves indicate there is at least a 90% probability or “reasonable certainty” that the reserves will be producing in the future.
2P reserves (proved + probable)
Probable reserves indicate there is at least a 50% probability or “more likely than not” chance that the reserves will be producing in the future.
3P reserves (proved + probable + possible)
Possible reserves indicate there is at least a 10 % probability or “less likely than probable” chance that the reserves will be producing.
A chemical used to remove impurities from natural gas in order to make the natural gas suitable for pipeline transport.
American Petroleum Institute (API)
National trade association that represents all aspects of America’s oil and natural gas industry.
Efficient, low-cost hydro, nuclear or coal –fired generating plants that generally run around the clock, serving the minimum load requirements of a region.
Base gas (or cushion gas)
The volume of gas that is needed as permanent inventory in a storage reservoir (i.e., aquifer, depleted natural gas or oil field, and/or salt cavern) to maintain adequate pressure and deliverability rates throughout the withdrawal season.
The difference between the Henry Hub spot price and the corresponding cash spot price for natural gas in a given location. Often relates to factors like product quality, location and takeaway capacity.
A market condition in which future commodity prices are lower than spot prices. A backwardated market usually occurs when demand exceeds supply.
A liquid compound that is mixed with petroleum products to improve the petroleum’s characteristics. For example, blendstocks are mixed with motor gasoline to increase the gasoline’s octane or oxygen content.
Bureau of Land Management
Approves permits for companies to produce oil and gas resources on Federal and Indian lands.
British Thermal Unit (Btu)
A measure of the amount of energy required to raise the temperature of one pound of water by one degree Fahrenheit. 1 mmbtu = 1,000,000 btu.
Regulation that places a cap on the amount of greenhouse gas emissions allowable from certain sources (i.e. power plants). Cap for each year is set as a reduction from total emissions of previous year until targeted overall reduction is reached. Allowances (credits) for emissions equal to the cap are auctioned to companies, who can then transfer/trade these credits amongst themselves.
Capital Expenditures. Funds used by a company to acquire or upgrade assets such as property, buildings or equipment with the purpose of creating future benefits.
Compound Annual Growth Rate. Year-over-year growth rate of an investment over a specified period of time.
The ratio of the actual electrical energy produced by a generating unit divided by the potential output over a given period of time.
A fee paid to a generator to ensure the availability of that facility for a given period of time, generally expressed as $/kW-month or $/kW-year. Separate from and incremental to an Energy payment.
Methane found in coal seams.
Combined Cycle Gas Turbine (CCGT)
A power plant that, while generating electricity via a gas turbine, uses waste heat to make steam to generate additional electricity via a steam turbine. Enhances the efficiency of the plant.
Cooling Degree Days (CDD)
A measure used to assess weather’s impact on natural gas usage. Each degree (°F) by which the average temperature rises above 65°F represents one CDD (i.e. a day with average temperature of 80°F would have 15 CDDs).
Uses surplus steam produced during the power generating process to supply a customer with steam for use in that customer’s operations.
Natural gas is compressed to a higher pressure to facilitate delivery of gas from one point to another.
A market condition in which future commodity prices are greater than spot prices. The higher future price is often due to the cost associated with storing and insuring the underlying commodity.
Storage process in which the same quantity of natural gas is injected into and withdrawn from storage within a certain period of time.
The difference between the cost of coal in generating electricity and the market price of electricity.
The amount of natural gas that can be delivered (withdrawn) from a storage facility on a daily basis (this also known as the deliverability rate, withdrawal rate, or withdrawal capacity). Deliverability is usually expressed in terms of millions of cubic feet per day (MMcf/day) or dekatherms per day. In general, the deliverability rate it is at its highest when the reservoir is most full and declines as working gas is withdrawn.
A well drilled into a known producing formation in a previously discovered area.
The use of crude oil derivatives to hedge natural gas liquids (NGL) exposure.
Department of Energy (DOE)
Department of the United States government responsible for energy policy and nuclear safety.
An increase in the number of available drilling locations as a result of a regulatory commission order.
The refining and marketing sectors of the energy industry. It is also associated with the sale of products after they are refined or processed.
A well found to be incapable of producing either oil or gas in sufficient quantities to justify completion as an oil or gas well.
A generating unit that can produce electricity using two or more input fuels; most often natural gas and fuel oil.
Economic (or Mineral) Interest
The rights that a company will seek to explore, develop, produce, and share in proceeds from the sale of any minerals that might exist beneath the property (unless it already holds that right).
Energy Information Administration (EIA)
Within the U.S. Department of Energy. Provides policy-neutral data, forecasts, and analyses to promote sound policy making, efficient markets, and public understanding regarding energy.
A regulatory “right to pollute”; generally a certificate that allows the holder to emit one ton of a controlled pollutant.
The revenue earned by a generator for the actual production of a MWh of power; can be incremental to a Capacity payment.
US Environmental Protection Agency
Leads the Nation’s environmental science, research, education and assessment efforts. The mission of the Environmental Protection Agency is to protect human health and the environment.
A well drilled into a previously untested geologic prospect to determine the presence of gas or oil.
Finding and Development Cost. Incurred when a company purchases, researches, and develops properties in an effort to establish commodity reserves.
Federal Energy Regulatory Commission (FERC)
An independent agency that regulates the interstate transmission of electricity, natural gas, and oil. The FERC also reviews proposals to build liquefied natural gas terminals and interstate natural gas pipelines, as well as licensing hydropower projects.
Under a fee-based arrangement, the processor receives a fee for processing. The producer retains ownership of both the dry gas and the NGLs.
The amount of time that a generating facility is unavailable to produce power due to an unexpected mechanical problem, expressed as a percentage of the total potential generation.
A process employed in the production of natural gas that typically involves the pumping of water (at very high pressures) to create an extensive crack in the rock formation. The crack in the rock exposes an increased surface area that allows a greater amount of natural gas to be produced.
The process that involves the separation of the NGLs into discrete NGL purity products (i.e., ethane, propane, normal butane, iso-butane, and natural gasoline).
A measure of profitability for processing plants. It’s the difference between the sales price of natural gas liquids (the processing output) and the cost of natural gas (the processing input).
The maximum output, commonly expressed in megawatts (MW), that generating equipment can supply.
Heating Degree Days (HDD)
A measure used to assess weather’s impact on natural gas usage. Each degree (°F) by which the average temperature falls below 65°F represents one HDD (i.e. a day with average temperature of 45°F would have 20 HDDs).
A measure of the amount of fuel required to produce a unit of power (for example, 10mmbtu of natural gas per megawatt hour of electricity).
An organic compound made of carbon and hydrogen atoms used as sources of energy, including natural gas, coal, and crude oil.
Independent Power Producer (IPP)
Produces and sells power to wholesale markets. IPPs are unregulated, so they are not guaranteed a return on capital like utilities.
Independent System Operator (ISO)
Organization formed at the direction or recommendation of the FERC that coordinates, controls, and monitors the operation of the electrical power system, usually within a single state, but sometimes encompassing multiple states.
Injection capacity (or rate)
The amount of gas that can be injected into a storage facility on a daily basis. As with deliverability, injection capacity is usually expressed in MMcf/day or dekatherms/day. The injection capacity of a storage facility is also variable, and is dependent on factors comparable to those that determine deliverability. In contrast to the deliverability rate, the injection rate is at its lowest when the reservoir is most full and increases as working gas is withdrawn.
The period of time (i.e., April 1 to October 31) during which producers and pipelines inject natural gas into storage for use during the winter months.
A pipeline that transports product across state lines. Interstate pipelines are regulated by the FERC.
In a keep-whole arrangement, the processor retains title to the NGLs produced from the natural gas stream to sell at market prices. By extracting the NGLs, the volume and BTU content of the dry gas is reduced. This is referred to as “shrinkage.” The processor must then replace the BTUs that it extracts from the natural gas stream (via the extraction of NGLs) with equivalent BTUs of natural gas. A holder of a keep-whole contract would be long NGL prices and short natural gas prices.
The process that changes natural gas from a gaseous state to a liquid state.
Liquefied Natural Gas (LNG)
Natural gas that is liquefied by reducing the temperature to -260°F. Usually used to supplement traditional natural gas supplies during periods of peak demand.
Liquid petroleum gas (LPG)
Created (as a by-product) during the refining of crude oil or from natural gas production. LPGs are typically a mixed form of propane and butane.
Local distribution company (LDC)
A company that obtains the major portion of its revenues from the operations of a retail distribution system for the delivery of gas for consumption by residential customers.
Involves the installation of additional pipeline next to an existing pipeline to increase the system’s capacity.
Lease Operating Expense (LOE)
Cost of maintaining and operating property and equipment on a producing oil and gas lease.
Market price of power stated in terms of gas price. For example, a $70/MWh power price, given a $ 7/mmbtu gas price has a market heat rate of 10,000 btu/kWh.
Also known as natural gas. It is the most commonly found hydrocarbon gas.
Gathering, treating, processing, transportation, or storage of a product after it is produced from the wellhead, but before it is distributed to the end use market for consumption.
Natural gas liquids (NGLs)
NGLs are extracted from the raw natural gas stream into a liquid mix (consisting of ethane, propane, butane, iso-butane, and natural gasoline). The NGLs are then typically transported via pipelines to fractionation facilities.
The removal of a generating unit from service to perform maintenance or repair work.
The temporary storage of natural gas for a pipeline customer. Pipeline customers may park natural gas to avoid selling the gas at a low price.
A power plant that runs only in times of short supply or high demand (normally during peak demand), when prices are high.
Percent of proceeds or liquids
In a percentage of proceeds (POP) arrangement, the processor gathers and processes the natural gas and then sells the residue gas and produced NGLs at market prices. The processor receives a percent of the resulting dry gas and/or NGLs. Under percent of liquids (POL) contracts, the processor receives a percentage of the NGLs only. Holders of POP or POL contracts are effectively long on natural gas or NGL prices.
Natural gas that has impurities removed. Pipeline quality gas is typically 95% methane.
Power purchase agreement (PPA)
A long-term contract between an electricity generator and a purchaser of energy or capacity.
The separation of raw natural gas into “pipeline quality” gas and natural gas liquids.
A measure of the decline in production from crude oil and natural gas reserves.
Producer Price Index (PPI) adjustment
FERC has allowed interstate natural gas and oil pipelines to increase the (maximum) rates charged to shippers based on the use of an index system. The index system is based on the Producer Price Index for finished goods plus 2.65%. Companies are allowed to increase their rates on an annual basis on July 1. The current index is valid for a five-year period that began on July 1, 2011, and extends through July 1, 2016.
Proved Developed Reserves (PD)
The portion of proved reserves which can be expected to be recovered through existing wells with existing equipment and operating methods.
Proved developed producing reserves (PDPs)
Reserves that can be recovered via existing wells and through the use of existing equipment and operations.
Proved Undeveloped Reserves (PUD)
The portion of proved reserves which can be expected to be recovered from new wells on undrilled, proved acreage or from existing wells where a relatively major expenditure is required for completion.
PV-10 (standardized measure)
The after tax present value of estimated future cash flow of proved reserves. The calculation is based on current commodity prices and is discounted at 10%.
Public Utility Commission (PUC)
A regulatory body in each state that governs public utilities within its jurisdiction, such as electricity, gas, and oil utilities.
The completion of an existing wellbore (i.e., had been previously completed) for production.
Refined petroleum products
Crude oil refineries process and refine oil into refined petroleum products. These products are primarily used as fuels by consumers (gasoline, diesel, jet fuel, kerosene, and heating oil).
The process that changes natural gas from a liquid state to a gaseous state.
Regional Greenhouse Gas Initiative
A regional carbon emission reduction scheme in ten north eastern states.
The amount of available plant reserve capacity above the system’s peak electricity requirements.
Reserves-to-Production ratio (R/P)
Measures years of supply (lifetime of oil/gas reserves) by dividing the remaining recoverable reserves at year-end by actual annual production volumes.
The natural gas that remains after processing and treating.
A type of payment received based on either a percentage of sales revenue or a fixed price per unit sold. For example, a partnership may lease out its coal reserves to operators for the right to mine the partnership’s coal reserves in exchange for royalty payments.
Process of injecting water, gas, etc., into a formation in order to produce additional oil/gas otherwise unobtainable by initial recovery efforts.
A form of sedimentary rock that contains crude oil or natural gas.
A measure of profitability for power plants. It’s the difference between the sales price of power (per megawatt hour) and the cost of fuel to produce it.
The production of oil and natural gas from the wellhead (also known as exploration and production).
Under this type of agreement, the buyer is obligated to pay for a product (i.e., natural gas, NGLs, crude oil, etc.) regardless of whether the buyer takes delivery of the product.
The amount of natural gas or NGLs transported through a pipeline system.
The volume of storage in the underground facility at a particular time.
Total gas storage capacity
The maximum volume of gas that can be stored in an underground storage facility based on the physical characteristics of the reservoir, installed equipment, and operating procedures at the site.
Natural gas gathered with impurities higher than what is allowed by pipeline quality standards is treated with liquid chemicals (i.e., amine) to remove the impurities. The natural gas is treated at a separate facility before being processed.
The hole created by a drill bit.
The equipment at the surface of a crude oil or natural gas well used to control the pressure of the well. The wellhead is also the point at which natural gas or crude oil emerges from the ground to the surface.
The period of time (i.e., November 1 to March 1) in which natural gas supplies are withdrawn from storage for use during the heating season.
Total gas storage capacity minus base gas.
A company’s equity interest in a project before reduction for royalties or production share owed to others under applicable fiscal terms.
The volume of natural gas in a storage reservoir above the level of base gas that can be extracted during the normal operation of the storage facility.
A major operation on a completed well to restore, maintain, or improve the well’s production (i.e. deepening the well).