Oil and Gas Leasing – a brief

Oil and gas leases are legal documents between the owner of the mineral rights, known as the lessor and the producer, known as the lessee. Once the lessor and the lessee sign the lease it becomes a legal document and thereafter the oil and gas mineral rights are transferred to the lessee for the period of the lease. Oil and gas leases must lay down the bonus amount agreed upon, the period of lease and the amount of royalty to be paid by the lessee to the lessor once the production commences.

Here the period of lease is critical in that production must commence before the lease period runs out. Should that happen the mineral rights are returned to the lessor. It is in the interest of both the parties to ensure that production commences.