Though Jed Clampett (the original “Beverly Hillbilly”) struck oil with an errant rifle shot, the rest of us have to seek black gold at the end of a drill bit. Whether you’re drilling for oil in Indiana or Texas, the process of drilling an oil well will prove complex, risky and expensive. The key to oil exploration is that while the risks are great, so are the rewards.
1. Develop a prospective drill site, a location at which the geology is favorable for accumulation of oil in amounts large enough to pay for the drilling of the well within a reasonable time. If you have no expertise in petroleum geology, professionals in the field sell these “prospects” for a cut of any profits.
2. Gather funds to drill the well. A ballpark cost figure for a well 2,000- to 3,000-foot deep (average depth for Indiana) is $100,000 to drill and install production equipment, according to the U.S. Department of Energy. Unless you plan to pay from your pocket, you will be expected to make presentations seeking funds from banks, venture capital companies or private individuals.
3. Obtain permission from the landowner(s) or the party holding mineral rights to the proposed site and adjacent properties. This permission is a contract in the form of a long-term lease (often five years) for a specified fee and annual rental plus royalties, a percentage of the profits from any produced hyrdocarbons. You may need the assistance of a lawyer or professional land agent in locating mineral rights holders and negotiating lease terms.
4. Create a well plan that meets state and national regulations and details the objectives of the proposed well. A background in petroleum engineering is useful for this task, or a professional petroleum engineer can be contracted to draw up the plans.
5. Obtain an official permit to drill a well at the proposed location. In order to obtain the permit, you must post a surety bond with the Indiana Department of Natural Resources to cover liability.
6. Contract with a drilling company to drill the well. The contractor will subcontract other required tasks such as surveying the proposed site, site preparation, drilling, and either installation of production equipment (if an oil well) or plugging (if a dry hole — a non-productive well).