Legal Definitions - lifting costs

Definition: Lifting costs refer to the expenses incurred in the production of oil and gas after drilling is complete but before the oil and gas is removed from the property. These costs include:

• Transportation costs
• Labor costs
• Costs of supervision
• Supplies
• Costs of operating the pumps
• Electricity
• Repairs
• Depreciation
• Certain royalties payable to the lessor
• Gross-production taxes
• Other incidental expenses

For example, if a company drills an oil well and begins producing oil, they will incur lifting costs to keep the well operating. These costs can include paying workers to operate the pumps, buying supplies like oil and filters, and paying for electricity to power the pumps.

Another example of lifting costs is transportation costs. Once the oil is produced, it needs to be transported to a refinery or other location for processing. The cost of transporting the oil is considered a lifting cost.

Overall, lifting costs are the expenses that oil and gas companies incur to produce and transport oil and gas before it is sold. These costs can add up quickly and impact the profitability of a project.