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Drilling Costs Estimation for Hydrocarbon Wells

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Worldwide drilling activities are significantly raised by the oil industry due to the increased global demand of hydrocarbon. The addition of new and sophisticated equipment, tools, and technologies in drilling a well are adding more costs in terms of new technology and equipment. In contrast, the reduction of drilling time due to the addition of those facilities has significantly reduced the drilling costs. As a result, there is a cost analysis dilemma faced by the drilling industry. In addition, shale gas wells are drilled using drilling technology very similar to that used in the drilling of conventional hydrocarbon wells. This causes the drill bit to wear out which significantly reduces the net penetration rate with the longer trip time. This scenario causes new challenges for the estimation of shale drilling cost in general. The overall cost estimation and analysis creates new challenges and responsibilities for the industry people. Moreover, cost effective drilling is one of the focal points for the industry toward a successful and sustainable drilling because by definition, sustainability covers the parameter, cost. The lack of proper training in handling financial sustainability has caused tremendous frustration in the current energy management sector. While everyone seems to have a solution, it is increasingly becoming clear that these options are not moving our drilling environment to any sustainable state. This article evaluates current and historical drilling and completion costs of oil and gas wells. As a starting point, the general cost analysis concepts are discussed in detail to have a strong foundation on the drilling cost and time estimation. Field data are used to show the cost trends for various depths in calculating drilling cost and drilling time estimation. Also outlined is the significance of Authorization for Expenditure (AFE) in terms of variations of oil and gas prices, costs, and availability of major well components and services at particular locations. The new addition of some features in cost estimation will help in understanding the overall cost estimation. This article will enhance understanding of drilling cost analysis and will provide a guideline in preparing AFE.
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Document Type: Research Article

Publication date: 01 October 2015

This article was made available online on 17 July 2015 as a Fast Track article with title: "Drilling Costs Estimation for Hydrocarbon Wells".

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