A Probabilistic Approach for Drilling Cost Engineering and Management

Abstract

Abstract One of the major challenges facing drilling operations engineering and management today is the prevention of costs and schedule overruns. The nature of drilling operations with the diversity of parties involved in the different tasks from well conception up to the completion, the more and more sophisticated technology used, the pressure of time, the increasing regulatory of safety and environment requirements, the inflating costs in addition to the big uncertainty of this activity make difficult meeting the financial and timing targets set for the premeditated financial resource allocation. The first objective of this paper is to provide the drilling manager with an efficient cost management and control tool that facilitates the management of the expenditures, and enables to take informed decision and corrective actions on the right time, by providing better understanding and awareness of the actual exposure to the cost overrun risks. Cost control techniques can be adapted to the well construction process by using the information gathered from the offset wells to mitigate the effect of the uncertainty of nature. Many studies have been made on this issue; they can be classified into deterministic and probabilistic approaches. For the latest, little work has been carried out and it is still not widely and comprehensively used in practice in spite of its powerfulness. The methodology used in this study consists, firstly, of analyzing data from offset wells to simulate and reproduce real life scenarios of possible cost outcomes based on Monte Carlo simulation combined with risk analysis to be applied in the planning phase of new wells, and secondly, of applying a real time control and continuous improvement processes in the execution phase. This paper illustrates the case study of Hassi-Messaoud oilfield in Algeria. This type of model facilitates the management tasks and save time and efforts, particularly when dealing with intensive drilling operations in major fields. Introduction Intensive drilling operations are carried out in today's oil and gas major fields, which require careful planning and precise implementation, especially as far as drilling costs are concerned that are critical to the overall economic performance. To achieve a high quality cost management, we need to answer the following questions: first, how to prevent cost overruns? How to assess uncertainty? How to manage costs for the aim of informed decisions and corrective actions? To which reference does a drilling team set a cost target? And how to calculate performance in terms of cost? To be able to face those difficulties the drilling manager needs an efficient tool that enables the control of expenditures and schedule in the frame of the requirements of quality and safety. This tool will help the drilling manager to: Know what have to be done (the estimation), know what have been done (progress), know what is left to be done (previsions), consider the possible cost overruns, control the expenses, in real time, and their projection at the end of the project, and finally, use the lessons learnt to improve the performance. First of all, the quality of planning is very important to achieve a successful cost management of the drilling project because it contains two keys to drill a cost effective well: minimizing problems and maximizing progress, therefore properly written drilling program leads to a cheaper well [1]. An important step in the planning process is the well cost estimation, which represents an integral part of the AFE [2] (authorization for expenditures) procedure that is mainly a tool for controlling expenditures. Therefore, the AFE should be written to ensure that just enough money has been approved to drill the well without being short of funds, or leaving unspent funds on the table [1], for the aim of an optimal financial resources allocation. Because uncertainty is ever present when dealing with nature, probabilistic approach is the suitable way to count for inherent risks in the process of well cost estimation and management [3]. The estimate enables to define the productivity team targets to be used for detailed control.