Drilling Costs

Abstract

Abstract Drilling costs in offshore U.K. waters are very high, and subject to large variations. To gain an insight into the major elements of total well costs a hypothetical exploration well is constructed. This well is assumed to be drilled from a contractor rig to a depth of 10,000 feet, in 500 feet of water located 100 miles from the nearest supply base. The proportion of each operation to total well cost is given. A time breakdown estimated from experience during 1974 is presented for this well. From the combination of costs, and times, average daily rates are generated. Reference is then made to actual drilling costs experienced since January, 1973 during which time 24 wells have been drilling by Shell Expro. The major influences upon well costs are identified, with tentative trends predicted for future drilling costs. Choice of type of rig and typical contract conditions are reviewed together with the methods and major areas in which a reduction of drilling costs are sought. In conclusion, the likely impact of inflation during 1975 is illustrated by reference to the hypothetical well. Introduction The cost of drilling a well in U.K. waters, particularly the Northern North Sea, is a voyage into the unknown. Factors affecting the eventual cost exhibit only one common characteristic, multiplication rather than addition. Basic costs, such as rig hire, or transport, are high. The weather conditions encountered dictate high capital costs for equipment designed for this environment. Even given the latest equipment, weather downtime still introduces a large variation in the time required for an operation and hence the cost. An illustration of the magnitude of this problem is given by the fact that during the winter months the maximum wave heights can exceed 30 feet, the approximate operating limit for many rigs, for 30% of the time. If contractor rigs are used, current rig hire rates can be higher than $40,000 per day. Back-up costs, for materials and per day. Back-up costs, for materials and transport etc. can exceed $25,000. Hence drilling offshore U.K. is an expensive business. Realisation of the extent of these costs, and the relationship between the various costs aids any attempt at cost reduction.