06 drilling economics

8/9/2019 06 Drilling Economics

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Petroleum Engineering[Type text]

5.0. DRILLING ECONOMICS

To optimise drilling operations, we have to specify the yardstick by which performance ismeasured. The most relevant yardstick is cost per metre or foot drilled. verall cost must

be looked at since individual costs can be misleading. The rig operating rate represents

only a fraction of the overall cost, therefore a cheap rig day rate does not always coincidewith a cheap well.

!oles are drilled in the ground to provide information "in the form of cores or logs or testinformation#, to provide production of oil and gas or to provide an in$ection point into areservoir. These ob$ectives of the well should never be forgotten during the drillingoperation.To optimise drilling economics, we must achieve the ob$ectives of the well aseconomically as possible. To do this, we must understand the cost allocations and

proportions in drilling operations and use our technology to fine%tune these to reduceexpenditure without affecting safely or efficiency.

This chapter looks at these cost allocations, discusses exactly who is controlling whichcosts and how they can be minimised.

&'T 'PE&()(&*T(+'

rilling costs can be broken down into three groups-

)ixedailynit

)ixed costs

)ixed costs are those which are determined mainly by the nature of the well and includethe following-

/ellheads'ite preparation&asing, cement, tubing and packers

Effecting economies in fixed costs, therefore, is the direct responsibility of the rilling

0anager and the rilling Engineers, who planned the well. The rilling 'upervisor haslittle impact on these.

aily costs

aily costs are related to the time spent on the operation. n offshore rigs, they areusually the largest items of expenses and are listed below-

Payments to drilling contractors "rig time#Tool rentalPayment to specialist services

'alaries, wages etc)uel


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1ubricating oil, greaserilling consumables "rope, soap and dope#Transport of materials

The rilling 'upervisor on site, the rilling 0anager and rilling Engineers can all have

an effect on daily costs.

nit costs

This is the price of a unit or a commodity such as the price per tonne of barryte orbenetonite. This can usually be optimised in the tendering process, which is usually theresponsibility of the rilling 0anager. )urthermore, good site supervision can ensure thatconsumption is not excessive.

&'T 23E*4/+ ) 3(11(+5 PE3*T(+'

*t present, as the oil industry is coming out of recession, the costs for individual types ofrig is varying considerably. The table below illustrates the average cost comparisons

between rig types at time or writing-

Total daily drilling costs drilling costs

3ig type "67day#

1and rig "shallow# 89 :::1and rig "deep# ;9 :::

Platform rig 9: :::


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rental

)ishing tools = :.;

rill bits 8: ;.>

0ud ;;: .;

&ementing 8>: A.;

Electric logging A;: B.80/ 8 :.A

0ud logging 8B: A.:

&oring B: 8.8

irectional control ;: .9

'upply boats A>: >.:

'tandby boats 8B: A.:

!elicopters ;8; .:

iving73F 8A: ;.9

/eather forecasting :.8

0edical services A :.8Testing e@uipment 8:: 8.=

'torage7onshoretransport

;B :.9

&ontract staff ;9: .D

2ase office 8 :.D

9;B> 8::

iscussion

(n this cost breakdown, there are ;B groups. )our of these, 3ig Positioning, )ishingTools, /eather )orecasting and 0edical 'ervices, all cost less than 68: ::: for the well,so fine%tuning these services will provide us with minimal savings. ur attention mustturn to the remaining ;; large items where a 8: per cent saving on individual costs cansubstantially reduce overall well costs.

1isting the remaining groups in order of either fixed, daily or unit, we achieve a spread asfollows-

&ost in ' 6

)ixed item "thousands# C of well cost1ocation survey 8B: .:

3ig mob7demob ;>: 9.8

&asing 9>: 8:.=

/ellheads 8D: A.

rill bits 8: ;.>

&ementing 8>: A.;

Electric logging A;: B.8

&oring B: 8.8

Testing e@uipment 8:: 8.=

8=>: AD


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&ost in ' 6

aily item "thousands# C of well cost

3ig "9B days G ;9 :::# 8:: ;B.B

rilling e@uipment

rental

9: :.=

0ud logging 8B: A.:

irectional control ;: .9

'upply boats A>: >.:

'tandby boats 8B: A.:

!elicopters ;8; .:

iving73F 8A: ;.9

'torage onshoretransport

;B :.9

&ontract staff ;9: .D

2ase office 7! 8 :.D

0/ 8 :.A

aily item total A:9A 9D

)rom this figure and knowing that the well lasted B: days, we can calculate the averagedaily cost.

*verage daily cost H 6A:9A::: H 9: :::7day B:

&ost in ' 6nit (tem "thousands# C of well cost

0ud ;;: .;

nit item total ;;:

To summarise these groups, we find the following-

)ixed cost items 68 =>: :::aily cost items 6 A :9A :::nit cost items 6 ;;: :::

/hat this means in real terms is that saving a day on the well will save 87B: of 6 A :9A::: and not 87B: of the overall well cost of 9 ;B> :::. (t also means that an extra dayspent on tripping, directional correction, treating the mud, waiting on weather andmaking spurious trips will cost the operator a minimum of 6 9: :::.

*T!3('*T(+ )3 EIPE+(T3E "*)E#

The *)E is the tool that is used for predicting the cost of a proposed well. The accuracyof the *)E depends on the amount of available information used to construct it. *soperators, we need to know how much a well is going to cost if it is dry, tested or

completed. &onse@uently, *)Es should be broken down into sections to allow us to seeat a glance how the various well options compare financially. (n this section, we look at


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the component parts of *)Es for onshore and offshore wells. *t +orwell, we have astandardised 8::%point *)E for both onshore and offshore wells. This is probably overkillas in most wells there are probably only B: or so cost centres, but having the additionalcodes for special operations built into every well *)E makes it easier to carry out post%well assessment and cost comparisons between wells.

*)E components

2oth the onshore and offshore *)Es are broken down into the following sections-

preparationdrilling and abandonmenttestingcompletion

Preparation

This part of the *)E covers the costs incurred to the point at which the rig is brought onto location. )or onshore wells this would include site building and well engineering as themain cost centres. )or offshore wells, the maincost centres are site surveying andwellengineering. (ncluded in this section should also be all the costs re@uired to bring thelocation back to its original condition.

rilling and abandonment

This is the Jdry holeK drilling component of the well. (t assumes drilling to T, loggingand finding nothing of interest. The well is, therefore, proposed for abandonment and

costed accordingly.

Testing

This is the additional cost incurred by a testing programme. (t is only merely the testingcost charged by the testing company but must also include all the ongoing daily costsassociated with the rig such as-

rig day ratefuel oilsite personnel

office personneloffice overheads

&ompletion

This is the further additional cost incurred following testing once the decision tocomplete the well has been made. *s with testing, the cost centres are not only the costof completion e@uipment and services but also the costs of-

rig day ratefuel oil

extra casing string if runperforation


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site personneloffice personneloffice overheads.

Estimating costs

(f there are similar, recent wells in the area to be drilled, most costs can be estimatedfairly readily. (f, on the other hand, you are planning a well in a new area, then the task ismuch harder. 2y calling up the following service companies and asking for budgetaryfigures, the main cost centres can be addressed-

drilling contractorsmud loggerselectric logging companiesmud companiescementing companies

bit companiescasing companieswellhead companiestool rental companiescoring companies

0ost service companies will be pleased to provide figures for *)E budgets and talking tothem serves a secondary purpose of updating your knowledge of the demand for certainservices and any new deals or e@uipment that is available. (t also allows the servicecompany to express an interest in the work which will be put out to tender at a later date.

The Time epth 5raph created for the rilling Programme provides an estimate of thedays to be spent on the well. 2y costing in the charges for these days, the *)E begins totake form. (t is difficult to fix charges such as coring on an exploration well with thelimited knowledge available regarding formations to be drilled so some assumptions must

be made. The *)E could either include one ;: m core or several runs.

'imilarly for the testing programme and completion programme some assumptions mustbe made. (t is, therefore, good practice to list the assumptions which have been made as apostscript to the *)E. )or example, *)E assumes four days open hole testing, or *)Eassumes single A 87; inch !;' tubing completion with single permanent packer. *fter

estimating costs, a contingency factor should be built into the *)E. This can be in theform of a lump sum or as a percentage of well costs.

06 drilling economics

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