Engineer

Drilling

Drilling costs depend on multiple variable that vary due to economic and drilling conditions. Below, Table 1, list the variables that affect drilling costs.

Table 1. Drilling Cost Variables

 Set up

 Rig rental rates

 Materials costs

 Drilling rental equipment  Drilling performance

 Services

 Total drill depth

Even though the drilling phase of well development is not the cost driver, it does include processes that can be optimized to improve overall costs. Figure 1 shows the budget breakdown for the drilling phase of a typical Eagle Ford well. As you can see from the breakdown, the both "Services and Rental Equipment" and "Rig Days" account for most of the costs.

Figure 1. Drilling Costs Breakdown

Rig days account for most of the costs. This was calculated by using 35 days as the average drilling period and $20,000 per day as the average cost per day to run the rig.

Another factor total depth. According to EOG Resources, while spud to total depth (TD) has increased for them, EOG has been able to relatively maintain or lower their drilling days (Figure 2). This shows that innovative drilling technologies have allowed operators to improve their spud to TD times.

Figure 2. EOG Spud to TD and Drilling Depth Over Time

The second highest cost shown in Figure 1 is the services and rental equipment. Based on interviews with industry Sales and Product Line Engineers, there seems to be a significant amount of variation drilling tools rental costs. Although data was with withheld due to its proprietary nature, it was mentioned during the interviews that the rental prices depended on current economic conditions (in the oil/gas industry), negotiations, historical customer/supplier relationship, and quantity. Furthermore, a Sales Engineer mentioned that the variation in rental prices for drill tool can vary as much as ±20%.

Based on the discussion above, both rig days and equipment costs can significantly be reduced if innovative tools can be rented/purchased at negotiated prices. For example, for horizontal drilling when an Agitator drilling tool is used, ROP is increased by X% by reducing friction. Additionally, wells in Haynesville have seen a 67% increase in ROP using a PowerDrive X5 rotary steerable system. Obviously, there is a balancing act between increased costs for using innovative technology and decreased spud to the TD time, but overall proper use of technology and negotiating can drive both rig days