7. drilling economics

8/16/2019 7. Drilling Economics

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JAMES A. JAMES A.CRAIGCRAIG


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TABLE OF CONTENTS TABLE OF CONTENTS

Drilling Cost Prediction

Cost Specifcation

Authorization or Ependiture !AFE" Drilling Opti#ization

Drilling Opti#ization Techni$ues

Drilling Cost E$uation Brea%e&en Calculations

Decision 'a%ing


3/47

Drilling cost predictions are #ade so thatsound econo#ic decision can (e #ade)

Predictions depend pri#aril* on+ Location , go&erns the cost o preparing

-ellsite. #o&ing rig to location. and dail*operating cost)

Depth , go&erns the lithologies to (epenetrated. thus the ti#e re$uired toco#plete the -ell)


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C / cost. 0

a. ( / constants depending on -ell location

D / depth. t

( )expC a bD=

Drilling costs tendto increaseeponentiall* -ithdepth)


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ln lnC a D

b b= −


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COST SPECIFICATIONCOST SPECIFICATION

Drilling costs can (e (ro%en do-n into1 groups+ Fied

Dail*

2nit


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Fied CostsFied Costs

Fied costs are deter#ined (* thenature o the -ell. such as+ 3ellheads

Site preparation

Casing. ce#ent. tu(ing and pac%ers


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Dail* CostsDail* Costs

Dail* costs are related to the ti#e spent on theoperation)

O4shore rigs ha&e high epenses -hich listed (elo-)

Dail* costs include+ Pa*#ents to drilling contractors !rig ti#e"

Tool rental

Pa*#ent to specialist ser&ices

Salaries. -ages etc

Fuel Lu(ricating oil. grease

Drilling consu#a(les !rope. soap and dope"

Transport o #aterials


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2nit Costs2nit Costs

This is the price o a unit o aco##odit* such as the price per tonneo (arite or (entonite)

This can (e opti#ized in the tenderingprocess. -hich is Drilling 'anagerresponsi(ilit*)

5ood site super&ision can ensure thatconsu#ption is not ecessi&e)


10/47

The operators. should %no- ho- #ucha -ell is going to cost i it is dr*. testedor co#pleted)

Conse$uentl*. AFEs should (e (ro%endo-n into sections)

AFE #a%es it easier to carr* out post6

-ell assess#ent and cost6co#parisons(et-een -ells)


11/47

AFEs are (ro%en do-n into the ollo-ing

sections+ Preparation

Drilling and a(andon#ent Testing

Co#pletion

AFE Co#ponentsAFE Co#ponents


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PreparationPreparation

This part o the AFE co&ers the costsincurred to the point at -hich the rig is

(rought on to location) For onshore -ells this -ould include site

(uilding and -ell engineering as the #ain

cost) For o4shore -ells. the #ain costs are site

sur&e*ing and -ell engineering)


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Drilling and AbandonmentDrilling and Abandonment

This is the 7dr* hole8 drilling co#ponent othe -ell)

9t assu#es drilling reached the TD.logging carried out and no economic fnding)

The -ell is. thereore. proposed ora(andon#ent and appropriate cost isallocated to it)


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TestingTesting 9t is onl* the testing cost charged (* the

testing co#pan*

9t #ust also include all the ongoing dail*costs associated -ith the rig such as+ rig da* rate uel oil site personnel o:ce personnel o:ce o&erheads


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CompletionCompletion

9t is not onl* the cost o co#pletione$uip#ent and ser&ices (ut also the costs o+

rig da* rate

uel oil

etra casing string i run

peroration

site personnel o:ce personnel

o:ce o&erheads


16/47

Costs can (e esti#ated airl* orde&elop#ent -ells

Costing or eplorator* -ells is a #uchharder tas%)

The ser&ice co#panies -ill gi&e theoperating co#panies the #ain costs+ drilling contractors #ud loggers

electric logging co#panies #ud co#panies ce#enting co#panies (it co#panies casing co#panies -ellhead co#panies tool rental co#panies coring co#panies


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The Time Depth Graph created or theDrilling Progra##e pro&ides an esti#ateo the da*s to (e spent on the -ell)

B* costing in the charges or these da*s.the AFE (egins to ta%e or#) So#e assu#ptions #ust (e #ade. e)g)+

9t is di:cult to f charges such as coring on

an eploration -ell -ith the li#ited%no-ledge a&aila(le regarding or#ations to(e drilled) The AFE could either include one;


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A contingenc* actor should (e appliedto the AFE)

This can (e in the or# o+ A lu#p su#. or

A percentage o -ell costs)


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DRIING OPTIMI!ATIONDRIING OPTIMI!ATION

Drilling opti#ization is #ini#izing thecost o reaching the -ell8s o(=ecti&e-hile #aintaining saet* standards)

This #ini#u# drilling cost is also theopti#u# drilling cost)


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The opti#ization process is a c*cle thatstarts -ith using the e"isting data(ase o drilling inor#ation)

'ore data are collected during thepractical drilling process)

The ne- data are then anal*zed to

update the data (ase or uture use)


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The process o opti#izing drilllingprocess is not al-a*s straight6or-ard)

Because o uncertainties in&ol&ed.

there is al-a*s need or so#e trade6o4s)

For ea#ple. opti#ization #ight #eanpa*ing #ore to o(tain a (etter tool.such as choosing a rig -ith a higherda* rate to o(tain (etter e$uip#ent)


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DRIING OPTIMI!ATIONDRIING OPTIMI!ATION

TEC#NI$%ESTEC#NI$%ES The ollo-ing opti#ization techni$ues

are popular in drilling+ Drilling cost e$uation

Brea%e&en calculations

Cost6e4ecti&e decision #a%ing


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Drilling Cost E$uationDrilling Cost E$uation

Also %no-n as the cost per oot e$uation)

Cdrill / cost per oot or the inter&al concerned. 0>t

C(it / cost o deli&ered (it at the drill site. 0

Ctools / cost o tools or repair to tools. 0

C#ud / cost o #ud to drill the inter&al. 0

Crig / rental rig rate. 0>hour

Csupport / support cost. i)e) third6part* contractorrates. 0>hour

( ) ( )bit tools mud rig support tool rental trip bit lost drill

bit avg

C C C C C C T T T C

T ROP

+ + + + + + + =×


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Ctool rental / rental o tools. 0>hour

Ttrip / round trip ti#e. i)e) ti#e to pull and run a

(it. hours

T(it / (it lie. i)e) ti#e re$uired to drill theinter&al. hours

Tlost / non6rotating ti#e. i)e) ti#e chargea(le to

non6drilling tas%. hours

?OPa&g / a&erage rate o penetration during (itrun. t>hour


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Ele&en &aria(les are listed in thedrilling cost e$uation)

'ost o these interact -ith one or #oreother &aria(les)

Because the degree o interaction isoten i#possi(le to deter#ine

intuiti&el*. the drilling cost e$uationcan aid decision #a%ing


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Brea%e&en CalculationsBrea%e&en Calculations

Brea%e&en calculations are econo#ice&aluations that deter#ine the changein a dependent variable that is re$uired

to create a benefcial change in anindependent variable.


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The t*pical &aria(les are as ollo-s+

Alteration in

Independent&ariable

Re'(ired

C)ange inDependent&ariable

Bit t*pe Bit lie. ?OP

Drilling tools Bit lie. ?OP. Tripti#e

'ud t*pe Bit lie. ?OP. Tripti#e


29/47

The procedure is as ollo-s+ Sol&e the drilling cost e$uation or present

conditions to deter#ine the cost>t) Speci* the independent &aria(le and the

dependent &aria(le to (e changed) Deter#ine the change in an* other para#eters

that -ill result ro# the change in the independent&aria(le)

Su(stitute the cost>t deter#ined in Step 1. the

independent &aria(le specifed in Step 2. and allother &aria(les into the drilling cost e$uation) ?earrange the e$uation and sol&e to fnd the &alue

o the dependent &aria(le re$uired or (rea%e&en)


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The (rea%e&en calculations can also (eused to e&aluate -hether additional rige$uip#ent should (e o(tained or

purposes other than to increase therate o penetration)


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Decision 'a%ingDecision 'a%ing

9t is di:cult to eactl* calculate theconse$uences o each decision to (e #ade

So#e degree o uncertaint* concerning the

conse$uences are #ade) Decision o this t*pe #ust (e #ade on a

statistical (asis+

a decision is #ade to i#ple#ent the course oaction that on average results in the lo-estcost)


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E"pe*ted &al(es Met)odE"pe*ted &al(es Met)od

An eplicit step6(*6step approach to

the decision process traditionall* used)

The #ethod is used to #a%e decisions(* e&aluating choices that ha&e (othdi4erent fnanacial returns and

di4erent pro(a(ilities o occurence)


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The (est decision is that -hich has thelo-est !or least negati&e" pro(a(ilit*cost product)

The unda#ental or# o the epected&alue e$uations is gi&en as ollo-s+

1 1 2 2 EV C P C P = +

1 2 1 P P + =


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E@ / epected &alue. 0

CA / cost o frst e&ent. 0

PA / pro(a(ilit* o frst e&ent. raction

C; / cost o second e&ent. 0 P; / pro(a(ilit* o second e&ent. raction


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Ea#ple , Cost per ootEa#ple , Cost per oot

calculationcalculation A 6>; (it drills .


36/47

( ) ( )bit tools mud rig support tool rental trip bit lost drill bit avg

C C C C C C T T T C

T ROP

+ + + + + + +

= ×

( ) ( )3,000 100 5,000 800 200 100 6 30 0

30 35drill C

+ + + + + + +

= ×

8,100 39,600

1,050drill C

+=

$45.43/ftdrill C =


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Ea#ple ; , Brea%e&en calculationEa#ple ; , Brea%e&en calculation

3hen planning a -ell) 9t has (een deter#inedthat the net section re$uires a pol*#er #udthat costs 0>((l) The rig has ine:cient shalesha%ers. -hich the drilling contractor -ill not

replace -ithout sharing the epense) #o+#o+m(*) s)o(ld t)e operator be prepared tom(*) s)o(ld t)e operator be prepared to

pa, -or t)e installation o- t)e ne+ )ig)/pa, -or t)e installation o- t)e ne+ )ig)/

e0*ien*, s)ale s)a1ers i- t)e rig is to bee0*ien*, s)ale s)a1ers i- t)e rig is to be

(sed -or onl, a single +ell2(sed -or onl, a single +ell2 Old shale sha%er solid control e:cienc* / H

Ne- shale sha%er solid control e:cienc* / H

Anticipated a&erage hole dia#eter / 1

'ai#u# allo-a(le drill solids concentration / H


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3e use #ud inter&al cost e$uation+

C#ud / cost o #ud to drill the inter&al. 0

Lint / length o inter&al. t

C#ud>((l / #ud cost. 0>((l Dh / a&erage hole dia#eter. in) E4 / e:cienc* o solids control s*ste#. H Sacti&e / drilled solids in acti&e #ud. &olu#e H

( ) ( )2h activemud int mud/bbl

active

D 1 ff 1 !" # "

1,029 !

− −= ×

×


39/47

For the eisting shale sha%ers+

( ) ( )2

mud

13 1 0.65 1 0.06" 6,000 15

1,029 0.06

− −= ×

×

mud" 6,000 15 0.9006= × ×

mud" $81, 051=


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9 ne- shale sha%ers -ere purchased+

Ecost / e$uip#ent cost. 0

( ) ( )2

mud c%t

13 1 0.&5 1 0.06" 6,000 15

1,029 0.06

− −= × +

×

mud c%t" 5&,894 = +

( ) ( )2h activemud int mud/bbl c%t

active

D 1 ff 1 !" # "

1,029 !

− −= × +

×


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Brea%e&en occurs -hen the cost o eistingsha%ers e$uals the cost o ne- sha%ers)

This &alue !0;1." represents the most most the operator should pa* or the installation

o ne- sha%ers) An* a#ount less that this can (e

negotiated -ith the drilling contractorrepresents a net sa&ings)

c%t81,051 5&,894 = +

c%t $23,15&=


42/47

3hen drilling ;6>I hole in an area. eperiencesho-s that a re&erse circulating =un% (as%et!?CJB" is re$uired on ;H o all -ells) Thea&erage rental period or -ells -here a ?CJB isre$uired is 1 da*s. and ; hours rig ti#e is

-asted -aiting or the e$uip#ent) A rig is contracted or a single -ell in -hich the

;6>I section is planned to ta%e ; da*s to drill)

5i&en+ ?ig rate / 0G.


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3e use the E@ #ethod and decision tree)

RCJ5rented

RCJ5not

rented

Re'(ir

ed

Notre'(ir

ed


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RCJ5 not rented Not re'(ired

Re'(ired

'i( )ate *nte)val time× 8, 000 25= × $200,000=

( ) [ ]'i( )ate *nte)val time +aitin( time '"- )ental 'ental time× + + +

( ) ( )8,000 25 0.5 150 25 2= × + + + × $204,200=


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RCJ5 on standb,

( ) ( )'i( )ate *nte)val time '"- )ental *nte)val time× + +

$200,&50=

( ) ( )8, 000 25 150 25 24= × + + ×


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RCJ5rented

RCJ5not

rented

Re'(ired

Notre'(ir

ed

C 7 89:::::P 7 ;


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RCJ5 not rentedRCJ5 not rented Total E& 7 8>

7. drilling economics

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