Authorisation For Expenditure

The AFE is the tool that is used for predicting the cost of a proposed well. The accuracy of the AFE depends on the amount of available information used to construct it. As operators, we need to know how much a well is going to cost if it is dry, tested or completed. Consequently, AFEs should be broken down into sections to fllow us to see at a glance how the various well options compare financially. In this section, we look at the component parts of AFEs for onshore and offshore wells. At Nor well, we have a standardised 100-point AFE for both onshore and offshore wells. This is probably overkill as in most wells there are probably only 60 or so cost centres, but having the additional codes for special operations built into every well AFE makes it easier to carry out post-well assessment and cost comparisons between wells,

3.1 AFE components

Both the onshore and offshore AFEs are broken down into the following sections: preparation drilling and abandonment testing completion

3.1.1 Preparation

This part of the APE covers the costs incurred to the point at which the rig is brought on to location. For onshore wells this would include site building and well engineering as the main cost centres. For offshore wells, the main cost centres are site surveying and well engineering. Included in this section should also be all the costs required to bring the location back to its original condition.

3.1.2 Drilling and abandonment

This is the 'dry hole' drilling component of the well. It assumes drilling to TD, logging and finding nothing of interest. The well is, therefore, proposed for abandonment and cos ted accordingly.

3.1.3 Testing

This is the additional cost incurred by a testing programme. It is not merely the testing cost charged by the testing company but must also include all the ongoing daily costs associated with the rig such as:

rig day rate fuel oil site personnel office personnel office overheads

3.1.4 Completion

This is the further additional cost incurred following testing once the decision to complete the well has been made. As with testing, the cost centres are not only the cost of completion equipment and services but also the costs of:

rig day rate fuel oil extra casing string if run perforation site personnel office personnel office overheads

3.2 Estimating costs

If there are similar, recent wells in the area to be drilled, most costs can be estimated fairly readily. If, on the other hand, you are planning a well in a new area, then the task is much harder. By calling up the following service companies and asking for budgetary figures, the main cost centres can be addressed:

drilling contractors mud loggers electric logging companies mud companies cementing companies bit companies casing companies wellhead companies tool rental companies coring companies

Most service companies will be pleased to provide figures for AFE budgets and talking to them serves a secondary purpose of updating your knowledge of the demand for certain services and any new deals or equipment that is available. It also allows the service company to express an interest in the work which will be put out to tender at a later date.

The Time Depth Graph created for the Drilling Programme provides an estimate of the days to be spent on the well. By costing in the charges for these days, the AFE begins to take form. It is difficult to fix charges such as coring on an exploration well with the limited knowledge available regarding formations to be drilled so some assumptions must be made. The AFE could either include one 20 m core or several runs.

Similarly for the testing programme and completion programme some assumptions must be made. It is, therefore, good practice to list the assumptions which have been made as a postscript to the AFE. For example, AFE assumes four days open hole testing, or AFE assumes single 3V2 inch H2S tubing completion with single permanent packer. After estimating costs, a contingency factor should be built into the AFE. This can be in the form of a lump sum or as a percentage of well costs.

3.3 AFE examples

The following are examples of the AFEs used in Norwell's operations and have proved to be generally effective. Most working AFEs will be of a similar format.

01 Site survey

02 Site rental

03 Site purchase

04 Site preparation

05 Site prep, management

06 Additional Port a-cab ins

07 Additional tankage

08 Conductor driving

09 Communications

10 Rig mobilisation

11 Rig day rate

12 Rig demobilisation

13 Public meetings

LAND WELL Initial AFE (for budgetary purposes)

Cost code Code nos description

Drilling and

Preparation abandonment Testing Completion

Cost Drilling code Code and nos description Preparation abandonment Testing Completion

14

Wellhead

15

16

17

20" conductor

18

133/s" casing

19

9s/a" casing

20

7" casing

21

Liner

22

23

24

13%" casing accessories

25

9Ys" casing accessories

26

7" casing accessories

27

Liner hanger

28

Liner accessories

29

V7W rock bits

30

17W PDC/diamond bits

31

16" rock bits

32

16" PDC/diamond

33

12V4 rock bits

34

12'/4 PDC/diamond bits

35

8V2" rock bits

36

6" rock bits

37

6" PDC/diamond bits

38

Bit accessories

39

40

Drilling consumables

41

Lubricants

42

Fuel oil

43

Drilling equipment rental

44

Mud equipment rentals

45

Equipment transportation

46

Solid waste disposal

47

Liquid waste disposal

48

Misc. consumables

49

50

Mud logging

51

Specialised equip, running

52

Mud engineering

53

Mud chemicals

How Many Site Office Personnel

Cost Drilling code Code and nos description Preparation abandonment Testing Completion

93 Abandonment

94 Site clean-up

95 Site accommodation & travel

96 Materials base

97 Site personnel

98 Office personnel

99 Office overheads

100 Insurance

Sub totals

OFFSHORE WELL

Initial AFE (for budgetary purposes)

Cost

Drilling

code

Code

and

nos

description

Preparation abandonment Testing Completion

01

Rig rate

02

Site survey

03

Tow and anchor handling

04

Mobilisation

05

Anchors

06

Anchor chain

07

Buoys

08

Rig location survey

09

10

Guide base

11

Conductor wellhead housing

12

20" wellhead equip.

13

13Vs" wellhead equip.

14

9s/s" wellhead equip.

15

7" wellhead equip.

16

17

30" conductor

18

24W/20" casing

19

18Vs"/16" casing

20

13Vb" casing

Afe Drilling

Cost code Code nos description

Drilling and

Preparation abandonment Testing Completion

60 Well surveying

61 Mud motor and turbine

62 Fishing

64 Coring

65 Coreheads

66 Core analysis

67 Wireline logging

68 Reservoir sample analysis

69 Velocity surveying

71 Downhole production testing

72 Surface production testing

73 Electronic gauges

74 Perforating

75 Prod, test consumables

76 Production test rentals

77 Aridisation/fracturmg

78 Gravel packing

79 Coil tubing

80 Nitrogen services

82 Christmas tree

83 Completion tubulars

84 Completion tubing acc.

85 Completion tubing running

86 Completion fluids

87 Completion wireline ops.

88 Completion perforating

89 Completion consumables

90 Completion rentals

92 Suspension

93 Abandonment

94 Site clean-up

95 Demobilisation

96 Materials base

97 Offshore personnel

Cost

Drilling

code

Code

and

nos

description

Preparation abandonment Testing Completion

98

Office personnel

99

Office overheads

100

Insurance

Sub totals

Was this article helpful?

+1 0
Going Green For More Cash

Going Green For More Cash

Stop Wasting Resources And Money And Finnally Learn Easy Ideas For Recycling Even If You’ve Tried Everything Before! I Easily Found Easy Solutions For  Recycling Instead Of Buying New And Started Enjoying Savings As Well As Helping The Earth And I'll Show You How YOU Can, Too! Are you sick to death of living with the fact that you feel like you are wasting resources and money?

Get My Free Ebook


Responses

  • philipp
    How many site office personnel?
    9 years ago

Post a comment