Specific cost breakdown onshore exploration wells

For comparison with the offshore well discussed in section 2,1, the following represents a shallow {1000 m) European land well to be drilled in 1990.

The cost breakdown is for a 1000 m well with 7 inch casing set at 500 m and 6 inch hole drilled to TD. It is assumed that there are two days spent coring, the well is then logged and abandoned. Estimated days on well is a total of 20.

72

MANAGING DRILLING OPERATIONS

Cost in US $

% of

Cost group

(thousands)

total cost

Site survey, rental, preparation and restoration

72

11.7

Rig mob/demob

46

7.5

Rig date rate (20 days)

97

15.8

Wellhead

26

4.2

Conductor and casing

40

6.5

Rock bits

17

2.7

Core heads service

13

2.1

Mud chemicals

14

2.3

Mud engineering

10

1.6

Mud logging

30

4.9

Cementation

35

5.7

Fuel

10

1.6

Tool rentals

5

0.8

Transport/cranes

10

1.6

Electric logging

30

4.9

Disposal

8

1.3

Accommodation

5

0.8

Water supply

5

0.8

Well engineering

50

8.1

Site supervision

15

2.4

Site geologist

8

1.3

Overheads

70

11,4

Total

616

100%

Breaking down these costs into fixed, daily and unit costs, we find the following:

Cost in US $

% of

Fixed item

(thousands)

total cost

Site survey, rental and restoration

72

11.7

Rig mob/demob

46

7.5

Wellhead

26

4.2

Conductor and casing

40

6.5

Rock bits

17

2.7

Core heads and service

13

2.1

Cementation

35

5.7

Transport/cranes

10

1.6

Electric logging

30

4,9

Disposal

8

1.3

Accommodation

5

0.8

Well engineering

50

8.1

Total

352

57.1

Cost in US $

% of

Daily item

(thousands)

total cost

Rig day rate (20 days)

97

15.8

Mud engineering

10

1.6

Mud logging

30

4.9

Fuel

10

1.6

Tool rentals

5

0.8

Water supply

5

0.8

Site supervision

15

2.4

Site Geologist

8

1.3

Overheads

70

11.4

Totals

250

40.6

Tntal Hflilv rmt= 250 000

= 12 500/day

20

Cost in US $

% of

Unit item

(thousands)

total cost

Mud chemicals

14

2.3

Unit item total

14

2

2.2.1 Discussion

The main cost groups (over

4 per cent of well cost) for this well

are as follows:

Cost in US $

% of

(thousands)

total costs

Site survey, rental, preparation and restoration

72

11.7

Rig mob/demob

46

7.5

Rig day rate

97

15.8

Wellhead

26

4.2

Conductor and casing

40

6.5

Mud logging

30

4.9

Cementation

35

5.7

Electric logging

30

4.9

Well engineering

50

8.1

Overheads

70

11.4

496

80.7

As can be seen above, ten cost centres account for over 80 per cent of the total well cost. Looking at each individually:

Site survey, rental, preparation and restoration $72 000 11.7 per ccnt

This expenditure is usually under the control of the Drilling Manager and/or the Engineers who select the final site location and negotiate the deal with the land owner and site building company.

In areas of extreme environmental sensitivity, this cost centre could represent up to 25 per cent of the well cost if special restrictions were placed on site screening and proximity to existing buildings. Site access roads can cost as much as the site itself and should, in principle,, be kept as short as possible or avoided altogether. Investigative engineering techniques should be employed when using any existing hard standing {e.g. old factory sites) and looking for natural screening and level areas.

Sites can be rented or purchased and in some cases, it is cheaper to purchase the site. The added advantage of doing so is that it ensures that there will be no problem with the land owner during construction and drilling. There are no hard and fast rules on site selection and it is up to the skill of the Drilling Manager to minimise these costs.

Rig mob/demob $46 000 7.5 per cent

This charge is made by the Drilling Contractor to cover the costs of getting his equipment to the site, rigging it up, and once the well is finished, returning it to its base. This is also a cost centre which is under the direction of the Drilling Manager. If suitable rigs are in the area of interest at a certain time of the year, the mob/demob costs can be reduced substantially during these periods. In order to establish rig movements it is necessary to maintain a dialogue with other operators and with drilling contractors.

Selection of smaller rigs which involves less truck movements between sites can reduce mob/demob costs. There is, of course, a limit to the smallness of the rig which can be used effectively on a given well so a compromise must be arrived at between cost and rig size.

Kig day rate $97 000 15.8 per cent

The above remarks for rig mob/demob also apply to day rates. The time spent on a well depends on the skill of the Drilling Manager, the Drilling Engineer and the Drilling Supervisor.

Wellhead $40 000 6.5 per cent

Wellhead selection is usually done by the Drilling Engineer or Drilling Manager. Company policy may dictate a certain brand or type. Otherwise tendering the various wellhead companies can result in a bargain. Furthermore, wellheads can be reused and refurbished. Wellheads of known history provide a low-cost alternative to a new one for every well.

Conductor and casing $40 000 6.5 per cent

These costs are dictated by the casing design for the well as well as local supply and demand conditions. The Drilling Engineer who programmes the casing design can provide several alternatives which meet the well needs. The alternatives can then be costed out and the cheapest one selected.

Mud logging $30 000 4.9 per cent

Selection of the most suitable mud logging company is by a tendering exercise controlled by the Drilling Manager and Drilling Engineer. The Drilling Supervisor can influence overall mud logging costs by keeping the days spent on the well to a minimum.

Cementation $35 000 5.7 per cent

When the well is programmed by the Drilling Engineer, certain basic cementation requirements will be established. The traditional cementation service companies all operate at similar costs, so the tendering exercise for services will produce the cheapest bid. If the Drilling Manager is prepared to use premixed slurry for cementation in areas where this is readily available, and use a simple displacement pump to put it in place, then considerable cost savings are possible. The Drilling Supervisor can assist cost control on cementation by accurately predicting when cementation services will be required. On most land wells, a substantial part of the overall cementing charge will be standby time for the cementers. This must be kept to the minimum possible.

Electric logging $30 000 4.9 per cent

In most companies, Petroleum Engineers will stipulate the electric logs that they require for a given well. The cost control on this is usually down to the tendering exercise and supply and demand. The Drilling Manager can try to ensure that no spurious logs are being run, but in most cases, he will be told what to run and have little or no input into the logging suite design.

Well engineering $50 000 8.1 per cent

The cost of engineering a well depends, basically, on whether it is done in-house or by using a specialist company. For operators with an intermittent drilling programme, the latter is probably more cost-effective, however, continuous drilling programme should probably be programmed in-house. When done in-house, the cost of well engineering will further depend on the manpower allocation, their costing, their effectiveness and the systems in place to allow quick and effective well programming. This cost centre, therefore, is under the direction of the Drilling Manager.

Overheads $70 000 11.4 per cent

Overheads are under the direction of the drilling manager, to some extent, but are also influenced by the assignment of Petroleum Engineers, Geologists and Administration staff within the operator's organisation. The Drilling Manager can ensure that he has no excess staff assigned to the well but beyond this, has little influence.

2.3 Comparison of cost breakdown between onshore and offshore wells

Comparing both sets of cost breakdown, we can see the following differences:

  1. On the offshore well, the fixed costs (38 per cent) are less than the daily costs (58 per cent).
  2. On the onshore well, the fixed costs (57 per cent) are more than the daily costs (41 per cent).

This is a fairly typical situation and its basic implication is that the economic influence of the Drilling Supervisor's skills in drilling a quick well are felt more on offshore than onshore. This is not to say that he does not have a major role in controlling well costs on land wells, but serves to indicate just how important it is to have the right office team of Drilling Manager and Drilling Engineer, if these costs are to be controlled effectively.

Offshore wells generally cost a lot more than land wells, and the example shown indicates that to save a day on the well would reduce the well costs by $50 000. A day saved on the shallow land well studied only represents a $12 500 saving. The difference between these two figures indicates that, when looking at time-saving services and equipment to be used on the rig, we have to cost out the time saved against the cost of services, rentals or purchases. Consequently, some services and tools which make great savings offshore might never pay ofF on land,

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  • robinia
    Who pays for mob demob of a rig?
    3 years ago

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