Overview of Well Construction Process

Drilling Costs

Mahmoud F. Radwan
Subsurface & Integrity Op. Act. Dept. Head
https:\\www.linkedin.com/in/mahmoud-farag-radwan-a9266626
 AFE - What is it?

• AFE - “Approval For Expenditure” or

Authorization for Expenditure
• This is generally a detailed cost estimate
which is submitted for management
approval to allocate money.
• Controlling costs, including estimating
future drilling costs, is a large part of the
Drilling Engineers’ responsibility.

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 Item £ Cost No days Length Total
basis

Rig cost
catering
£40,000
£1,000
day
day
60
60
£2,400,000
£60,000 Rig costs
Modifications £100,000 well £100,000
Conductor £200 foot 250 £50,000
13-3/8" casing £150 foot 2500 £375,000
9-5/8" casing
7" Liner
Conductor accessories
£50
£30
£2,000
foot
foot
well
8500
3500
£425,000
£105,000
£2,000
Drilling Hardware
13-3/8" casing accessories £4,000 well £4,000
9-5/8" casing accessories
7" Liner accessories
5" tubing
£4,000
£2,000
£50
well
well
foot 11500
£4,000
£2,000
£575,000
Tangible Costs
Tubing accessories £2,000 well £2,000
Downhole safety valve £50,000 well £50,000
Completion packers £30,000 well £30,000
Subsea Christmas trees
Nipples
£500,000
£10,000
well
well
£500,000
£10,000
Completion Hardware
Control line £5,000 well £5,000
Completion Crossovers etc £10,000 well £10,000
Mud Chemicals £50 foot 11500 £575,000
Cement and additives £30 foot 11500 £345,000
Electric Logging £30 foot 11500 £345,000
Perforating £100,000 well £100,000
Directional drilling and surveys £5,000 day 40 £200,000
Rock bits £80,000 well £80,000
PDC/Diamond bits £200,000 well £200,000
Drilling Consumables
Mud Engineers
Casing Crews
£1,000
£800
£2,000
day
day
day
40
60
20
£40,000
£48,000
£40,000
Intangible Costs
Cementers £800 day 60 £48,000
Mud Loggers £1,000 day 40 £40,000
MWD Engineers £5,000 day 20 £100,000
Fishing Services
Liner Hanger engineer
Filtration [completion phase]
£500
£1,000
£1,000
day
day
day
60
5
20
£30,000
£5,000
£20,000
Variable Costs; people and
Miscellaneous Drilling Rentals
Geology office services
Onshore office services
£2,000
£1,000
£5,000
day
day
day
60
60
60
£120,000
£60,000
£300,000
consumables…etc.
Drilling Supervision £1,000 day 60 £60,000
Wellhead serviceman £1,000 day 12 £12,000
Onshore materials man £300 day 60 £18,000
Cuttings ship to shore £5,000 day 60 £300,000
Packer crew personnel £1,000 day 6 £6,000
Completions Engineer £1,000 day 25 £25,000
Daily Transport Costs £5,000 day 60 £300,000
Standby Boat £3,000 day 60 £180,000
Total AFE Cost £8,306,000
 Importance of Budgeting

Goal: deliver the Well to agreed technical and

financial specifications
Thus; must know the TRUE cost of each service
to effectively manage our business
Cost control = managing the well cost
Well Cost = verification of actual cost Vs
estimated cost, based on an agreed scope of
work
 Cost Types
Five different cost types were
described;
1. Fixed
2. Depth dependent
3. Time dependent
4. Overhead (or Support)
5. Contingency

5
 Types of Cost - Fixed

• Costs in an estimate are generally divided into 5

major types.
• FIXED costs do not change with well depth or
duration.
• Examples;
 Surveying the rig location
 Mobilizing the rig to the wellsite

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Types of Cost - Depth Dependent

• DEPTH DEPENDENT costs change with well

depth. The deeper the well, the greater these
costs become
• Examples;
 Casing and accessories
 Drill bits
 Drilling fluid

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Types of Cost - Time Dependent

• TIME DEPENDENT costs

change with well duration.
• Examples;
 Drilling rig day rate
 Supply boats and
helicopters
 Salaries and consultant
fees
 Fuel

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 Cost of Drilling Rigs
Offshore Onshore
Daily Rig Cost
1998 $90,000
1999 $40,000
2006 $95,000 Daily Rig Cost
2018 $65,000 1998 $60,000
(Single year contract) 1999 $30,000
2006 $30,000
2018 $25,000
(Single year contract)
Ultra Deep
Daily Rig Cost
1998 $180,000
1999 $180,000
2006 $200,000
2018 $160,000
(Single year contract)

JMA 9
Types of Cost - Overheads

– OVERHEAD costs are not incurred at the wellsite.

They may be shared among several operations and a
portion of the cost is allocated to each well. Tend to
be time dependent.
– Examples;
• Office costs including secretaries, stationary etc.
• Logistic bases and supply depots.

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Types of Cost - Contingency

Contingency costs provide for problems.

– The contingency cost = cost of problem x

probability of occurrence.

– Examples;
• Stuck pipe
• Fishing

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Thank You