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Drilling Economics: James A. Craig
Drilling Economics: James A. Craig
JAMES A. CRAIG
TABLE OF CONTENTS
Drilling Optimization
Decision Making
DRILLING COST PREDICTION
C = a exp ( bD )
C = cost, $
a, b = constants depending on well location
D = depth, ft
ln C ln a
=
D −
b b
COST SPECIFICATION
Daily
Unit
Fixed Costs
Sitepreparation
Casing, cement, tubing and packers
Daily Costs
Daily costs are related to the time spent on the operation.
Offshore rigs have high expenses which listed below.
Daily costs include:
Payments to drilling contractors (rig time)
Tool rental
Payment to specialist services
Salaries, wages etc
Fuel
Lubricating oil, grease
Drilling consumables (rope, soap and dope)
Transport of materials
Unit Costs
fuel oil
perforation
site personnel
office personnel
office overheads
Costs can be estimated fairly for development
wells
Costing for exploratory wells is a much harder
task.
The service companies will give the operating
companies the main costs:
drilling contractors mud loggers
electric logging companies mud companies
cementing companies bit companies
casing companies wellhead companies
tool rental companies coring companies
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.
Some assumptions must be made, e.g.:
Itis difficult to fix charges such as coring on an
exploration well with the limited knowledge
available regarding formations to be drilled. The
AFE could either include one 20-m core or several
runs.
A contingency factor should be applied to the
AFE.
This can be in the form of:
A lump sum, or
A percentage of well costs.
DRILLING OPTIMIZATION
Tbit = bit life, i.e. time required to drill the interval, hours
P1 + P2 =
1
EV = expected value, $
C1 = cost of first event, $
Cdrill = $45.43/ft
Example 2 – Breakeven calculation
When planning a well. It has been determined that the
next section requires a polymer mud that costs
$15/bbl. The rig has inefficient shale shakers, which
the drilling contractor will not replace without sharing
the expense. How much should the operator be
prepared to pay for the installation of the new, high-
efficiency shale shakers if the rig is to be used for only
a single well?
Old shale shaker solid control efficiency = 65%
New shale shaker solid control efficiency = 75%
Anticipated average hole diameter = 13”
Maximum allowable drill solids concentration = 6%
We use mud interval cost equation:
D h2 (1 − Eff )(1 − Sactive )
= Lint × Cmud/bbl
Cmud
1, 029 × S active
=
Cmud 57,894 + E cost
Breakeven occurs when the cost of existing shakers
equals the cost of new shakers.
= 57,894 + E cost
81,051
E cost = $23,157
Not
required
RCJB not
rented
Required
RCJB
rented
RCJB not rented
Not required
Rig rate × Interval time
= 8, 000 × 25 = $200, 000
Required
Rig rate × ( Interval time + Waiting time ) + [ RCJB rental + Rental time ]
= $200, 750
C = $200,000
P = 75%
EV = 200,000 x 0.75
Not
EV = $150,000
required
RCJB not
rented C = $204,200
P = 25%
EV = 204,200 x 0.25
Required EV = $51,050
RCJB
rented C = $200,750
P = 100%
EV = 200,750 x 1.00
EV = $200,750
RCJB not rented
Total EV = $150,000 + $51,050 = $201,050
RCJB on standby
Total EV = $200,750
RCJB on standby < RCJB not rented
Therefore, the better economic solution is to
have the RCJB on standby at the rigsite.