11/2/2023

Part 3-1
Drilling Costs and AFE
By
Prof. Abdel-Alim Hashem

Contents
• Reasons For Costing
• Factors Affecting Well Costs
• Ways for Well Costing
• Use of Historical Cost Data
• Use of Historical Penetration Rates
• Use of Historical Record Wells
• Itemized Costs
• Other Time Calculations
• Contingency

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Reasons for Costing

• There are many elements which comprise the well cost.
• These range from rig, casing, people, drilling equipment etc.
• The final sheet summarizing the well cost described as the AFE: “Authorisation For Expenditure”.
• The AFE is the budget for the well.
• Once the AFE is prepared, it should then be approved and signed by a senior manager from the operator.
• The AFE sheet would also contain: project description, summary and phasing of expenditure, partners shares and well
cost breakdown.
• Details of the well will be attached to the AFE sheet as a form of technical justification.
• There are several reasons for producing a well cost, including:
1. Budgetary control
2. Economics
3. Partners recharging
4. Shareholders
• The AFE is then used as a document for partners recharging, paying contractors and an overall control on the well
spending.

Breakdown of Total Drilling costs

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Total Costs for Different Well Types

Example of An AFE for Gulf of Mexico

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Example of An AFE for Gulf of Mexico

Example of An AFE for Gulf of Mexico

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Factors Affecting Well Costs

Well costs for a single well depend on:
1.Geographical location: land or offshore, country
2.Type of well: exploration or development, HPHT or sour gas well
3.Rock Drillability, Drilling rate
4.Hole depth
5.Well target(s)
6.Profile (vertical/ Dirctional/horizontal /multilateral)
7.Subsurface problems (hole problems)
8.Rig costs: land rig, jack-up, semi-submersible or drillship and rating of rig
9.Completion type
10.Knowledge of the area: wildcat, exploration or development

Factors Affecting Well Costs

Total well costs for a development drilling program
comprising several wells depend on:
1. Rig rate
2. Well numbers and well type
3. Total hole depth
4. Well layout and spacing
5. Specifications of equipment
6. Target tolerances
7. Water depth for offshore wells
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Ways of Cost Estimate

• Use of Historical Cost Data

• Use of Historical Penetration Rates

• Use of Historical Record Wells

• Itemized Costs

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Use of Historical Cost Data

• Planners refer to accumulated data showing local figures of
cost versus depth.
• For this purpose linear or logarithmic plots are used to
interpolate depth between history cases after correction of
figures for price variations. Inflation is a factor that affects
historical cost figures.
• For the correction of the influence of inflation, corrective
factor is used to account for inflation

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Use of Historical Penetration Rates

• Same as in the previous method, average penetration rates and average well
depth are calculated using historical data.
• The average penetration rate is used to get total drilling time. The expected cost
is calculated:
• Cost = (depth/average rate) x average drilling cost/day
• The cost obtained using this formula is function of the change in technology used
in obtaining the average ROP versus the technology that will be used to drill the
planned well.
• The predicted cost will not be accurate if there is a change in the techniques and
the drilling plans.

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Cost and ROP Depth Correlations

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Drilling Costs
• Tend to increase exponentially with depth.
• Thus, when curve-fitting drilling cost data, it is often convenient to
assume a relationship between total well cost, C, and depth, D, given
by:

C = aebD

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Average Costs of Drilling and Equipping

Wells: South Louisiana

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Least-square curve fit of 1978 completed well costs for

wells below 7,500 ft in the south Louisiana area

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Data Analysis
For these data
• a = 1X105 dollars
• b = 2x10-4 ft-1

• Then the cost can be calculated as:

5 2 x 104 D
C  10 e

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The Drilling Cost Equation

C b  C r (t b  t c  t t )
Cf  $ /ft
F
Cf = drilling cost, $/ft
Cb = cost of bit, $/bit
Cr = fixed operating cost of rig, $/hr
Tb = total rotating time, hrs
Tc = total non-rotating time, hrs
Tt = trip time (round trip), hrs
F = footage drilled with bit, ft
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Example
• A recommended bit program is being prepared for a
new well using bit performance records from nearby
wells. Drilling performance records for three bits are
shown for a thick limestone formation at 9,000 ft.
Determine which bit gives the lowest drilling cost if
operating cost of the rig is $400/hr, the trip time is 7
hours, and connection time is I minute per connection.
Assume that each of the bits was operated at near the
minimum cost per foot attainable for that bit

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Example
Bit Bit Cost Rotating Connection Mean
$ Time Time (Hrs) Penetration
(Hrs) Rate (ft/hr)
A 800 14.8 0.1 13.8
B 4,900 57.7 0.4 12.6

C 4,500 95.8 0.5 10.2

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Solution
• The cost per foot drilled for each type can be computed as:
• For Bit A
800  400(14.8  0.1  7)
Cf   $46.81/ft
13.8*14.8
• For Bit B
4, 900  400(57.7  0.4  7)
Cf   $42.65/ft
12.6*57.7
• For Bit C
4,500  400(95.8  0.5  7)
Cf   $46.89/ft
10.2*95.8

• The lowest cost obtained using bit B

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Drilling Time Based on Penetration Rate

• Penetration rate varies with compressive strength and shear strength of the
rock
• Penetration rate can be related to depth by:
td D
dD
 Ke 2.303a2D K  dt   e 2.303a2D dD
dt 0 0
• Integrating and Solving for td yields
1
td 
2.303 a K
 e 2.303a2 D  1 1.19
Where 2

• K and a2 = constants
• td = time required to drill a given depth, can be obtained by separating variable
and integration
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Time Required to Drill from Depth D to D+1000

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Example
• The bit record for a well drilled in South China Sea are shown in table 1.8. Make plots
of depth vs. penetration rate and depth vs. rotating time for this area using semilog
paper. Also evaluate the use of Eq 1.19 for predicting drilling time in this area.
• Solution
• The plots obtained using the bit records are shown in Fig, 1.66. The constants K and a2
can be determined using the plots of depth vs. penetration rate on a semilog paper>
The value of 2.303a2 is 2.303 divided by the change in depth per log cycle.

• The constants 2.303 is a convenient scaling factor since

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Bit Records from South China Sea Area

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Solution
• The plots are shown in the next graph.
• The constant K and a2 can be determined using the plot of depth vs
penetration rate on semilog paper.
• The value of 2.303a2 is 2.303 divided by the change in depth per log cycle
• 2.303a2 = 2.303/6,770 = 0.00034
• K is the penetration rate at the surface= 280

t d  10.505 e 0.00034 D  1

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Drilling Time Plot

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Drilling Time Plot

• Semi log paper is based on common logarithm.
• The value of K is equal to the value of penetration rate at the surface.
From depth vs penetration rate plot, K=280 and the value of
a2=1/6770.
• Substitute of these values of a2 and k into the equation 1.19 gives

• The line represented by this equation is given in the previous figure.

• Note that the line gives good agreement with the bit record data
over the entire depth range
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Trip Time
• Trip time depends on depth of the well, used rig and drilling practice
• Can be approximated by:
 t   D  Di 
tt  2 s   
 ls  2 

• For approximated known bit life, Depth of next trip is:

1
D ln  2.303a2 Kt b  e 2.303a2Di 
2.303a2

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Example
Construct an approximate depth vs. trip time for the South China Sea
area if the rig can handle a 90-ft stand in an average time of 2.7
minutes. Assume an average bit life of 10.5 hours for the entire depth
interval. Use the value of a2 and K obtained from the previous
example. Also, the casing program calls for set at 500, 2,000 and 7,500
ft. The planned well depth is 9,150 ft.

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Solution
• The time required per trip at a given depth is given by:
t   2.7 
tt  2  s  D  2  60  D  0.001D
l
 s  90 
 
• The approximate depth of each trip is:
1
D ln  2.303a2 Kt b  e 2.303a D  2 i

2.303a2
1
 ln  0.00034 * 280 *10.5  e 0.00034 D i

0.00034
 2,941*ln  0.9996  e 0.00034 D  i

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Trip Time Computation

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Solution
• The first bit will drill to the first casing depth
• The first trip will occur at 500 ft
• Subsequent trips are predicted
• Col. 2 obtained by selecting the smaller of the two depths shown in cols 5
and 6
• Col. 3 is obtained from tt equation
• Col. 4 is the cumulative obtained by summing Col. 3
• Col. 5 is obtained using depth of next trip equation
• The results is plotted in the following figure

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Trip Time Plot

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Number of Bits per 1000 ft

• Time required per trip over 1000 ft interval is relatively constant
• Total trip time per 1000 ft is equal to the time per trip times the number
of trips per 1000 ft
• The number of bits per 1000 ft, Nb at a given depth can be approximated
by:

'
t
N b'  b
tb
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Number of Bits per 1000 ft

• The drilling time required to drill from D to D+1000 can be obtained by:

e 2.303a2D 2.303a2 *1000

'
t 
d
2.303a2
 e  1

• Multiplying the number of bits per 1000 ft by the time per trip yields trip time
per 1000 ft

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Example
• Compute the trip time requirements for the South China Sea area
between 8,000 ft and 9,000 ft. Use the condition stated in the
previous example

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Solution
• Average trip time can be estimated using tt equation and mean depth of 8,500
ft
t   2.7 
tt  2 s  D  2 60  8,500  8.5 hrs
l
 s  90 
 

• The drilling time is e 0.00034(8,000

t d' 
0.00034* 280
e 0.34  1  64.6 hrs
• Number of bits t b' 64.6
N b'    6.15
t b 10.5
• Trip time = 8.5*6.15 = 52.3 hrs
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Other Time Calculations

• Time for other drilling operations
• Wellsite preparation
• Rig movement and rigging up
• Formation and well bore surveys
• Casing placement
• Hole completion
• Drilling problems

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Use of Historical Record Wells

• Record and average wells need big data or source of data relative to an area.
• For each area there is a learning curve where the drilling performance (if everything
is maintained the same) improves due mainly to improvement in planning, in
optimization and in crew performance.
• As a result of the improvement, record performance is realized in some wells.
• The record performance can used as a reference for cost estimate, and can, therefore,
represent the “minimum” expected cost.
• If the cost is low a mark up of 10 to 20 percent can be applied on the figures obtained
this way

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Record Well Plot

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Drilling Time Well Estimation

Theoretical and actual time verses depth curve showing different stages of drilling activities

Itemized Cost
• A breakdown of the drilling operation is made
• Operations are split into categories and cost centers such as
rig, moving, drilling, tripping, casing, cementing, logging ...
problems, tangibles and intangibles:
• The following shows an example of a check list for most of
the drilling operations with notes that show those for
offshore and onshore.
• The accuracy of the forecast depends on the completeness
of the analysis of cost centers
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Itemized Cost
• Breakdown operations:
• Rig, moving, drilling, tripping, casing, cementing, logging
• Tangibles
• Intangibles
• Apply contingency for problems
• The following table gives the items used in drilling any
oil and gas well.
• Items per well is selected and cost of the date is given.
• Cost are collected ad contingency will be add
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ser Type of services Remarks ser Type of services Remarks

1 Bit supply and services 10.3 completion fluid services
1.1 Rock bits 10.4 material supply
1.2 PDC bits 10.5 engineering services
1.3 Diamond 10.6 lab services
2 Catering & camp services 11 Computer services
2.1 Laundry 11.1 software supply
2.2 Cleaning 11.2 Software services
2.3 Catering 11.3 Hardware supply
2.4 Manpower supply 11.4 Hardware services
3 Cased hole services 12 Conductor driving services
4 Casing accessories 12.1 welding rods
4.1 Centralizers 12.2 Welders
4.2 stop collars 12.3 drive shoe
4.3 Nails 12.4 equipment rental
4.4 cement baskets 12.5 Equipment rental
4.5 Scratchers 13 Consultancy services
4.6 Turbulators 13.1 Technical
4.7 ECP 13.2 Legal
4.8 Z packer 13.3 Contractual
4.9 Radioactive marker subs 14 Contingency
5 Casing circulation services 14.1 Fishing
5.1 CCP (cup or packer type) 14.2 Hole problems
5.2 Stingers 14.3 Directional correction
6 Casing cutting services 15 Coring rental and services
6.1 Cold cutters 15.1 Equipment rental
6.2 Torch cutting 15.2 Core cutting
7 Cement services 15.3 Core analysis
7.1 cement supply 15.4 Special fluid services
7.2 cutting and transportation 16 Custom clearance
7.3 Pumping 17 Direction drilling services
7.4 Additives 18 Directional equipment rental
7.5 Recording 19 Directional survey services
7.6 evaluation and analysis 20 Drill water supply
8 Coil tubing, nitrogen supply, and 21 DST and production testing services
simulation services
8.1 Equipment 21.1 Downhole equipment
8.2 Nitrogen supply 21.2 Surface equipment
8.3 Engineering services 21.3 Engineering services
8.4 stimulation services 22 Environmental and EIA services
8.5 Acidizing 23 Entertainment
9 Communication services 25 Fresh water supply
9.1 Telephone 25.1 Potable water
9.2 Telefax 25.2 Fresh water for drilling
9.3 Mobile and wireless 26 Fuel supply
9.4 Internet services 27 General welding services
9.5 Equipment supply and/or rental 28 Hospital and emergency services
10 Completion packer setting services 29 Inspection services
10.1 Packer setting services 30 Insurance services
10.2 SSV and CL services 31 Land leasing services
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ser Type of services Remarks ser Type of services Remarks

31.1 Land rental 52 Specialized welding services
31.2 Compensation, Indemnification, … 52.1 WH welding
32 Liner hanger supply and services 53 Supervision services
33 Location preparation 54 Tubular running services
33.1 Access road building 55 Waste management services
33.2 Location building 56 Wellhead services, drilling
33.3 Cellar 57 Wellhead services, production
33.4 Restoration 58 Workshop services
34 Location survey 59 Xerox and drafting services
5 LWD and MWD services 55 Waste management services
36 Manpower supply 56 Wellhead services, drilling
36.1 Skilled 57 Wellhead services, production
36.2 Unskilled 58 Workshop services
37 Marine freight services 59 Xerox and drafting services
38 Material transportation services 55 Waste management services
39 Meteorological services 56 Wellhead services, drilling
Miscellaneous supplies (stationery,
40 57 Wellhead services, production
newspapers, …)
41 Mud engineering services 58 Workshop services
41.1 Mud material services 59 Xerox and drafting services
42 Mud logging services 55 Waste management services
43 Open hole logging 56 Wellhead services, drilling
44 Overheads 57 Wellhead services, production
44.1 Office 58 Workshop services
44.2 Sundry expenses 59 Xerox and drafting services
45 Personnel transportation 55 Waste management services
45.1 Air 56 Wellhead services, drilling
45.2 Land 57 Wellhead services, production
45.3 Water 58 Workshop services
46 Pharmaceutical services 59 Xerox and drafting services
47 Rental of rotary equipment 55 Waste management services
47.1 Jars 56 Wellhead services, drilling
47.2 Stabilizers 57 Wellhead services, production
47.3 Shock subs 58 Workshop services
47.4 Monel Services, Directional 59 Xerox and drafting services
47.5 Roller reamers 55 Waste management services
48 Rig move services 56 Wellhead services, drilling
49 Rig's additional supplies 57 Wellhead services, production
49.1 Shaleshaker screens 58 Workshop services
49.2 BOP rubbers 59 Xerox and drafting services
49.3 Drill pipe rubber protectors 55 Waste management services
50 Slick line services 56 Wellhead services, drilling
51 Solid control services 57 Wellhead services, production
51.1 Centrifuge 58 Workshop services
51.2 Mud cleaner 59 Xerox and drafting services

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Rig Time Analysis

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Platform Name/NO. Field – 15

Lat. = 28° 16’ 2.12” N
Surface geographical location
Long.= 33° 15’ 6.19” E
Slot No. Slot# D (-4.6’ N, 5.3’ E), Slot Recovery.
Well Name WELL98
Well Type Development
Easting: 835,966.8 M
Reference Surface Location
Northing: 620,002.5 M
Surface UTM (universal transverse Easting: 835,968.42 M
meridian) location Northing: 620,001.1 M
Primery Target Name Lower Rudies sand (RLS4)
Primery Target UTM (universal Easting: 835,665 M
transverse meridian) location Northing: 619,796 M
8210’ TVD (-8120 FT SS) hard line on SW edge due
Primery Target Depth (TVD), Shape,
to fault, 400 X 400 FT square centered on target with
Diminsions & Orientation
one side of box oriented to 305 deg.
Well Profile, Maximum Inclination Hold, Build & Turn, Hold.
& Final Azimuth 41.8 Max. Inclination and 244.8 Final Azimuth
Authorized Total Depth 9272’ MD, 8660’ TVD (8570’ TVDSS). 49
Authorized Cost P50:$5.15 MM

P50 Days: 66 (8.5 day pre-spud+45.8 day dry hole+11.7 day

Authorized Days
completion)
Technical Limit Time (Days) 47 DAYS
KPI (Days/10 K Ft) 45
Rig heading 43°
Leg penetrations 6 ft, 6 ft, 5 ft, 5 ft
Water depth 127 FT
RT- MSL 86 FT
RT-ML 213 FT
16” Hole: All WELL-15 PLTF.
Offset Wells 12.25” Hole: WELL15, WELL18, WELL24
8.5” Hole: WELL15, WELL18, WELL24
Completion Lower Rudies sand producer
Type
Tubing 3.5” 13% cr.x 4.5” steel Completion string
C.H.Housing Cameron 13.5/8”X3000 PSI
(B.Head)
Completion And Wellhead
Cameron 13.5/8”X3M PSI- 11”X3M
T.H.Spool
Psi (F), 45 DEG, EE TRIM
50
Tubing Hanger 4-1/2” FBB, NACE TRIM

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Ser Cost Center Land Offshore

1 I. Intangibles
2 Pre-drilling, data collection, scouting, ... x x
3 Planning, approval(s), permits, right of way x x
4 Others: de-mining, clearance,... x x
5 Water well for drilling x no
6 Road construction, surveying, marking, ... x no
7 Location preparation x x
8 Divers x
9 Location Surveying x x
10 Sonar and sparker surveying no x
11 Soil boring, analysis and reporting no x
12 Marking with buoys no x
13 Mud pit, reserve water pit x no
14 preparing drilling site, cellar ... x no
15 Move in, mobilization x x
16 Hammering services x x 51

Ser Cost Center Land Offshore

17 Bits x x
18 Directional surveying and equipment rental x x
19 Drilling Fluids services x x
20 Mud x x
21 Engineering x x
22 Materials, chemicals x x
23 Mud logging/detection x x
24 Equipment rental/their services x x
25 Others x x
26 Logging services x x
27 Casing/Liner services x x
28 Cementing services x x
29 cement, additives, bulk material, drop plugs x x
30 retainers, non-retrievable x x
31 equipment rentals x x
32 services x x 52

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Ser Cost Center Land Offshore

33 Rental Rotary drilling tools: x x
34 Jars x x
35 HWDP, collars, DP x x
36 Additional BOP's x x
37 Fishing services x x
38 Transportation of personnel x x
39 helicopters, fixed wings x x
40 Busses x ?
41 The rig and its tool x x
42 Trucks, cranes, dozers, forklifts x x
43 Boats no x
44 Logistics and support services x x
45 Telecommunication x x
46 Labor services x x
47 Roustabouts, clerks, welders x x
48 Computer services x x 53

Ser Cost Center Land Offshore

49 Salaries, supervision and office expense x x
50 Foreman, geologist x x
51 Overall office expense x x
52 Fuels and lubricants x x
53 Potable water and drill water x x
54 Drill stem testing x x
55 Stimulation, nitrogen services x x
56 Acidizing, fracturing, ... x x
57 Coring, coring fluids x x
58 Completion intangibles x x
59 Rentals x x
60 Services x x
61 Fluids x x
62 Chemicals x x
63 Perforating x x
64 Putting well on production x 54

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Ser Cost Center Land Offshore

65 Lost tools, damaged, worn x x
66 Pollution control x x
67 Guards, security x x
68 Entertainment, recreation, ... x x
69 Insurance cost x x
70 Workshop: manpower and consumables x x
71 Stationery x x
72 Corrosion and related services x x
73 Move out, demobilization x x
74 Clean up of location after finishing the drilling x maybe
operation
75 Miscellaneous x x
76 Accommodation/meals (above normal) x x
77 II. Tangibles x x
78 Conductors, drive shoes, ... x x
79 Casing/Liner, ECP's, accessories x x 55

Ser Cost Center Land Offshore

80 Wellheads, hangers, seal assemblies x x
81 Completion, downhole equipment x x
82 Christmas trees and surface equipment x x
83 surface valves and control equipment x x
84 Surface facilities: tanks, separators, ... x x
85 Safety system x x
86 portion of platform and production facilities for x x
the well, if required
Total Well Cost: the sum of all of these

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Contingency
• Contingency of 10%, 15%, or 20% is applied on the estimate of
well cost (itemized or others) depending on
• the type of the well: exploration/development
• well depth
• drilling difficulties
• remoteness
• other risks
• weather
• availability of data
• personal feelings 57

Note
• Categories of cost of services or equipment rental based on
way of payment:
• daily, weekly, monthly, lumpsum
• rig controlled (RC), or Not Rig-controlled (NRC): the cost
is depending on rig operation and performance (fishing,
logging, cementing, running casing, …)
• Approved price list
• Actual cost plus overhead
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End

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