1997 U.S. drilling costs highest in years

The cost of oil and gas drilling operations in the U.S. rose in 1997 to its highest level in more than a decade, American Petroleum Institute said.

According to the 1997 Joint Association Survey (JAS) on drilling costs, the U.S. oil and gas industry spent 46.9% more last year to drill and equip wells than it did in 1996. Total drilling outlays were pegged at $16 billion in 1997 vs. $10.9 billion the prior year.

The jump in drilling costs parallels the sharp upswing in the number of wells completed last year, to the highest level since the Persian Gulf crisis year of 1991. Last year, the U.S. oil and gas industry also posted its highest numbers for drilling footage since 1988.

Helping fuel the runup in costs was a growing emphasis on deep to ultradeep (12,500 ft to more than 20,000 ft) exploratory targets, both onshore and offshore. This helped push the average cost per well and average cost per foot to their highest levels in 15 years.

Another factor in the rising price tag for drilling and completing wells is the growing significance of horizontal drilling in U.S. oil and gas field development schemes. While more costly than vertical wells, horizontal wells often are more cost-effective in terms of increased production or enhanced reservoir maintenance.

According to the JAS, horizontal drilling levels in 1997 were roughly flat with 1996 levels, with 1,111 horizontal wells completed and $1.1 billion spent. However, the average depth of these wells last year was 7% greater than in 1996.

Sector breakouts

With its growing ability to drill and complete wells in ever-deeper waters, U.S. operators spent $4 billion offshore in 1997, double the amount spent in 1996. According to the survey, the Gulf of Mexico is the most important U.S. offshore drilling theater. Drilling and completion activities there accounted for 75% of all U.S. offshore outlays in 1997.

Onshore spending for exploratory oil and gas wells shallower than 10,000 ft more than doubled in 1997 from the prior year. Hot spots for this kind of drilling action were in West Texas and throughout the thrust environments of the northern Rocky Mountains of Montana, North Dakota, Wyoming, and Nebraska. Operators also chalked up numerous exploratory successes in the gas-rich areas of East Texas' Gulf Coast basin and the Appalachians.

Another sector that is maintaining a significant share of U.S. drilling activity is coalbed methane drilling. In 1997, operators drilled and completed 668 coalbed methane wells at a total cost of $69 million, accounting for total foot- age of 935,102 ft.