Bakken has lowest average drilling and completion cost

By Patrick C. Miller | April 06, 2016

Oil and gas industry upstream costs in 2015 were 25 percent to 30 percent below 2012 levels in the Bakken and four other onshore areas evaluated, according to a recent study by IHS Global Inc. (IHS) for the U.S. Energy Information Administration (EIA).

To better understand the costs of upstream drilling and production activity, EIA commissioned IHS to study costs on a per-well basis in the Bakken, Eagle Ford, Marcellus and Permian (Delaware and Midland basins) plays. Titled “Trends in U.S. oil and natural gas upstream costs,” the report is available here.

The period studied is from 2006 through 2015, with forecasts to 2018. Well costs in the regions studied were:

- Bakken wells costs were $7.1 million in 2014, but will drop to $ 5.9 million in 2015.

- Eagle Ford wells averaged $ 7.6 million in 2014, but will fall to $ 6.5 million in 2015.

- Marcellus wells will cost $ 6.1 million in 2015 after having an average cost of $6.6 million in 2014.

- Midland Basin wells were $ 7.7 million in 2014, but will drop to $ 7.2 million in 2015.

- Delaware Basin wells cost $ 6.6 million in 2014 and will drop to $5.2 million during 2015.

The study found that since 2012 when costs were at their highest in the past decade, costs per well have decreased because of reduced overall drilling activity and improved drilling efficiency and tools. Changes in costs and well parameters—such as the need to drill deeper or longer lateral wells—have affected the onshore oil plays differently in 2015, with recent per-well costs ranging from 7 percent to 22 percent below 2014 levels.

“The adoption of best practices and the improvement of well designs have reduced drilling and completion times, decrease total well costs, and increase well performance. Greater standardization of these drilling and completion practices and designs across the industry should continue to lower costs,” the report said.

According the study, Bakken wells are more costly because of long well lengths and the use of higher-cost manufactured and resin coated proppants. Marcellus wells, by comparison, are the least costly because the wells are shallower and use less expensive natural sand proppant.

However, the reported noted that the Bakken play has consistently had the lowest average drilling and completion costs of the basins and plays reviewed. Improvements in drilling rig efficiency and completion crew capacity helped drive down drilling costs per total depth and completion costs per lateral foot. Recent declines are partly a result of an oversupply of rigs and service providers. Standardization of drilling and completion techniques will continue to push costs down, the report said.

EIA said it is using the observations developed in the IHS report as a guide to potential changes in near-term costs as exploration and production companies deal with a challenging price environment.

 

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