Page 306 - Drilling Technology in Nontechnical Language

Chapter 12 – MANAGING DRILLING OPERATIONS 297

Depth-dependent costs

Depth-dependent costs will increase as the well deepens. Typical
depth-dependent costs relate to casings, cement, completion tubings,

drilling fluid, and drill bits. These might form up to one-third of the total
well cost, unless problems occur that substantially increase the time-
dependent costs.

Support costs (overheads)

Overheads are the costs that are incurred by the office and other off-
rig activities. Examples include engineering work, such as data analysis
or studies, and support staff, such as secretaries, as well as a proportion
of the cost of the office. Some of these costs are time dependent and some

are fixed costs.

Contingency costs

There are some problems that can be expected to occur, with a small or
large probability that any particular problem will actually occur. The cost
of each event—the contingency cost—is the probability of its occurrence
multiplied by the cost if it actually does occur. Say that in a particular
hole section, offset data predicts that mud losses might occur. If the cost
of those losses might be $50,000 and the likelihood of losses is 10%, the
contingency cost is $5,000. An example estimate of contingency costs is

given in figure 12–4.

Accuracy of the estimate

There is one other element to the cost estimate. The accuracy of

the estimate (the confidence in the final figure) must be given. If good

offset data is available, the accuracy generally will be that the final cost
should be within 10% of the estimate, or, exceptionally, 5%. For an
exploration well, the accuracy will be considerably less—25% would be a
reasonable assumption.

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