Page 163 - Introduction to Petroleum Engineering

150 DRILLING

formations that will be penetrated. The design will include drilling and casing oper-
ations. An authorization for expenditure (AFE) is prepared after a detailed drilling
plan is complete. In general, the depth and complexity of the well will have the
greatest impact on total cost. Complexity refers to variations in formation properties
for each formation that is encountered during the drilling of the well. Completion
costs usually dominate the cost of drilling shallow wells. Completion and drilling
costs are often comparable for medium‐depth wells. The cost of drilling deep wells
is usually dominated by drilling costs. The AFE will include tangible and intangible
costs, dry hole costs, completed well costs, overhead charges, and contingencies.
With the AFE completed, the production company must obtain stakeholder
support from anyone involved with the well. Stakeholders include asset team mem-
bers, different levels of management within the company, other partners, royalty
owners, surface rights owners, regulators, public interest groups, and anyone that has
a say on what happens to the well. Different stakeholders have different concerns or
interests in the project that must be addressed. To obtain permission to drill in the
United States, an application for permission to drill must be submitted to proper
governing agencies, such as the federal government and the state agency regulating
oil and gas development. Getting that permission can be a slow and iterative process,
including site visits. Drilling operations must wait until permission is obtained.
Most production companies do not drill wells using their own personnel and
equipment, so they must find a drilling contractor. The drilling contract will specify
the start or spud date of the well and drilling costs. The drilling contractor will drill
the well according to contract specifications. There are three types of drilling
contracts. A turnkey contract will have a fixed price for drilling and equipping a well.
All of the risk in this case falls on the drilling contractor to meet the terms of the
contract. Footage contracts are based on cost per foot to a total depth (TD). In this
case, the production company and the drilling contractor share the risk of drilling the
well. Day‐rate contracts are based on cost per day to drill and complete the well, and
all risk falls on the production company.

8.3.2 Site Preparation
The next step after obtaining all permissions is to prepare a site for the drilling
operation. This step includes building a road to the location, clearing and building the
location, drilling for and setting conductor pipe, drilling mouse and rat holes, and
setting anchors (usually four) for supporting rigs.
The size of onshore locations varies from about 2 to 5 acres, largely depending on
the amount of room needed for equipment during completion operations. Topsoil on
location is pushed to one side and saved for later site restoration activities. Berms are
often built to control spills. One or two pits for used drilling and completion fluids
are excavated and lined as required by governing agencies.
Conductor pipe is the first and largest diameter casing to be cemented into place
for a well. It serves as a foundation for the start of the drilling operation. A small
drilling rig, often truck‐mounted, drills the hole and sets the casing. Conductor pipe