Spending on Offshore and Gas-Directed Drilling Soars
The industry spent 35% more on offshore drilling in the U.S. and
about 10% more on gas-directed drilling last year than in 1997,
according to the 1998 Joint Association Survey on Drilling Costs
(JAS) by the American Petroleum Institute.
U.S. oil and gas drilling operation expenditures rose in 1998
from the previous year to its highest level since 1985, API said.
The cost increase occurred despite sufficient supplies of crude oil
worldwide, falling oil and natural gas prices and weakened
Southeast Asian economies. According to the survey, the industry
spent 9.6% more in 1998 to drill and equip wells than it did in
1997. Total drilling expenditures were estimated to be $17.6
billion in 1998, compared with $16 billion during the previous
For the first time in four years, gas targets dominated domestic
drilling as the oil-well share of total wells drilled fell 10% from
the previous year. Also, an emphasis on deep to ultra-deep (10,000
to 20,000+) development objectives, mainly offshore, fueled the
highest average cost per well and the highest average cost per foot
ever. Operators spent $5.5 billion offshore in 1998, a 35% jump
from the previous year, drilling and completing wells in steadily
deeper waters. The number of offshore development wells drilled and
their costs rose 40% and 71% respectively from the previous year.
Exploration in the U.S. offshore remained confined almost entirely
to the Gulf region where drilling and completion activities
accounted for nearly 85% of all offshore expenditures in 1998.
Onshore, expenditures for deep development dry hole activity
(greater than 10,000 feet) increased nearly 30% in 1998 from the
previous year. Development onshore drilling rebounded in 1998,
compared with 1997, largely due to activity concentrated in East
Central California's Kern County, Central Alabama, the Texas
Panhandle and East Texas Basin, and those areas of the
Rockies-northern New Mexico, Utah and Wyoming-where drilling in
recent years has increasingly focused on natural gas.
Advances in technology have made horizontally drilled wells a
viable option for field development. Horizontal drilling activity
in 1998 remained at roughly the same level compared with the
previous year with 1,016 horizontal wells completed and $1.1
billion spent, a nearly 4% increase over 1997 expenditures.
Copies of the 1998 Joint Association Survey on Drilling Costs
are available for $450. Call (202) 682-8375. There is a 20%
discount for API members.
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