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API: Industry Spends Twice as Much on Gas Drilling

API: Industry Spends Twice as Much on Gas Drilling

Following a four-year upswing in spending between 1995 and 1998, domestic oil and natural gas industry expenditures for drilling in the U.S. fell 15.2% in 1999, the American Petroleum Institute (API) reported last week.

Overall, the industry spent an estimated $14.9 billion on drilling for oil and gas last year, down from $17.6 billion for 1998, according to API's Joint Association Survey on Drilling Costs.

The industry exhausted 51% of its total U.S. drilling budget on looking for natural gas last year, more than double the amount (24%) it spent on searching for oil, the survey said. Last year marked the 12th consecutive year that the industry spent more on drilling for gas than oil, it noted.

The survey further revealed the industry spent $6.7 billion --- or nearly half of its total U.S. budget --- on drilling and completing wells in steadily deeper waters. The number of offshore wells drilled last year and their costs rose 28% and 48%, respectively, from 1998, it said.

Not surprisingly, the API survey found that most of the drilling and completion activities in the U.S. offshore were confined almost entirely to the Gulf of Mexico. It estimated the Gulf accounted for nearly 98% of all offshore expenditures.

Onshore, gas exploration kept a steady pace in 1999 largely due to activity concentrated in Central Alabama, North Texas RRC 9, East Texas RRC 3 and several areas in the Rockies - northern New Mexico, Montana and Wyoming - where drilling in recent years remains increasingly focused on natural gas, particularly coalbed methane work, the survey said.

Production of methane gas from coal seams has become an important source of pipeline quality gas, the API said. In 1999, it reported 908 coalbed methane gas wells were completed at a total drilling cost of $66.1 million.

In addition, horizontal drilling of wells is becoming a more viable option for field development, it noted. Operators spent $795 million to drill 4.9 million feet of hole for 576 horizontal wells in 1999, according to the survey.

Susan Parker

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