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

Overall, the industry spent an estimated $14.9 billion ondrilling for oil and gas last year, down from $17.6 billion for1998, according to API’s Joint Association Survey on DrillingCosts.

The industry exhausted 51% of its total U.S. drilling budget onlooking for natural gas last year, more than double the amount(24%) it spent on searching for oil, the survey said. Last yearmarked the 12th consecutive year that the industry spent more ondrilling 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 andcompleting wells in steadily deeper waters. The number of offshorewells 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 drillingand completion activities in the U.S. offshore were confined almostentirely to the Gulf of Mexico. It estimated the Gulf accounted fornearly 98% of all offshore expenditures.

Onshore, gas exploration kept a steady pace in 1999 largely dueto activity concentrated in Central Alabama, North Texas RRC 9,East Texas RRC 3 and several areas in the Rockies – northern NewMexico, Montana and Wyoming – where drilling in recent yearsremains increasingly focused on natural gas, particularly coalbedmethane work, the survey said.

Production of methane gas from coal seams has become animportant source of pipeline quality gas, the API said. In 1999, itreported 908 coalbed methane gas wells were completed at a totaldrilling cost of $66.1 million.

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

Susan Parker

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