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Survey: U.S. Drilling Costs Highest in More Than Two Decades

The domestic oil and natural gas industry spent 37% more on drilling in 2003 than in the previous year, according to the 2003 Joint Association Survey on Drilling Costs (JAS) released by the American Petroleum Institute (API). The only time U.S. operators exceeded 2003's drilling and completion cost figure was in 1982, the survey said.

Total oil and gas drilling expenditures were estimated to be $36.9 billion in 2003, the latest figure available, compared to $26.9 billion in 2002, the JAS survey reported. The spread between oil and gas drilling in the United States, both onshore and offshore, continues to favor natural gas with a definite trend towards deeper gas drilling, it noted.

The survey revealed that 2003 was the 16th consecutive year the industry spent more drilling for natural gas than for oil. Gas expenditures accounted for 58% of the total drilling expenditures, compared to oil's 22%, the survey said.

It reported that 19,205 natural gas wells were drilled in 2003, up 22% from the previous year, for an average well cost of $1.1 million. In contrast, an estimated 7,968 oil wells were drilled in the same year, up 24.5% from 2002, for an average well cost of $1.04 million.

Oil and gas producers spent a significant sum -- $12.1 billion -- in the offshore in 2003, according to the JAS survey. U.S. offshore exploration remains almost entirely in the Gulf of Mexico region. For the fourth consecutive year, the survey said the Gulf region drilling and completion activities accounted for 99% of all offshore expenditures.

Onshore, total expenditures were up 36% in 2003 over the year-earlier period, it noted. The hottest areas were Alaska, Mississippi, Montana and the Texas Panhandle, where onshore expenditures rose more than 60%.

Production of methane gas from coal seams became an important source of pipeline quality gas in 2003. The survey estimated that 4,151 coalbed methane gas wells were completed in that year at a total drilling cost of $743 million. Total footage drilled in search of this unconventional fuel source was 6.4 million.

Participants in the survey were API, the Independent Petroleum Association of America and the Mid-Continent Oil & Gas Association.

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