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Spending on Domestic Oil, Gas Drilling Set Record in 2004, Survey Says

January 16, 2006
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Total drilling expenditures for the domestic oil and natural gas industry set a record in 2004, with gas drilling costs significantly outpacing oil, according to the results of the 2004 Joint Association Survey on Drilling Costs.

Drilling costs for the U.S. oil and gas industry in 2004 were estimated at $56.2 billion -- the most ever spent -- compared to $36.9 billion spent during the previous year, reported the American Petroleum Institute, the Independent Petroleum Association of America and the Mid-Continent Oil & Gas Association, which sponsored the survey.

Overall, the industry spent 52% more to drill and equip wells in 2004 than in the prior year, according to the survey that was released last week.

It revealed that industry expenditures for gas drilling exceeded spending for oil for the 17th consecutive year. In 2004, gas expenditures accounted for 65% of total drilling expenditures, while oil represented 22% of the drilling costs and dry holes accounted for 13%.

The survey further showed that producers spent more to drill onshore than offshore in 2004. In 2004, onshore drilling expenditures totaled $44.8 billion, almost four times more than what was spent offshore. Onshore spending, especially for natural gas, rose sharply in northern Louisiana, Oklahoma, the Rocky Mountain states and in the Central and Eastern regions -- as well as the Texas Panhandle, it noted.

In contrast, operators spent $11.4 billion to drill offshore in 2004 where exploration remains confined almost entirely to the Gulf of Mexico region. For the fifth straight year, drilling and completion activities there accounted for 99% of all offshore expenditures, the survey said.

It also reported that operators spent $4.6 billion drilling horizontally in 2004 and $1.2 billion in search of coalbed methane gas.

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