Major improvements in well productivity from new technology andhigher success rates in gas drilling will help producers meetanticipated robust growth in U.S. gas demand over the next twodecades, according to a Gas Research Institute study.

“U.S. Oil And Gas Drilling Costs: Historical Trends And A LookInto The New Millennium” (GRI-98/0137) concludes that producerswill meet the expected growth in consumption with drilling levelsand expenditures that remain well below historic highs. GRIprojects a 2% annual increase in U.S. gas consumption over the nexttwo decades, from the current 21.5 Tcf to more than 31 Tcf in 2015.

Increased offshore drilling is expected to make a majorcontribution in meeting growing gas demand. GRI projectsultra-deep-water drilling will increase from 3% of total offshoreactivity in 2000 to 24% in 2015. During this period, the averagecost per foot of drilling offshore wells is expected to remainrelatively flat, although the mix of water depths will change. Theaverage cost of drilling at any specific water depth is projectedto decrease because of technology improvements.

“Technology is critical to drilling economics, and advances indrilling technology are allowing drillers to work much smarter,”said John Cochener, who announced the GRI findings Monday at theannual Offshore Technology Conference in Houston. “Technologiesthat improve drilling efficiencies reduce the required drillingtime, resulting in lower costs. Rigs that reduce drilling time arealso able to drill more wells, thus alleviating the need foradditional rigs.

“This means that drilling productivity improvements and higherdrilling success rates can be expected to partially offsetanticipated increases in expenditures normally associated withgrowth in drilling footage.”

Major technology advances cited in the study include 3D seismicand improved drills bits and fluids.

Among the study’s other key findings:

GRI forecasts drilling efficiency (measured in annual drilling footage per active onshore rig) will improve at an average of 1.5% per year, which is consistent with the past three decades. Drilling costs per foot for each onshore depth interval are expected to increase slowly. Because the depth of the typical well will increase by 500-600 feet, the general trend will be to higher drilling costs per well.

GRI’s projections of future drilling activity and costs are based on an analysis of historical data that identified five “mega-trends” that shape the cost of drilling:

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