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% last year, the American Petroleum Institute(API) reported.

Overall, the industry spent an estimated $14.9 billion ondrilling for oil and gas in 1999, down from $17.6 billion for theprior year, 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 in 1999, the survey said. Lastyear marked the 12th consecutive year that the industry spent moreon 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. drilling budget — on drillingand completing wells in steadily deeper waters. The number ofoffshore 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 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.

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