Oil and natural gas industry spending on drilling and equipping wells in the United States surged again in 2007, hitting an all-time high of $226.4 billion, more than double the previous record of $109.8 billion set in 2006, according to a joint survey of drilling costs cited by the American Petroleum Institute (API).
Spending on natural gas wells more than doubled to $119.1 billion in 2007 — the most recent year for which data was available — from $59.3 billion in 2006, while oil well expenditures rose 94% to $72.3 billion from $37.3 billion in 2006, the 2007 Joint Association Survey on Drilling Costs (JAS) reported. Overall the industry spent 106% more to drill and equip oil and gas wells in 2007 than the prior year.
For the 20th year in a row, producers spent more drilling for natural gas than oil in 2007, the survey said. Natural gas accounted for 53% of the total drilling expenditures in 2007, while oil accounted for 32% and dry holes made up the 15% balance.
The average cost per natural gas well was $3.9 million in 2007, up 105% from 2006’s $1.9 million. Per foot, gas well expenditures averaged $604 in 2007, up from $348 in the prior year. For oil wells, average per-well spending increased 82% to $4 million in 2007, compared with $2.2 million in 2006, according to JAS.
“Strong demand and historically high prices spurred increased competition for limited material and labor, and combined with record-high costs for steel, pushed up drilling costs,” said Hazem Arafa, director of API’s statistics department.
“But despite a doubling of the costs to drilling and develop wells, we also witnessed a rise in both the number of wells drilled, which increased 4% from 2006, and the average depth of those wells, which increased 9%. This demonstrates the industry’s commitment to developing our oil and natural gas resources.”
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