Cost analysis of oil, gas, and geothermal well drilling

This paper evaluates current and historical drilling and completion costs of oil and gas wells and compares them with geothermal wells costs. As a starting point, we developed a new cost index for US onshore oil and gas wells based primarily on the API Joint Association Survey 1976-2009 data. This index describes year-to-year variations in drilling costs and allows one to express historical drilling expenditures in current year dollars. To distinguish from other cost indices we have labeled it the Cornell Energy Institute (CEI) Index. This index has nine sub-indices for different well depth intervals and has been corrected for yearly changes in drilling activity. The CEI index shows 70% higher increase in well cost between 2003 and 2008 compared to the commonly used Producer Price Index (PPI) for drilling oil and gas wells. Cost trends for various depths were found to be significantly different and explained in terms of variations of oil and gas prices, costs, and availability of major well components and services at particular locations. Multiple methods were evaluated to infer the cost-depth correlation for geothermal wells in current year dollars. In addition to analyzing reported costs of the most recently completed geothermal wells, we investigated the results of the predictive geothermal well cost model WellCost Lite. Moreover, a cost database of 146 historical geothermal wells has been assembled. The CEI index was initially used to normalize costs of these wells to current year dollars. A comparison of normalized costs of historical wells with recently drilled ones and WellCost Lite predictions shows that cost escalation rates of geothermal wells were considerably lower compared to hydrocarbon wells and that a cost index based on hydrocarbon wells is not applicable to geothermal well drilling. Besides evaluating the average well costs, this work examined economic improvements resulting from increased drilling experience. Learning curve effects related to drilling multiple similar wells within the same field were correlated. (c) 2014 Elsevier B.V. All rights reserved.