Cap 17 Well Costing - Libro Well Engineering and Cons

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W ELL C OSTING
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17
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Content
1 Reasons
2 Elements Of Well Costing
3 Drilling Time Estimate
4 Total AFE
5 Factors Affecting Well Costing
6 Risk Estimates
7 Contracting Strategies
8 Future Trends
1.0
. . . . . .Reasons
. . . . . . . . . .For
. . . .Costing
..................................................
As will be discussed later, there many elements which comprise the well cost. These range
from rig, casing, people, drilling equipment etc.
The final sheet summarizing the well cost is usually described as the AFE: Authorisation
For Expenditure. The AFE is the budget for the well. Once the AFE is prepared, it should
then be approved and signed by a senior manager from the operator.
The AFE sheet would also contain: project description, summary and phasing of
expenditure, partners shares and well cost breakdown. Details of the well will be attached to
the AFE sheet as a form of technical justification.
There are several reasons for producing a well cost, including:

1. Budgetary control
2. Economics
3. Partners recharging
4. Shareholders
Well Engineering &Construction 743

WE L L C O S T I N G
17 Factors Affecting Well Costs
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The AFE is then used as a document for partners recharging, paying contractors and an
overall control on the well spending.
2.0
. . . . . .Factors
. . . . . . . . Affecting
. . . . . . . . . . Well
. . . . . Costs
.........................................
Well costs for a single well depend on:
1. Geographical location: land or offshore, country
2. Type of well: exploration or development wells, HPHT or sour gas

3. Drillability
4. Hole depth
5. Well target(s)
6. Profile (vertical/ horizontal /multilateral)
7. Subsurface problems
8. Rig costs and performance: land rig, jack-up, semi-submersible or drillship and
rating of rig
9. Completion efficiency
10. Knowledge of the area: wildcat, exploration or development
The total well costs for a development drilling programme comprising several wells depend
on:
Rig rate
Well numbers and well type
Total hole depth
Well layout and spacing
Specifications of equipment
Target tolerances
744 Well Engineering & Construction

.....
Drilling Time Estimate
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Water depth
3.0
. . . . . .Drilling
. . . . . . . .Time
. . . . . .Estimate
..................................................
The time spent on a well consists of:
Drilling times spent on making hole, including circulation, wiper trips and
tripping, directional work, geological sidetrack and hole opening.
Flat times spent on running and cementing casing, making up BOPS and
wellheads.
Testing and completion time.
Formation evaluation time including coring, logging etc.
Rig up and rig down of rig.
Non-productive time, see Non Productive Time (NPT) on page 755 for
details.
Before an AFE can be prepared, an accurate estimate of the time required to drill the well
must be prepared. The time estimate should consider:
1. ROP in offset wells. From this the total drilling time for each section may be
determined.
2. Flat times for running and cementing casing
3. Flat times for nippling Up/down BOPs and nippling up wellheads
4. Circulation times.
5. BHA make up times.
E xa mp le 1 7. 1: Cal cul at io n o f t im e - de pt h c ur v e
Assume the following well design for Well Pak-1:
36 Hole / 30" Conductor 50 m BRT
26 Hole / 20" Casing 595 m BRT
17.5Hole / 13.375" Casing 1421 m BRT
Well Engineering & Construction 745

17 Drilling Time Estimate
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12.25 / 9.625" Casing 2334 m BRT
8.5 Hole / 7" Casing 3620 m BRT
Total Depth 3620 m BRT
From three offset wells, the following data was established for average ROP for each hole
section:
36 Hole 5.5 m/hr
26 Hole 5.5 m/hr
17.5Hole 7.9 m/hr
12.25 4.6 m/hr
8.5 Hole 2.5 m/hr
The expected flat times for this well are shown in Table 17.1:
Table 17.1 Estimated flat times
Running &
Casing cementing NU Total
Size (days) (days) (days)
26 0.5 2 2.5
20" 1.0 1.5 2.5
13 3/8" 1.0 1.0 2.0
9 5/8" 1.0 1.0 2.0
7" 2.0 1.5 3.5
Total 12.5
Calculate the total drilling time and plot the depth-time curve.

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Drilling Time Estimate
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So lu ti on
1. We must first calculate the times required to drill each hole section using ROPs from
offset data. At this stage it is advisable to use the best ROP values from offset well. This is
because it is always possible to match or exceed previous performance if similar or better
equipment is used. Indeed, some engineers may increase the possible ROP for the new well
if it is known that high quality and up-to-date equipment may be used on the new well.
Hence at this stage all drilling time estimates do not allow for down time. As will be seen
later this is called the P10 value.
Using the above raw data, Table 17.2 can be established for the planned drilling days:
Table 17.2 Calculations of planned drilling times
Hole Size Metres Offset Planned Planned

To Drill ROP Hours Drilling
(m/hr) A/B Days
A B
26" x 36" 47 5.5 8.5 0.35
26" 545 5.5 99.1 4.13
17 1/2" 826 7.9 104.6 4.36
12 1/4" 913 4.6 198.5 8.27
8 1/2" 1286 2.5 514.4 21.43
925.1 38.5
Using the data from Table 17.2 and the flat times from Table 17.1, Table 17.3 can be
constructed:

17 Detailed Time Estimate
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Table 17.3 Time-depth calculations
Operations Description Depth Days

MD m BRT Activity Cum.
Rig up to drill 1.00 1.00
Drill 36" hole to 50m 50 0.35 1.35
Run / cmt 26" conductor / NU diverter 2.50 3.85
Drill 26" hole to 596m 596 4.13 7.98
Run / cmt 20" csg / NU wellhead 2.5 10.48
Drill 17.5hole to 1422m 1422 4.36 14.84
Log hole 1.00 15.84
Run / cmt 13 3/8" csg / NU 2.0 17.84
Drill 12 1/4" hole to 2334m 2334 8.27 26.11
Log 12 1/4" hole 0.50 26.61
Run / cmt 9 5/8" csg / NU 2 28.61
Drill 8 1/2" hole to 3620m 3620 21.43 50.04
Log 8 1/2" hole (full open hole logging) 4.00 54.04
Run / cmt 7 liner , run CBL/VDL 3.5 57.54
Displace hole to completion fluids, prepare well for testing 1.5 59.04
Total Days 59
Using data from Table 17.3, a time-depth curve, Figure 17.1 can be constructed. The graph
shown is the planned time curve. During drilling, actual drilling times are plotted on the
same graph to compare actual performance against planned performance.
4.0
. . . . . .Detailed
. . . . . . . . .Time
. . . . . .Estimate
.................................................
In the previous section, time estimates were based on major operations such as drilling a
hole section where drilling time, tripping, circulating, making BHA etc. were lumped
together.
Detailed time estimates can be prepared for each hole section by considering the individual
operations involved. This exercise requires experience on part of the engineer and also
knowledge of drilling in he area and knowledge of the expertise of the drilling contractor.

.....
Elements of Well Costing
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Table 17.4 gives an example of this for a North Sea offshore well for two hole sections.
Figure 17.1 Time-depth curve
5.0
. . . . . .Elements
. . . . . . . . . . of. . .Well
. . . . .Costing
..............................................
There are three main elements of the well cost. No matter what service or product is used, it
will fall under one of the following three cost elements, namely:
1. Rig costs
2. Tangibles
3. Services

17 Elements of Well Costing
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Table 17.4 Detailed time estimate for 30 conductor
OPERATION HOURS MD CUM HOURS CUM DAYS

1 Jack Up Transit 48.0 0.0 48.0 2.00
2 Jack up 6.0 0.0 54.0 2.25
3 Pre-Load 12.0 0.0 66.0 2.75
4 Skid Rig 6.0 0.0 72.0 3.00
5 Make Up 36" hole opener & 26" bit 4.0 0.0 76.0 3.17
6 Drill Mudstone at 90 ft/hr (340ft) 3.8 617.0 79.8 3.32
7 Pump 100 bbl pill/drop totco 1.0 617.0 80.8 3.37
8 POOH recover Totco 0.5 617.0 81.3 3.39
9 Rest Hole 1.0 617.0 82.3 3.43
10 RIH check for Fill 0.5 617.0 82.8 3.45
11 Circulate to Hi Vis Mud 1.0 617.0 83.8 3.49
12 POOH 1.0 617.0 84.8 3.53
13 Rig up to run 30" Conductor 3.0 617.0 87.8 3.66
14 Run 30" conductor 5.0 617.0 92.8 3.87
15 Run Cementing stinger 2.0 617.0 94.8 3.95
16 Circulate annulus clean 2.0 617.0 96.8 4.03
17 Pump cement 2.5 617.0 99.3 4.14
18 Rig down cementing stinger 1.0 617.0 100.3 4.18
19 Install riser support 3.0 617.0 103.3 4.30
20 Cut and dress 30" conductor 3.0 617.0 106.3 4.43
21 Install diverter 6.0 617.0 112.3 4.68
22 Make up 26" bit and BHA 4.0 617.0 116.3 4.84
Drill Quaternary & Mercia at 80 ft/hr
23 (663ft) 8.3 1280.0 124.6 5.19
24 Pump 100 bbl pill/drop totco 1.0 1280.0 125.6 5.23
25 POOH recover Totco 1.0 1280.0 126.6 5.27
26 Rest Hole 1.0 1280.0 127.6 5.32
27 RIH check for Fill 1.0 1280.0 128.6 5.36
28 Circulate to Hi Vis Mud 1.0 1280.0 129.6 5.40
29 POOH 2.0 1280.0 131.6 5.48

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Rig Costs
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30 R/U & run logs - BHC/GR 3.0 1280.0 134.6 5.61

30 Rig up to run 20" Conductor 3.0 1280.0 137.6 5.73
31 Run 20" conductor 7.0 1280.0 144.6 6.02
32 Run Cementing stinger 3.0 1280.0 147.6 6.15
33 Circulate annulus clean 2.0 1280.0 149.6 6.23
34 Pump cement 2.5 1280.0 152.1 6.34
35 POH & Rig down cementing stinger 1.0 1280.0 153.1 6.38
36 Open washports 2.0 1280.0 155.1 6.46
37 Flush Washports 1.0 1280.0 156.1 6.50
38 Close Washports 2.0 1280.0 158.1 6.59
39 Cut and dress 20" conductor 6" below 30" 3.0 1280.0 161.1 6.71
40 Run Gyro 5.0 1280.0 166.1 6.92
Section Totals 166.1 166.1 6.92
5.1 Rig Costs
As the name implies, rig costs refer to the cost of hiring the drilling rig and its associated
equipment. This cost can be up to 70% of well cost, especially for semi-submersible rigs or
drilling ships.
Rig cost depends entirely on the rig rate per day, usually expressed as $/day.
Rig rate depends on:

Type of rig
Market conditions
Length of contract
Days on well
Mobilisation/ Demobilisation of rig and equipment
Supervision
Additional rig charges

17 Tangibles
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5.2 Tangibles
Tangibles refer to the products used on the well. These include:

Casing
Tubing/completion equipment
Wellhead/accessories
Bits
Coreheads
Cement products
Mud products
Solid control consumables
Fuel and lubes
Other materials and supplies
Costing of tangibles should look at the individual elements making up that item.For
example, the costing of casing should begin by selecting the appropriate casing seats (length
of casing) and selecting the appropriate casing grades/weights (see Chapter Five) for each
hole section.
Then each casing string for each hole size should be costed and the total costs of all the
casing strings are added to produce the casing costs for the well in question.
The same method applies to each tangible item which requires design, selection and
breaking into individual groups, e.g tubing/completion equipment, drillbits, coreheads and
wellhead equipment.
Cementing and mud products should be costed for each hole section by calculating the
quantities of mud or cement products and additive required, see chapters Six and Seven fro
details.
Table 17.5 gives details of these individual costs.

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Services
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5.3 Services
This group of costs refers to any service required on the well. Services include:
1. Communications
This refers to telephones, data transfer etc. A lump sum cost or cost per day is usually used.
2. Rig positioning
The cost required to position the rig. This is usually required in offshore operations. This is a
one off cost.
3. Logging (wireline)
The cost of running and producing wireline logs, both open hole and cased hole logs.
4. MWD
This is the cost of renting and running MWD /LWD (measurement while drilling or logging
while drilling).
5. Downhole Motors
The cost of using downhole motors during directional drilling or during drilling long
sections of vertical wells.
6. Solids Control Equipment
This cost refers to the consumables required for solids control equipment and any special
equipment the rig contractor does not normally provide.
7. Mud Engineering
This is the cost of the mud engineer and the services required to maintain the mud. This is
not the cost of mud products which was explained earlier under tangibles.

17 Services
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8. Directional Engineering
This is the cost of the directional engineer, software and support required during directional
drilling. In vertical wells, this service is usually not required.
9. Surveying
This is the cost of running surveys inside the hole to determine hole angle and azimuth. This
usually include the cost of single shots, MMS and gyro plus the cost of the engineer and
rental of the equipment to run the surveys.
10. Cementing
This is the cost of renting the cementing unit and the cement engineer.
11. Mud Logging
This is the cost of renting the mud logging unit and the engineers required to run the unit.
12. Fishing
This is an ad-hoc cost of renting fishing equipment and cost of engineers. It is only included
if used or included if experience in the area dictates that fishing may be required in some
parts of the hole.
13. Downhole tools
Any tool required which is not supplied by the drilling contractor; including jars, shock subs
etc.
14. Casing services
This refers to the equipment required to run the casing and cost of engineers. This cost
element will always be included.
Once again each of the above items should be costed for each individual hole section (if
applicable) and a total cost is produced.

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Total Well Costs
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For example, under surveying and directional, the engineer can easily determine the
requirements for each hole section (Chapter Nine) and add the individual costs to obtain a
total cost for surveying and direction, if required.
Most of the above items require input from contractors who will supply these costs either
during the bidding stage or as part of an ongoing contract.
For offshore wells there are other costs which must be included:
Supply boats
Stand-by boats
Helicopters
6.0
. . . . . .Total
. . . . . .Well
. . . . .Costs
.....................................................
Table 17.5 shows the detailed cost calculation for the land well Pak-1 given in example 1.
The table also gives details of miscellaneous well costs which were not discussed here but
they are trivial in nature.
7.0
. . . . . .Non
. . . . .Productive
. . . . . . . . . . . .Time
. . . . . (NPT)
..........................................
The time required for any routine or abnormal operation which is carried out as a result of a
failure is defined as Non Productive Time (NPT)
Waiting on weather or Waiting on Orders, people or equipment is not NPT. This is standby
time.
Non-Productive Time (NPT) in drilling operations currently account for 20% of total
productive time. With the increasing pressures on drilling budgets and measures to improve
performance, a slight reduction in NPT can result in substantial savings. An article in one
major operators magazine reported that savings from reductions in NPT are enough to drill
several wells for that operator alone.

17 Classification of NPT
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The reason for including NPT in this chapter because it is customary to include some NPT
time in the time estimate especially if known drilling problems are expected during current
drilling operations. Hence the engineer must decide when studying the list below which item
is applicable to his well. He must then decide whether to allow any down time for the item
chosen or a certain percentage of the previously recorded down time. This subject will also
be discussed under risk assessment which will be discussed later.
7.1 Classification of NPT
1. Rig equipment
Down time due to:
Mud pumps, generators, shakers, rotary table, top drive/Kelly, hoist, drilling line, gauges,
compressors, anchors
Note that within the rig contract a fixed time is allowed for rig repairs/ maintenance. The
NPT rig time should be the time recorded above the agreed fixed time.
2. Surface Equipment
Downtime in this category includes:
Surface and Subsea equipment including wellheads, BOPs and control equipment, riser, rig
floor equipment (tongs, iron roughneck). Wear bushing setting problems. Leaks on
wellhead/BOPS.
3. Downhole Equipment
Downtime in this category includes:
MWD (but not LWD as this is part of logging)
BHA elements (Adjustable stabiliser, drop-in subs, hole openers blades not opening)

.....
Classification of NPT
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4. Drillstring Equipment
Includes: twist offs, wash-outs, backed-off strings, plugged pipes, collapsed pipes, plugged
bit and bit failure.
5. Logging equipment
This is the time lost during formation evaluation. This includes downtime due to failure of:
LWD tools, wireline tools, stuck logging tools, failure of surface related equipment including
wireline reels, electrical faults.
6. Stuckpipe and Fishing of BHA equipment
Down time is recorded from the moment the string is considered stuck to the point where it
is released and operations are back to before the stuck time.
This includes times spent on:
Jarring, spotting of organic agents, freepoint indicators, back-off charges, pulling out of hole
with parted pipe, dressing of fish, milling, retrieval of fish, wiper trips, conditioning of hole
prior to drilling.
If fish can not be retrieved, then down time is recorded as the time from when the pipe was
stuck to the time when drilling starts at the point where the bit was originally when pipe was
considered stuck. This time includes: mechanical back-off, POH, hole conditioning, setting
cement plugs, drill out of cement plugs, kick off time, drilling time to original depth.
This category also includes time required to fish a dropped bit cones or the drilling of cones
if considered feasible.
7. Miscellaneous fishing
Time spent on fishing or retrieving tools other than BHA elements and drillstring.
This includes dropped objects, wireline tools.

17 Classification of NPT
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8. Casing Hardware and Cementing Equipment
Includes times spent on:
Trying to free stuck casing, POH of casing, hole conditioning trip and re-running of casing.
Time lost due to faulty casing accessories either at surface or downhole including float
collars and float shoes. Collapsed or parted casing and repair time including sidetrack time if
carried out.
Liner hanger and liner top packers failures and times lost as a result.
Time lost due to faulty cementing equipment: cementing unit, cementing tools, plugs and the
cement material.
8. Fluids
Time lost due to the need to condition mud properties, shortage of mud materials (barite
etc.), mixing of mud.
9. Hole problems
This includes lost circulation, wellbore instability and hole collapse.
Tight hole problems resulting in changes in BHA configuration, POH and RIH of new
string.
Also tight hole causing pulling of wireline logging tools to condition hole and time required
to re-run to original depth. All rig up and rig downs associated with the above.
Redrilling of collapsed hole, squeezing salts problems and Redrilling and circulating of hole
fills. Excessive reaming and directional corrections.
During lost circulation, time is inclusive of mixing time, pumping mud and lost circulation
materials, waiting on LCM and hole to heal, running logs to establish position of lost

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Calculation of NPT
TOC . . . . . . . . . ..
circulation zone. Also included times required to set cement plugs, waiting on cement, drill
out of plugs, condition hole.
10. Well Control
Time lost from the moment the kick is detected and BOPS operated to the time when
operations are back to the moment before the kick.
Included times related to closing-in of the well, observing wellbore pressures, mixing and
pumping of new mud, circulating influx out, wiper and check trips.
11. Testing and Completion NPT
This includes:
Cleaning out liner / Displacement with Brine NPT:
Displacement of OBM to brine, stuck tools, packer problems, PBR leaks,
slickline problems and liner top remedial jobs.
Completion Equipment and X-mas tree NPT:
Running of tubulars, surface equipment problems, setting of packers, SSV
failure to test. Testing of surface and subsurface trees. Leaks in tubing due to
connections, tools.
Tubing and annulus Pressure test NPT: Failed tests.
Slickline and electricline NPT: All downtime relating to rig up and rig down,
running and carrying out operations.
Perforating NPT: Guns fail to detonate, guns stuck in packer tailpipe.
Coiled Tubing NPT: All problems relating to the operation of CT including rig
up and down, running and operating and fishing.
7.2 Calculation of NPT
In all of the above, the NPT is calculated as the time when the problem occurred to the time
when operations are back to prior to the problem occurring. The NPT time includes normal

17 Risk Assessment In Drilling Cost Calculations
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operations such as POH, RIH, circulating etc. It is as if these operations are not part of the
drilling process and they are merely carried out to get us to where we were before the
problem occurred.
Accurate calculation of NPT is essential if the operator attempts to improve future drilling
operations. Understanding the reasons for the NPT is the starting point to reducing drilling
time and saving money.
Details of the NPT should be recorded by the operator on a daily basis and should be
checked against historical NPT in the area to obtain trends and then arrive at solutions.
8.0
. . . . . .Risk
. . . . .Assessment
. . . . . . . . . . . . . .In. .Drilling
. . . . . . . . Cost
. . . . . .Calculations
.............................
The decision whether an individual well will be drilled will depend on the estimated cost of
drilling the well. Hence it is essential that cost estimates are made realistic, as low as
possible and produced in a consistent manner. These criteria are achieved through the
application of risk assessment.
Well cost estimates are made up of two major elements:

Time dependent costs
Tangible costs
Time dependent costs are dependent entirely on the time required to drill the well, as each
day either under or over the planned duration will impact costs. Tangible costs can well be
defined at the budgetary (before a detailed well plan is made) or the AFE stage after the
detailed well plan is made. The risk involved in estimating tangibles is usually small.
Risk assessment is defined in terms of the probability of meeting a given target. There are
three levels of risks:
1. P10
2. P50
3. P90

.....
P10 Estimate
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8.1 P10 Estimate
This is an estimate which has only a 10% chance of being achieved. This is a highly
optimistic estimate which can only be achieved under exceptional circumstances. This level
may represent the limit of technology or some stretched target that the company believes can
be achieved.
8.2 P50 Estimate
This is the key figure in most well cost estimates. As implied, there is a 50% chance of that
the well will be drilled for less than this figure and a 50% chance that it will cost more.
This estimate will be based on known information derived from offset data. The P50
8.3 P90 Estimate
This is an estimate of well cost which is likely to be met 90% of the time and that well cost s
can not be exceeded except under exceptional cases. This estimate was widely use in the oil
industry before accurate cost estimating was introduced in the early 1990s.
8.4 Estimating the P10 value
In terms of drilling operations, assume the time required to drill a given hole section is 5
days based on the average of several wells in a given area, excluding NPT. The 5 days
include making up the BHA, tripping, circulating and drilling a given hole section. If one
were to produce a new estimate for a new well, then the 5 days may be taken as the P50, as it
is likely to be met at least 50% of the time.
The P10 for the above example is a little bit more difficult to determine. This is because if it
is based on the best well in the area which say took 4 days, then all that implies is that all
operations went according to plan (to the nearest minute) and the lithology encountered was
homogeneous. However, this time may also be improved on if a better technology is used in
drilling the well.
As there is no exact method for estimating P10, it is now customary to base P10 value on the
best possible performance on any operation on any well in the area. For example, if it took
10 hours to run and cement casing in well 1, but took longer on other wells, then the P10

17 Estimation of P50 Value
TOC
value for running and cementing the casing is 10 hours. A similar logic applies to other
operations, e.g. tripping, making up BHA, drilling a given section etc. Hence the total P10
value for a given section will be the best individual values from several wells for all
operations required to drill, case and cement the given hole section.
Table 17.4 gives detailed time estimates for every individual operation on the 36 hole/30
conductor based on the best times recorded in the area.
Because of the way the P10 value is derived, it is unlikely that this value can be met exactly
more than 10% of the time. Indeed, some may argue that it is more difficult to produce a P10
value than a P50 value. After all, the P50 value is based on the most likely time to carry out a
given operation which can be easily established.
8.5 Estimation of P50 Value
Assume that the approach for calculating well costs was based on first estimating the P10
value. The P50 value should then be derived from the assumed P10 value. This P50
probability of any event occurring should be derived from engineering judgment by the
drilling engineer and is an estimate of the normal expected occurrence frequency for that
event.
As an example, consider the top hole section in an offshore operation where 36 hole is
drilled and 30 conductor is run and cemented. The following events may occur and increase
drilling time:

.....
Estimation of P50 Value
TOC . . . . . . . . . ..
Potential Time P50 of Problem Result Time Delay

Problem Implication Occurring (result x prob)
( days)
Boulder in 36 Boulder double 10% 4 hrs rig time 0.02
hole drilling time
Cement job on Losses during 40% 6 hours rig 0.1
30 conductor cement job time
slump requiring two
top jobs
Problems This may 20% 6 hours rig 0.05
rigging up happen on a time
diverter new rig or
with new crew
Total 0.17 days
Hence if the P10 time for drilling 36 hole, running and cementing 26 conductor is 1.5
days, then the P50value is: 1.5 + 0.17 =1.67 days
The same logic can be applied to all hole sections citing all known hole and equipment
problems and assigning probabilities to them.
The reader should not take this approach as a license to increasing drilling time but merely to
obtain realistic drilling times. Indeed, the P50 estimate obtained should be close to the
average drilling time in the area. The onus is on the engineers and crews to approach the P10
value and may even improve upon it. This can be achieved by innovation through improved
well designs, modification of equipment or new practices.

17 Estimation of P90 Value
TOC
8.6 Estimation of P90 Value
Applying the same approach as for the P50 value, the P90 for the 36 hole may be derived as
follows:
Potential Time P90 of Result Time Delay
Problem Implication Problem (result x prob)
Occurring ( days)
Boulder in 36 Boulder double 30% 4 hrs rig time 0.05
hole drilling time
Cement job on Losses during 50% 6 hours rig 0.13
30 conductor cement job time
slump requiring two
top jobs
Problems This my 40% 6 hours rig 0.1
rigging up happen on a time
diverter new rig or
with new crew
Total 0.28 days
The P90 value is the P10 value plus 0.28 days, i.e. 1.78 days.
It is recommended that for each area, a list of potential problems is complied and
probabilities of problems occurring are established to help in future cost estimates.
The reader should note that drilling operation follow a learning curve where the first well
typically takes longer than the average well and the last few wells take less time than the
average.
9.0
. . . . . .Technical
. . . . . . . . . . .Limit
. . . . . Drilling
................................................
Technical Limit Drilling (TLD)
A theoretical limit representing a stretched target of what is theoretically possible in a

perfect world where both ideal and optimised drilling conditions 3.

.....
Basis of TLD
TOC . . . . . . . . . ..
The difference between historical performance and TLD represents and opportunity to
reduce costs 3.
Traditionally, planning time for well engineering has been very small in comparison with
other industries:
Planning Time Comparison 3
1.Construction industry spends up to 15% of its budget on up front planning
2.Drilling industry spends less than 5% on well Engineering
TLD requires very detailed planning of every aspect of the drilling operation and this usually
requires every process to be broken down into its smallest possible constituent and the time
for it is established.
9.1 Basis of TLD
TLD requires detailed numerical answers to the following questions:
1.What is the current Figure 17.2

performance? Normal average
2.What is possible? Theoretical Technical Invisible Conventional

limit Limit Time Lost Time NPT
3.What is needed to get there?

Resource investment Total Historical Drilling Time
TLD requires that drilling estimates are made without the inclusion of invisible lost time or
non-productive time, Figure 17.2. Non productive time was discussed in detail in Non
Productive Time (NPT) on page 755
Invisible Lost Time: This time is usually absorbed in productive time and is made up of the
total of previously acceptable wasteful events such as 3:
1.Use of sub-optimal equipment

17 Cost Reduction
TOC
2.Lack of personnel
3. Application of sub-optimal operations and procedures
Examples
1. Bit trips before reaching TD
2. Wiper trips
3. Check trips
4. Mud conditioning
5. Double checking directional motors and MWD tools
As an example of what can be achieved using the technical limit and unlimited experts, con-
sider the process of changing the cars tyres:
1.A team of Formula One can change 4 tyres in 6 seconds
2.It takes a garage mechanic 2- 5 minutes to change one tyre
3.It takes you 5-15 minutes to change one tyre
In summary, time estimates for TLD are meant to use the limits of current technology with
no restriction on equipment or personnel. Clearly, TLD can only be applied by a very few
companies that have infinite resources.Most companies would opt to calculating the P10
value using the best performance from offset wells.
10.0 Cost Reduction

......................................................................
The objective of all E&P companies is drill and produce wells in the less possible time,
consistent with safe operations. In the oil industry time really means money. The longer an
operation takes, the more it will cost. This is because as you spend more time say on drilling
operations, the company will be paying more money for equipment and people which will
make the operation more expensive. Also any delay to drilling operations will mean a delay

.....
Cost Reduction
TOC . . . . . . . . . ..
to actual production. If there is no production, there is no income and the company is not
making money.
There are two elements of costs which must be controlled:
1. Capital Expenditure (Capex): This includes the cost of finding and developing an
oil/gas field. The cost of drilling operations is the major cost element and must be kept to an
acceptable value.
2. Operating Cost (OPEX): This includes the actual cost of production: cost of maintaining
the platform, wells, pipelines etc. We will not be concerned with costs as this is part of
production operations.
E&P companies aim to reduce time to develop fields in order to o reduce CAPEX and
OPEX. At the time of writing this book, there are several ways of judging a minimum price
per barrel of oil. In the North Sea, it is accepted that the principle of 1/3/3 results in a
profitable operation. The 1/3/3 stands for: $1 for finding, $3 for developing and $3 for
production. This gives a combined cost of $7 per barrel. In the Middle East, this combined
cost can be as low as $2 for some giant fields.
In general the more remote the area the more expensive is the final cost of barrel of oil. This
is particularly true for deep waters in hostile environments.
The following is a list of measures to reduce costs:

1. Technical innovation: This time dependent and can be applied immediately
2. Productivity improvement: e.g. faster drilling operations
3. Increased operational effectiveness
4. Incentive contracts (sharing gains and pains)
5. Less people
Cost reduction is a wide subject and is beyond the scope of this book. We will only
concentrate on the most important aspects relating to drilling operations, namely, drilling
contracting strategies.

17 Drilling Contracting Strategies
TOC
11.0 Drilling Contracting Strategies

......................................................................
There are basically four types of contracts which are currently used in the oil industry:
1. Conventional
2. Integrated Services (IS)
3. Integrated Project Management (IPM)
4. Turn Key
The type of drilling contract used can mean the difference between an efficient and a less
efficient operation. The operator must weigh all the relevant factors before opting to one of
the above strategies. Indeed, going for one type, say turn key, can mean that the operator has
no control on the operation whatsoever and has no means of building knowledge for future
operations.
11.1 Conventional Contract
In this type of contract, E&P company does every thing using its own staff or contractors.
This is the most involved type of contract and can mean handling up to 100 contracts per
well.
In this contract, the operator has total control on the operation and carries full risk. The
contractor has no risk and it could be argued has no incentive in speeding up the operation.
This type of contract has the advantage that lessons learnt during drilling operations are kept
with the company and used to improve future operations. Nowadays, only large operators opt
for this type of contract.
A variation of the above contract is to include an incentive clause for completing operations
early or if a certain depth is reached within an agreed time scale. The contractor will be paid
a certain percentage of the savings made if operations are completed ahead of the planned
drilling time.

.....
Integrated Services (IS)
TOC . . . . . . . . . ..
11.2 Integrated Services (IS)
In this type of contract, major services are integrated under two or three main contracts.
These contract are then given to lead contractors who, in turn, would subcontract all or parts
of it to other subcontractor. The lead contractor hold total responsibility for its contract and is
free to choose its subcontractors.
The operator still holds major contracts such as rig, wellheads and casing. Also the operator
appoints one of its staff to act as a coordinator for the drilling operation.
11.3 Integrated Project Management (IPM)
This is the ultimate in devolving the operator conventional method of drilling wells. In this
type of contract, a main contractor is chosen. This contractor is the Integrated Project
Management (IPM) contractor. The contractor is responsible for 20-30 service companies.
Service companies may be responsible for other service companies.
The drilling operation will be controlled by a representative from the IPM contractor.
The operator may hold one or two major contracts.
There is also a built-in incentive in contract between the IPM contractor and the operator.
This either based on the time-depth curve, safety or other criteria. The incentive contract
based on beating the time curve is the most common one. In this type, an agreed time-depth
curve is first established. If the IPM contractor beats this time curve, then the contractor is
eligible for all or a percentage of the saving.
In the authors experience, this is the worst kind of contract for the operator because:
There is virtually no learning for the operator. Lessons learnt are lost as the IPM
contractor traditionally has a staff turnover. Electronic means of gathering
information and building knowledge bases are alleviating this problem.
However, there is no substitute for hand on experience of drilling problems.
The incentive contract is built on a time curve developed and based on the
contractors experience. Use of better equipment and personnel may beat the
IPM contractors time-curve.

17 Turn Key Contract
TOC
Experience in drilling HPHT wells in the North Sea has shown that an operator
can beat the P10 curve (see later) developed by any contractor. Incentive are
usually given to contractor s when beating a P50 time curve, which is a less
stringent time estimate.
11.4 Turn Key Contract
This is the easiest of all the above contracts. The operator chooses a contractor. The
contractors submits a lump sum for drilling a well: from spud to finish with operator
virtually not involved. The contractor carries all risks if the well comes behind time and also
gains all benefits if he should drill the well faster.
Contractors only opt for this type of contract if they know the area extremely well or during
times of reduced activities. The operator opts for this type of contract if he has a limited
budget or has no knowledge of drilling in the area.
11.5 Current And Future Trends In Drilling Contracts
There are two new development in drilling and production contracts:

Production Sharing Agreement
Capital Return Agreement Plus Agreed Production
These new types of contracts were initially initiated in some Middle Eastern countries
attempting to draw western investment. These contracts are still developing in nature and
have now been used by a number of third world countries.
A Production Sharing Agreement stipulates that the contractor will be paid a certain
percentage of the produced fluids (oil or gas) in return for the services of the contractor in
drilling and producing. The agreement may be time-dependent running for a fixed number of
years or may include an initial payment for the contractor in addition to a percentage of the
production.
A Capital Return Agreement Plus Agreed Production stipulates that the contractor will
develop a field using his own finance. In return, the operator (or national oil company) will
pay the contractor all his capital expenditure plus an agreed percentage of the production. In

.....
Current And Future Trends In Drilling Contracts
TOC . . . . . . . . . ..
Iran where this type of contract is used, the agreed production is limited to a fixed number of
years. The ownership of the field and its facilities always remain with the operator.
Table 17.5 AFE for Well Pak-1 based on P50 estimates

17 Current And Future Trends In Drilling Contracts
TOC

.....
Current And Future Trends In Drilling Contracts
TOC . . . . . . . . . ..

17 References
TOC
12.0 References
......................................................................
1. Rabia H. (2000) Drilling Optimisation Report on North Drilling Practices to various
companies
2. Rabia H. (1997) Risk assessment in cost estimation various internal reports for BG
International
3. Schreuder J and Sharpe P(1999) Drilling the limit- a key to reduce well costs
SPE 57258, SPE Asia Pacific Improved Oil Recovery Conference, Kuala Lumpur, 25-26th
October
4. Rabia H. (2001) Drilling cost estimation Entrac Seminars

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TOC

There are several reasons for producing a well cost, including:

Well Engineering &Construction 743

2. Type of well: exploration or development wells, HPHT or sour gas

6. Profile (vertical/ horizontal /multilateral)

10. Knowledge of the area: wildcat, exploration or development

744 Well Engineering & Construction

36 Hole / 30" Conductor 50 m BRT

26 Hole / 20" Casing 595 m BRT

17.5Hole / 13.375" Casing 1421 m BRT

Well Engineering & Construction 745

12.25 / 9.625" Casing 2334 m BRT

8.5 Hole / 7" Casing 3620 m BRT

Total Depth 3620 m BRT

36 Hole 5.5 m/hr

26 Hole 5.5 m/hr

17.5Hole 7.9 m/hr

12.25 4.6 m/hr

8.5 Hole 2.5 m/hr

Table 17.1 Estimated flat times

746 Well Engineering & Construction

Table 17.2 Calculations of planned drilling times

Hole Size Metres Offset Planned Planned

Well Engineering & Construction 747

Table 17.3 Time-depth calculations

Operations Description Depth Days

748 Well Engineering & Construction

Figure 17.1 Time-depth curve

Well Engineering & Construction 749

Table 17.4 Detailed time estimate for 30 conductor

OPERATION HOURS MD CUM HOURS CUM DAYS

750 Well Engineering & Construction

30 R/U & run logs - BHC/GR 3.0 1280.0 134.6 5.61

5.1 Rig Costs

Rig rate depends on:

Well Engineering & Construction 751

Tangibles refer to the products used on the well. These include:

Table 17.5 gives details of these individual costs.

752 Well Engineering & Construction

6. Solids Control Equipment

Well Engineering & Construction 753

11. Mud Logging

13. Downhole tools

14. Casing services

754 Well Engineering & Construction

Well Engineering & Construction 755

7.1 Classification of NPT

Down time due to:

Downtime in this category includes:

Downtime in this category includes:

MWD (but not LWD as this is part of logging)

756 Well Engineering & Construction

6. Stuckpipe and Fishing of BHA equipment

This includes times spent on:

This includes dropped objects, wireline tools.

Well Engineering & Construction 757

8. Casing Hardware and Cementing Equipment

Includes times spent on:

This includes lost circulation, wellbore instability and hole collapse.

758 Well Engineering & Construction

10. Well Control

11. Testing and Completion NPT

7.2 Calculation of NPT