Sonatrach Well Costing

Development Phase
September October 2005

abalt solutions limited - 2005
INTRODUCTION TO HYDROCARBON EXPLOITATION
Abalt Solutions
Introduction to Hydrocarbon Exploitation
2005 Abalt Solutions Limited. All rights reserved
Development Phase
Well Costing
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Well Economics
Maximizing revenue by:
Increase in probability of finding
hydrocarbons.
Controlling costs of Drilling and
Production.
Planning and Design of wells to produce
at optimum flow rates with respect to
safety and reliability.
Development Phase
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Drilling Contracts
Common forms of drilling rig contracts
Day Rate
Day Rate Incentive
Footage
Turnkey
Most common type is the day rate
contract.
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Drilling Contracts
Day Rate Contracts
Operator in total control of drilling operation
Contractor paid daily rate for use of rig
Example of rates-
Mobilization and Demobilization
Operational rate
Stand by rate
Shut down rate
Repair rate
Force Majeure rate
Extra equipment etc.
Development Phase
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Drilling Contracts
Day Rate Incentive
Bonus per foot
Significant component of contractors revenue.
Well drilled according to drilling programme.
Contractor can advice on type of bit (not decide on
it)
Faster the drilling, more effective
Requires high level of Supervision and adherence
to Operators Policies.
Operator has control of drilling
Provides material and equipment to drill the well
except rig.
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Drilling Contracts
Footage Contract
Rate per foot to pre determined depth, after
which day rate format.
Contractor supplies bits.
Operator can take control anytime and revert to
day rate.
Contract specifies conditions for good well
integrity.
Suitable where downhole risks such as lost
circulation are low.
Development Phase
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Drilling Contracts
Turn Key Contracts
Lump sum paid to contractor to drill to TD or pre
determined depth.
Contractor purchases material and equipments.
Operator is liable to Government for any issues
or risks taken during drilling
Operator places observer on rig during
operations.
Useful contract in regions where Operator has no
base or Contractor has good track record.
Turn key contract is common when drilling
market is low.
Turn key contracts are tendered than negotiated.
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Drilling Contracts
Negotiating the contract
What you want from the contract ?
What the contractor wants
Know what you are prepared for
Exploit your strengths
Know what the contractor is prepared to take
Get a win/win agreement
Minimum Maximum Service
Lowest Rated Highest Rated Rig choice
Expensive Cheap Rates
Contractor Operator
Development Phase
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Drilling Cost Categories
Fixed Costs: Wellheads, bits, site preparation
etc.
Unit Costs: Bulk Barite , cement etc.
Day Rate Costs: rig hire, rental tools etc.
Some companies use Tangible and Intangible
Costs
Tangible costs are Unit and fixed costs.
In Tangible costs are day rates.
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Drilling Cost Categories
To Minimize Drilling costs-
Specify fit for purpose materials for well
Minimize NPT
Optimization of drilling times with respect to
safety and reliability
Competitive prices on materials
Minimize overheads.
Development Phase
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Day Rate Costs- Land Rigs
1500 Mud Logging services
5000 Electric Logging
1200 Mud engineering services
2500 Cementing services
50,000 Rig(2000 HP)
25,000 Rig(1000 HP)
Cost/day($)
The Costs above are a rough guide and depend upon market
conditions and locations.
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The Authorisation for expenditure is the budget for a well
and prepared and signed by a senior manager from the
Operator.
It contains
Project Description
Summary of expenditure
Partners shares
Well breakdown costs
AFE
Development Phase
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AFE
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Factors affecting well costs
Well costs for a single well depend upon-
Geographical location
Type of well
Drill ability
Hole depth
Target
Profile
Sub surface problems
Rig costs
Completion type
Knowledge of area: wild cat, exploration or
development
Development Phase
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Drilling Time estimate
Drilling time on hole, circulation, wiper trips ,
tripping , side tracking , directional work and
hole opening.
Flat times spent on running and cementing
casing, make up BOP and wellheads.
Testing and completion times
Formation evaluation time
Rig up and down
Non Productive time (NPT)
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Well Costs
Rig Costs
Tangibles
Services
Development Phase
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Well Costs
Rig Costs
Cost of hiring drilling rig and associated equipments.
Depends upon rig rate per day ($/day)
Rig rate depends upon :
Type of rig
Market conditions
Length of contract
Days on well
Mobilization and Demobilization of rig
Supervision
Other charges
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Well Costs
Tangible Costs
Refer to products used on the well.
Casing
Tubing
Completion equipment
Wellhead accessories
Bits
Core heads
Cement products
Mud products
Solid control consumables
Fuel
Other supply materials
Development Phase
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Well Costs
Services
Costs related to any service on the well.
Communication: Telephone, data transfer-lump sum or
cost/day.
Rig positioning
Logging open and cased hole
Renting and running tolls such as MWD/LWD
Downhole motors for directional surveys
Consumables for solid control
Mud and directional engineering services such as personnel,
software etc.
Running surveys to determine azimuth or hole angle. Cost
of rental equipment and personnel.
Renting cementing and mud logging unit and personnel.
Ad hoc costs of Fishing tools and personnel only if required.
Casing and downhole tool
Each of the items are costed for individual hole section and a total cost is
produced
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Time vs. Depth
Bases for all daily drilling cost estimates.
For AFE purposes, it is recommended the most
likely drilling time curve be used.
Development Phase
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Non Productive Time
Any time that has been spent for routine or
abnormal operations which are carried out as a
result of failure.
It is important to realize that each step should
follow preceding step without delay.
Each step should take least possible time with
good practise.
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Non Productive Time
Classification of NPT
Repair Time
Rectification time
Client time
Development Phase
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Non Productive Time
Repair Time
Time spent on repairs on the rig and
related equipment during which drilling
operations is shut down.
Any operation that might be carried out
to place the well in safe conditions before
attempting repair and on completion
returning the well to former status.
Waiting on spare parts, weather or
personnel before normal drilling
operations are carried out.
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Non Productive Time
Rectification time
Time spent in overcoming downhole
problems that delay operations.
Some of the operations are :
Freeing stuck pipe
Fishing lost cones
Squeeze cement
Well kill operation
Development Phase
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Non Productive Time
Client Time
Time spent on operations requested by
client that was not included in the drilling
program earlier.
These are not NPT, but indirectly linked
and might affect the AFE.
Operations are
Plugging back
Extra coring
Extra logging

Sonatrach Well Costing

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Development Phase

September October 2005

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