| |
June 2003
Excel Spreadsheet Model - 1986-2002 XLS
Overview
Generally, the inflation adjusted year-to-year costs of equipping
oil and gas leases was marginally higher and the cost of operating
oil and gas leases were lower from 2001 to 2002.
Gas equipment costs increased by about 1 percent while gas operating
costs dropped 1 percent. The 1 percent drop in the gas operating
cost index from 2001 to 2002 is partly attributable to an almost
40 percent decline in the average cost of gas from 2001 to 2002.
Oil equipment costs were flat while oil operating costs dropped
about 4 percent. The oil operating cost is sensitive to gas prices
because natural gas is used in many oil production processes. The
4 percent decline in oil operating costs for 2002 is primarily attributable
to the almost 40 percent decline in real gas prices from 2001 to
2002.
Offshore operating costs increased by over 4 percent. The increase
in the operating cost index for 2002 is primarily caused by a large
increase in insurance rates for offshore operations.
These changes are graphically shown in Figures ES1, ES2, and ES3,
described in the Summary section.
Background
This report, with the accompanying Excel spreadsheet, presents estimated
costs for domestic oil and natural gas field equipment and production
operations for 1986 through 2002. Beginning with the 2002 report,
coal bed methane costs have been added. Coal bed methane now accounts
for about 8 percent of U.S. dry gas production and almost 10 percent
of the dry natural gas reserves.
The costs of all equipment and services are those
in effect during June of each year. The aggregate costs for typical
leases by region, depth, and production rate were averaged and these
averages provide a general measure of the changed costs from year
to year for lease equipment and operations. The accompanying spreadsheets
contain summary tables and detailed tables for equipment and services
by region for the period 1986 through 2002.
Summary
Figures ES1 and ES2 indicate deflated oil and gas prices, equipment
costs, and operating costs indexed to the base year of 1976 for
natural gas and oil in the contiguous lower 48 states excluding
offshore Gulf of Mexico. Figure ES3 shows separately the deflated
operating costs and gas price indexed to 1976 for the offshore Gulf
of Mexico wells.
Figure ES1 shows that the deflated prices of both
natural gas equipment and operations have changed less over time
than has the deflated price of natural gas. Deflated gas equipment
costs remain below those for the base year of 1976. The deflated
gas prices were high from 1982 to 1984 (in the range of 270) and
set a record of 274.4 in 2001 before declining to 194.5 in 2002.
The January 2001 gas price averaged $8.06 per MCF and averaged $4.12
per MCF for the year 2001. Gas prices started 2002 at $2.35 per
MCF and averaged $2.95 per MCF for the year. Beginning in the 4th
quarter of 2002, gas prices began rising due to increased demand
resulting from colder than average temperatures.
Similarly, Figure ES2 depicts deflated oil prices, equipment and operating
costs for oil production indexed to 1976. There are two main differences
between the gas and oil indexes. First, the gas price index has
remained above the 1976 base, while oil prices rose above the base
only five times since 1986, in 1987, 1990, 2000, 2001 and 2002.
The 1998 deflated oil prices were only 20 percent of the peak price
in 1981. In December 1998 oil prices were at their lowest level
since World War II.
Oil prices averaged $21.84 per bbl for 2001 and began 2002 at $15.89
per bbl. The high price for the year was in September when average
oil prices were at $26.08 per bbl. The average 2002 price was $22.93
per bbl, an increase of 5 percent from 2001.
Second, oil operating cost index values have remained above 1976
levels while gas operating index values fell below 1976 values in
1986 and only went above the baseline starting in 1998. Both have
remained within a relatively narrow range since 1976.
The oil operating cost is sensitive to gas prices because natural
gas is used in some oil production processes. Thus the increase
in the oil operating cost index for years 2000 and 2001 is primarily
attributable to the increase in gas prices for 2000 and 2001. The
same effect was observed from 1976 to 1982 with the increase in
gas prices during that time frame causing the oil operating index
to increase. The 4 percent decline in oil operating costs for 2002
is therefore primarily attributable to the almost 40 percent decline
in real gas prices from 2001 to 2002.
Figure ES3 shows the deflated oil and gas operating costs for offshore
Gulf of Mexico wells. Gas prices for Louisiana were used to represent
offshore indexed gas prices. The increase in the operating cost
index that occurred in 1997 was primarily caused by a major increase
in the cost for transport boats. The increase in the operating cost
index for 2002 is primarily caused by a large increase in insurance
rates for offshore operations.
Methodology
The costs provided in this report are for representative lease operations
with equipment and operating procedures designed by EIA staff engineers.
Costs are estimated for representative 10-well oil leases producing
by artificial lift; 1 flowing gas well per gas lease; or 10-well
coal bed methane leases dewatering by artificial lift. While coal
bed methane leases will typically have hundreds of wells, we have
chosen to use a 10-well lease for the purpose of this study. The
design criteria took into account the predominant methods of operation
in each region. Individual items of equipment were priced by using
price lists and by communicating with the manufacturers or suppliers
of the item in each region. The leading supply, service, and contracting
companies (active in one or more of the regions) were contacted
every year (1976 through 2002) for local June prices for their component
of equipment or operating function. The objective of this process
is to acquire prices that are representative for each region. The
annual operating costs measure the change in direct costs incident
to the production of oil and gas and exclude changes in indirect
costs such as depreciation and ad valorem and severance taxes.
Primary Oil Recovery
Leases for onshore oil wells were assumed to consist of 10 wells
producing by artificial lift into a centrally located tank battery.
The depths of all wells on each of the leases were either 2,000,
4,000, 8,000, or 12,000 feet.
Costs were determined for new equipment capable of producing 200 barrels of liquid
per day per well for onshore primary operations. Tubing costs were
included for information only. Note that care must be exercised when
combining these equipment costs with drilling costs to obtain total
lease development and equipment costs, because most drilling and completion
cost estimates include tubing costs. Drilling and completion costs
for the primary production wells are not included in this study. The
artificial lift method selected was dependent on the type of lift
found to be dominant for each depth in each region. The two types
of prime movers considered were electric motors and natural gas engines.
Annual operating costs were estimated for daily production rates of
100 barrels of liquid per day per well for each depth in each region
of operation with a 10 percent water content.
Secondary Oil Recovery
Costs for secondary oil recovery in west Texas were calculated for
wells producing from depths of 2,000, 4,000, and 8,000 feet. Each
lease was assumed to have 10 producing wells, 11 injection wells
and 1 disposal well. Costs for water storage tanks, injection plant,
filtering systems, injection lines and drilling water supply wells
and water injection wells are included. Equipment was designed to
handle 350 barrels of liquid per day per producing well. Gas engines
used in primary operations were replaced by electric motors for
secondary oil recovery. Some equipment for primary oil recovery
was replaced with larger equipment to accommodate the increased
liquid volumes assumed for secondary oil production. Increases in
operational costs for secondary oil recovery are indicated for the
increased liquid lift of 250 barrels of liquid per day per producing
well and for the water injection system.
Offshore Gas and Primary Oil Recovery
Operating costs for the offshore Gulf of Mexico were estimated for
12- and 18-slot platforms containing one dually-completed well in
each slot. Maximum crude oil production was assumed to total 11,000
barrels of oil per day from each platform. Maximum associated gas
production was assumed to be 40 million cubic feet of gas per day
per platform. Note that the balance between gas and oil is more
heavily weighted toward gas in offshore operations than in onshore
leases. Operating costs were derived for platforms assumed to be
50, 100, and 125 miles from shore corresponding to water depths
of 100, 300, and 600 feet, respectively. Meals, platform maintenance,
helicopter and boat transportation of personnel and supplies, communication
costs, insurance costs for platform and production equipment, and
administrative expenses are included in normal production expenses.
Crude oil and natural gas transportation costs to shore were excluded,
as were water disposal costs.
Gas Recovery
Leases for gas wells were assumed to consist of one well producing
into an onsite separator with two storage tanks (a lease condensate
sales tank and a water storage tank). Line heaters, dehydration
units, and methanol injectors were included where needed. It was
assumed that any compression or gas treatment would be furnished
by the first purchaser. The cost data presented were based on the
installation of new equipment and included items needed from the
wellhead to the outlet on the meter run for the gas stream and through
the tank for liquid streams. Tubing costs were not included, nor
were costs of equipment for disposal of produced water above nominal
amounts of water entrained in the gas stream. Gas production rates
of 50, 250, 500, 1,000, 5,000 and 10,000 MCF/D and well depths of
2,000, 4,000, 8,000, 12,000 and 16,000 feet were the assumed volume
and depth divisions for the cost determinations. These volumes were
selected because of different processing requirements for each of
these flow rates. Production records were used to determine the
average production rate for each depth in each region. The equipment
and operating costs for each of these average production rates were
then calculated. For a broader view of each flow rate in each region
at each depth, the equipment and operating costs of the next higher
and/or lower rates are shown. Costs were calculated for equipping
gas wells at producing rates of 50 MCF/D even though a new well
coming onstream at this rate may not be economic. This low rate
was selected to identify costs of production from stripper gas wells.
Flow rates above 10,000 MCF/D usually require custom design of equipment
and are not priced in this report.
The depths of 2,000, 4,000, 8,000, and 12,000 feet were chosen
to be compatible with data provided for oil production. An additional
depth of 16,000 feet was added for gas equipment and operations
because there is significant gas production from this depth in some
regions studied.
Coal Bed Methane Recovery
Leases for coal bed methane were assumed to consist of 10 wells
dewatering by the predominant artificial method employed in that
area. The production depths and rates were chosen as representative
for that area. The areas modeled are Appalachia, Black Warrior Basin
(Alabama), Powder River Basin (Wyoming), and San Juan Basin (New
Mexico). Additional areas may be added in future reports. The following
table lists the average production depth, per well production rates,
and dewatering method used in the model.
| Dewatering
Method |
Per Well |
AREA |
Depth |
Gas Mcf/d | Water BWPD |
Appalachia |
2,100' | sucker rod | 60 | 3 |
Black Warrior |
2,000' | sucker rod | 100 | 20 |
Powder River |
1,000' | submersible | 50 | 50 |
San Juan | 3,000' |
sucker rod | 500 | 100 |
Costs were determined for new equipment. Tubing costs were included
for information only. Note that care must be exercised when combining
these equipment costs with drilling costs to obtain total lease
development and equipment costs because most drilling and completion
cost estimates include tubing costs. Drilling and completion costs
are not included in this study.
Revisions
Data used in this work were revised for at least one year. Late
arrival of data necessitates using estimates in some cases, and
in other cases, small items have been combined to reduce reporting
burdens on data suppliers. The cost data comes from leading supply,
service, and contracting companies in a region. If one of these
companies should go out of business a replacement company is identified.
The replacement company prices may vary slightly from the original
company's prices. The costs to drill and complete the water disposal
wells, water supply wells and secondary recovery water injection
wells are based on an estimate since the source for the drilling
and completion costs (the Joint Association Survey on Drilling Costs)
are a year behind in order to collate the necessary data. In general,
since 1976, data gathering has become more challenging, in part
due to the restructuring of the industry, and in part due to normal
changes in product lists. Changes in equipment and operating practices
are adopted where they represent a majority of new property activity.
In this manner, increases in productivity are recognized, although
gradually.
Results
Oil Leases
Tables ES1 and ES2 contain the 2002 equipment costs and operating
costs for a 10-well oil lease for the six regions, the Lower 48
states and the additional costs for secondary recovery in West Texas.
Costs for the offshore Gulf of Mexico wells are not included in
the aggregated totals used for tables ES1 and ES2.
| Table ES1. Annual Equipping
Costs for 10-well Oil Leases in 2002 (Current US Dollars) |
|
| Producing Depth, feet |
Region |
2,000 |
4,000 |
8,000 |
12,000 |
California |
1,169,600 |
1,403,000 |
1,783,500 |
2,144,000 |
Oklahoma |
866,300 |
1,080,000 |
1,558,400 |
1,876,200 |
South Louisiana |
952,400 |
1,117,800 |
1,421,400 |
2,147,300 |
South Texas |
889,600 |
1,034,200 |
1,282,800 |
2,049,700 |
West Texas |
862,600 |
1,060,400 |
1,777,400 |
1,900,900 |
Rocky Mountains |
880,100 |
1,084,800 |
1,693,700 |
1,939,200 |
Lower 48 States excluding offshore |
936,800 |
1,130,000 |
1,586,200 |
2,009,600 |
Additional
cost for Secondary
Recovery in West Texas |
2,338,400 |
4,472,000 |
8,356,500 |
N.A. |
| Table ES2. Annual Operating
Costs for 10-well Oil Leases in 2002 (Current US Dollars) |
|
| Producing Depth, feet |
Region |
2,000 |
4,000 |
8,000 |
12,000 |
California |
161,700 |
211,300 |
370,600 |
545,000 |
Oklahoma |
144,100 |
167,500 |
301,200 |
361,700 |
South Louisiana |
177,000 |
252,700 |
299,600 |
426,400 |
South
Texas |
175,600 |
229,200 |
281,900 |
435,600 |
West Texas |
135,200 |
157,400 |
216,200 |
338,700 |
Rocky
Mountains |
149,700 |
169,500 |
240,600 |
338,900 |
Lower 48
States excluding offshore |
157,200 |
197,900 |
285,000 |
407,700 |
Additional
cost for Secondary
Recovery in West Texas |
322,600 |
440,000 |
616,300 |
N.A. |
Gas Leases
Tables ES3 and ES4 contain equipping and operating costs for onshore
gas wells displayed by depth, region, and per well producing rate.
Since the rate-depth combinations are chosen for each region to
reflect the majority of the wells in that region, the tables contain
blanks, which represent rate-depth combinations which were not found
in significant numbers in the base year of 1976. The averages for
the Lower 48 states show that the equipping costs generally increase
with depth at each of the producing rates.
| Table ES3. Annual Equipment
Costs for 1 well Gas Leases in 2002 (Current US Dollars) |
|
Region |
2,000 |
4,000 |
8,000 |
12,000 |
16,000 |
Producing 50 Mcf/D |
West Texas |
19,600 |
19,600 |
29,300 |
South Texas |
21,300 |
21,300 |
South Louisiana |
22,800 |
21,800 |
|
North Louisiana |
22,800 |
Mid-Continent |
22,100 |
22,100 |
Rocky
Mountains |
23,400 |
23,400 |
Lower 48 States excluding offshore |
21,700 |
21,600 |
29,300 |
Producing 250 Mcf/D |
West Texas |
19,600 |
29,900 |
48,700 |
64,000 |
South Texas |
21,300 |
31,800 |
50,700 |
South Louisiana |
21,800 |
32,300 |
51,600 |
North Louisiana |
21,800 |
32,400 |
51,100 |
Mid-Continent |
24,000 |
32,100 |
51,700 |
67,500 |
Rocky Mountains |
23,400 |
48,400 |
55,000 |
69,100 |
Lower 48 States excluding offshore |
22,000 |
34,500 |
51,500 |
66,900 |
Producing 500 Mcf/D |
West Texas |
| |
46,900 |
62,300 |
69,800 |
South Texas |
| |
48,900 |
64,300 |
South Louisiana |
| |
49,700 |
65,100 |
65,100 |
North Louisiana |
|
31,300 |
49,700 |
65,100 |
Mid-Continent |
|
30,200 |
49,000 |
65,600 |
71,200 |
Rocky Mountains |
|
52,200 |
53,200 |
67,200 |
Lower 48 States excluding offshore |
|
37,900 |
49,600 |
64,900 |
68,700 |
Producing 1 MMcf/D |
West Texas |
|
|
|
69,800 |
69,800 |
South Texas |
| |
70,000 |
70,000 |
South Louisiana |
| |
70,800 |
70,800 |
70,800 |
North Louisiana |
| | |
70,800 |
70,800 |
Mid-Continent |
| | |
71,200 |
71,200 |
Rocky Mountains |
| | |
67,200 |
Lower 48 States excluding offshore |
| |
70,400 |
70,000 |
70,700 |
Producing 5 MMcf/D |
West Texas |
| | | |
85,200 |
South Texas |
| | |
85,500 |
South Louisiana |
| | |
86,300 |
86,300 |
North Louisiana |
| | | |
86,300 |
Mid-Continent |
| | | |
86,900 |
Lower 48 States excluding offshore |
| | |
85,900 |
86,200 |
Producing 10 MMcf/D |
North Louisiana |
| | | |
113,100 |
| Table ES4. Annual Operating
Costs for 1 well Gas Leases in 2002 (Current US Dollars) |
|
Region |
2,000 |
4,000 |
8,000 |
12,000 |
16,000 |
Producing 50 Mcf/D |
West Texas |
10,300 |
12,800 |
16,900 |
South Texas |
11,900 |
13,900 |
South Louisiana |
11,800 |
13,700 |
|
North Louisiana |
11,800 |
Mid-Continent |
11,900 |
13,700 |
Rocky Mountains |
12,400 |
14,600 |
Lower 48 States excluding offshore |
11,700 |
13,700 |
16,900 |
Producing 250 Mcf/D |
West Texas |
12,800 |
18,400 |
31,400 |
39,600 |
South Texas |
14,400 |
19,600 |
33,600 |
South Louisiana |
14,300 |
20,100 |
34,700 |
North Louisiana |
14,300 |
20,200 |
35,100 |
Mid-Continent |
16,200 |
21,900 |
34,800 |
43,100 |
Rocky Mountains |
14,900 |
25,000 |
34,400 |
43,100 |
Lower 48 States excluding offshore |
14,500 |
20,900 |
34,000 |
41,900 |
Producing 500 Mcf/D |
West Texas |
| |
23,100 |
28,800 |
33,200 |
South Texas |
| |
25,700 |
32,500 |
South Louisiana |
| |
28,900 |
33,300 |
36,500 |
North Louisiana |
|
19,900 |
28,300 |
32,100 |
Mid-Continent |
|
20,400 |
27,600 |
33,400 |
36,800 |
Rocky Mountains |
|
23,600 |
26,900 |
33,300 |
Lower 48 States excluding offshore |
|
21,300 |
26,800 |
32,200 |
35,500 |
Producing 1 MMcf/D |
West Texas |
| | |
37,200 |
41,700 |
South Texas |
| |
39,300 |
38,100 |
South Louisiana |
| |
36,700 |
43,400 |
47,400 |
North Louisiana |
| | |
41,800 |
47,500 |
Mid-Continent |
| | |
43,500 |
47,100 |
Rocky Mountains |
| | |
41,800 |
Lower 48 States excluding offshore |
| |
38,000 |
41,000 |
45,900 |
Producing 5 MMcf/D |
West Texas |
| | | |
46,100 |
South Texas |
| | |
41,100 |
South Louisiana |
| | |
38,300 |
50,400 |
North Louisiana |
| | | |
50,800 |
Mid-Continent |
| | | |
48,000 |
Lower 48 States excluding offshore |
| | |
39,700 |
48,800 |
Producing 10 MMcf/D |
North Louisiana |
| | | |
66,000 |
Offshore
Table ES5 provides operating costs for offshore wells displayed
by platform size and water depth.
| |
Table ES5. Annual Operating Costs for
Gulf of Mexico wells in 2002 (Current US Dollars) |
| |
| | Water Depth, feet |
| Platform Size |
100-ft |
300-ft |
600-ft |
| 12 Slot |
4,580,100 |
4,768,000 |
|
| |
| 18 Slot |
5,606,300 |
5,822,500 |
6,237,600 |
| |
| GOM Average |
5,093,200 |
5,295,300 |
6,237,600 |
Coal Bed Methane Leases
Table ES6 and ES7 provide the 2002 lease equipment costs and operating
costs for a 10-well Coal Bed Methane lease.
|
Table ES6. Annual Operating Costs for
Gulf of Mexico wells in 2002 (Current US Dollars) |
| | Producing Depth, feet |
|---|
| Area | 1,000 |
2,000 | 3,000 |
| Appalachia | |
616,800 | |
| Black Warrior | |
431,900 | |
| Powder River | 286,400 |
| |
| San Juan | |
| 912,200 |
| | | | |
| Table ES7. Annual Operating Costs for
10-well Coal Bed Methane leases in 2002 (Current US Dollars) |
| Producing Depth, feet |
| Area | 1,000 |
2,000 | 3,000 |
|
| Appalachia | |
148,400 | |
| Black Warrior | |
82,700 | |
| Powder River | 93,400 |
| |
| San Juan | |
| 119,000 |
Water handling costs are a major factor in coal bed methane operating costs and partially account for the difference in operating costs.
Items tracked
Table ES8 indicates the more significant cost items tracked from
year to year, beginning in most cases with the year 1976. Freight
and taxes are also a part of the equipment cost, as is the labor
to install the equipment. Maintenance costs include replacement
costs of some of the more common wear items.
| Table ES8. Items tracked for
Oil or Gas, or Coal Bed Methane Lease Equipment and Operating Costs |
|
| Automobile Costs | Oil transfer pumps |
| Communications costs - land | Oilfield chemicals |
| Communications costs - offshore | Oilfield maintenance - land |
| Electric lease power | Oilfield maintenance - marine |
| Electric motors and controllers | Packers |
| Electric labor - field | Perforating |
| Electric materials - field | Pipe coating |
| Fences | Plastic tanks |
| Field structures - small | Pumping engines- gas |
| Fishing tools | Pumping motors - electric |
| Miscellaneous fittings | Pumping unit bases |
| Gas compressors | Pumping units |
| Gas lift equipment | Slick line work - offshore |
| Gas sales meters | Speciality tubing |
| Gross national product deflator | Submersible pumps |
| Helicopter service | Submersible hydraulic pumps |
| Hot oil service | Sucker rods |
| Insulation | Tubular goods - lease |
| Insurance - offshore | Tubular goods - well |
| Labor statistics - oil field | Tugs and barges |
| Labor - clerical | Valves, pumps, misc. - land |
| Labor - supervisory | Water filter cases |
| Labor - technical | Water filters |
| Large engine for hydraulic pumping | Water injection pumps |
| Lease processing and storage equipment | Well costs - secondary recovery |
| Lubricants | Well servicing - land |
| Marine food services | Well servicing - offshore |
| Natural gas prices | Wellheads |
| Oil sales meters | Work boats |
|
