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Excel Spreadsheet Model - 1988-2006 XLS (1,178 KB)
Overview
Oil and gas well equipment and operating costs were higher in 2006. Gas equipment costs increased by about 10 percent while gas operating costs increased 13 percent. The 10 percent increase in gas equipment costs was partly caused by an increase in the cost of steel items such as safety valves, chokes, separators, and dehydrators. The 13 percent increase in gas operating costs was partly caused by an increase in the cost of chemicals and labor.
Oil equipment costs were up over 4 percent, while oil operating costs increased about 3 percent. The 3 percent increase in oil operating costs for 2006 is partly attributable to the large increase in the cost of well servicing rigs. Oil equipment costs were affected by an increase in the cost for steel. This increased the cost for tubulars and most surface equipment.
Offshore operating costs increased by 33 percent. The increase in the operating cost index for 2006 was primarily caused by an increase in the costs for transportation and offshore rigs.
These changes are graphically shown in Figures 1, 2, and 3, 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 1988 through 2006. Beginning with 2002 , coal bed natural gas costs were added. At the end of 2005, coal bed natural gas accounted for about 9 percent of U.S. dry gas production and 10 percent of the dry natural gas reserves. The importance of coal bed natural gas is expected to continue.
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. These averages provide a general measure of the change in 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 1988 through 2006.
Summary
Figures 1 and 2 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 3 shows separately the deflated operating costs and gas price indexed to 1976 for the offshore Gulf of Mexico wells.
Figure 1 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 and operating costs are slightly more than for the base year of 1976. The deflated gas price index dropped below the record of 460.6 set in 2005. Actual gas prices averaged $4.98 per MCF in 2003, $5.49 per MCF in 2004, $7.51 per MCF for 2005, and $6.42 per MCF for 2006. By comparison, the average gas price in 1976 was $0.58 per MCF.
Similarly, Figure 2 depicts deflated oil prices, and equipment and operating costs for oil production indexed to 1976.
First purchaser oil prices averaged $27.56 for 2003, $36.77 for 2004, $50.28 for 2005, and $60.78 for 2006. The high price for the year was in August when WTI oil prices were in the $75.00 per bbl range.
The 3 percent increase in oil operating costs for 2006 is partly attributable to the large increase in the cost of well servicing rigs.
Oil equipment costs were up by over 4 percent. This increase was primarily caused by an increase in the price of steel which increased the price for tubulars and most surface equipment.
Figure 3 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 2006 was primarily caused by an increase in costs for transportation and offshore rigs. Part of this increase may be due to major storms in 2005.
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 natural gas leases dewatering by artificial lift. While coal bed natural gas 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 2006) 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.
Costs were determined for new equipment. Tubing costs are included for the oil wells but not for the gas wells. 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 also include tubing costs. Drilling and completion costs are not included in this study.
Primary Oil Production
Leases for onshore oil wells consist of 10 wells producing by artificial lift into a centrally located tank battery. The depths of all wells on each of the leases are 2,000, 4,000, 8,000, or 12,000 feet.
Costs were determined for new equipment capable of handling 200 barrels of liquid per day per well for onshore primary operations. Tubing costs are included. 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 also 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 10 percent water content.
Secondary Oil Production
Costs for secondary oil production 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 water supply 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 production. Some equipment for primary oil production was replaced with larger equipment to accommodate the increased liquid volumes assumed for secondary oil production. Operational costs for secondary oil production are indicated for the increased liquid lift of 250 barrels of liquid per day per producing well (90 barrels of oil per day) and for the water injection system.
Offshore Gas and Primary Oil Production
Operating costs for the offshore Gulf of Mexico were estimated for 12- and 18-well fixed structure platforms. 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 Production
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 or transporter. 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 Natural Gas Production
Leases for coal bed natural gas were assumed to consist of 10 wells dewatering by the predominant artificial lift method employed in that area. The production depths and rates were chosen as representative for that area. The areas studied 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 study.
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Dewatering
Method |
Per Well |
AREA |
Depth |
Gas MCF/D |
Water BWPD |
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Appalachia |
2,000' |
sucker rod |
60 |
3 |
Black Warrior |
2,000' |
sucker rod |
100 |
20 |
Powder
River |
1,000' |
submersible |
100 |
50 |
San Juan |
3,000' |
sucker rod |
500 |
100 |
Revisions
Data used in this work are 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 not be able to respond a replacement company is identified. The replacement company prices may vary slightly from the original company's prices. In order to collate the necessary data, the costs to drill the water disposal wells, water supply wells and secondary recovery water injection wells are estimated since the source for the drilling costs (the Joint Association Survey on Drilling Costs) is two years behind. 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 become common usage in an area. In this manner, improvements in productivity and technology are recognized, although gradually.
Results
Oil Leases
Tables 1 and 2 contain the 2006 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 1 and 2.
Table 1. Equipment Costs for 10-well Oil Lease in 2006 (Current US Dollars) |
| Producing Depth, feet |
Region | 2,000 | 4,000 |
8,000 | 12,000 |
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California |
1,731,400 |
2,073,600 |
2,686,900 |
3,243,100 |
Mid-Continent |
918,700 |
1,465,300 |
2,423,400 |
2,924,500 |
South Louisiana |
1,116,600 |
1,545,100 |
2,013,300 |
3,288,300 |
South Texas |
1,029,200 |
1,461,800 |
1,867,900 |
3,220,300 |
West Texas |
938,700 |
1,438,800 |
2,348,700 |
2,950,200 |
Rocky Mountains |
1,044,800 |
1,500,100 |
2,330,700 |
2,950,900 |
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Lower 48 states excluding offshore |
1,148,600 |
1,580,800 |
2,278,500 |
3,096,200 |
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Additional cost for Secondary Recovery in West Texas |
4,397,700 |
8,799,000 |
17,937,400 |
NA |
Table 2. Annual Operating Costs for 10-well Oil Lease in 2006
(Current US Dollars) |
| Producing Depth, feet |
Region | 2,000 | 4,000 |
8,000 | 12,000 |
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California |
225,200 |
301,1000 |
507,600 |
758,400 |
Mid-Continent |
204,500 |
243,800 |
430,200 |
529,000 |
South Louisiana |
244,100 |
350,900 |
419,700 |
626,900 |
South Texas |
259,900 |
332,700 |
416,300 |
649,300 |
West Texas |
186,400 |
223,5000 |
326,200 |
497,100 |
Rocky Mountains |
232,500 |
259,400 |
351,900 |
454,600 |
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Lower 48 states excluding offshore |
225,400 |
285,200 |
408,700 |
585,900 |
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Additional cost for Secondary Recovery in West Texas |
434,900 |
593,700 |
827,900 |
NA |
Gas Leases
Tables 3 and 4 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 3. Equipment Costs for 1-well Gas Lease in 2006 (Current US Dollars) |
| Producing Depth, feet |
Region |
2,000 |
4,000 |
8,000 |
12,000 |
16,000 |
Producing 50 MCF/D |
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Mid-Continent |
31,200 |
31,200 |
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North Louisiana |
30,700 |
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South Louisiana |
30,700 |
30,700 |
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Rocky Mountains |
33,300 |
33,300 |
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South Texas |
30,300 |
30,300 |
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West Texas |
27,100 |
27,100 |
39,800 |
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Lower 48 states excluding offshore |
30,600 |
30,500 |
39,800 |
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Producing 250 MCF/D |
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Mid-Continent |
33,500 |
44,200 |
70,500 |
91,200 |
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North Louisiana |
30,700 |
44,500 |
69,500 |
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South Louisiana |
30,700 |
44,300 |
70,300 |
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Rocky Mountains |
33,400 |
67,600 |
77,600 |
95,900 |
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South Texas |
30,300 |
44,000 |
70,000 |
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West Texas |
27,100 |
40,500 |
65,500 |
85,700 |
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Lower 48 states excluding offshore |
31,000 |
47,500 |
70,600 |
90,900 |
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| Producing Depth, feet |
Region | 2,000 | 4,000 |
8,000 | 12,000 | 16,000 |
Producing 500 MCF/D |
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Mid-Continent |
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41,800 |
68,900 |
88,800 |
97,700 |
North Louisiana |
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43,400 |
68,100 |
88,000 |
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South Louisiana |
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68,100 |
88,000 |
88,000 |
Rocky Mountains |
|
74,100 |
75,300 |
93,500 |
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South Texas |
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67,800 |
87,700 |
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West Texas |
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63,800 |
83,700 |
95,300 |
Lower 48 states excluding offshore |
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53,100 |
68,700 |
88,300 |
93,700 |
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Producing 1 MMCF/D |
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Mid-Continent |
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97,700 |
97,700 |
North Louisiana |
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96,900 |
96,900 |
South Louisiana |
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96,900 |
96,900 |
96,900 |
Rocky Mountains |
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93,500 |
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South Texas |
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96,600 |
96,600 |
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West Texas |
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95,400 |
95,300 |
Lower 48 states excluding offshore |
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96,800 |
96,200 |
96,700 |
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Producing 5 MMCF/D |
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Mid-Continent |
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115,300 |
North Louisiana |
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114,400 |
South Louisiana |
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114,400 |
114,400 |
South Texas |
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114,200 |
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West Texas |
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112,500 |
Lower 48 states excluding offshore |
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114,300 |
114,200 |
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Producing 10 MMCF/D |
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North Louisiana |
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144,700 |
Table 4. Annual Operating Costs for 1-well Gas Lease in 2006
(Current US Dollars) |
| Producing Depth, feet |
Region | 2,000 | 4,000 |
8,000 | 12,000 | 16,000 |
Producing 50 MCF/D |
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Mid-Continent |
15,600 |
18,500 |
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North Louisiana |
15,100 |
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South Louisiana |
15,100 |
18,100 |
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Rocky Mountains |
17,800 |
21,100 |
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South Texas |
16,600 |
19,200 |
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West Texas |
12,900 |
16,100 |
20,900 |
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Lower 48 states excluding offshore |
15,500 |
18,600 |
20,900 |
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| Producing Depth, feet |
Region | 2,000 | 4,000 |
8,000 | 12,000 | 16,000 |
Producing 250 MCF/D |
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Mid-Continent |
21,800 |
30,400 |
49,100 |
60,700 |
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North Louisiana |
19,000 |
27,700 |
48,700 |
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South Louisiana |
19,000 |
27,600 |
48,000 |
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Rocky Mountains |
21,700 |
36,700 |
51,900 |
64,100 |
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South Texas |
20,500 |
28,100 |
47,700 |
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West Texas |
16,800 |
24,600 |
42,300 |
52,600 |
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Lower 48 states excluding offshore |
19,800 |
29,200 |
48,000 |
59,100 |
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Producing 500 MCF/D |
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Mid-Continent |
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27,100 |
36,500 |
44,400 |
48,600 |
North Louisiana |
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25,700 |
36,300 |
42,000 |
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South Louisiana |
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37,200 |
43,300 |
47,900 |
Rocky Mountains |
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35,100 |
40,100 |
48,700 |
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South Texas |
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34,900 |
43,700 |
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West Texas |
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28,400 |
34,900 |
43,600 |
Lower 48 states excluding offshore |
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29,300 |
35,600 |
42,800 |
46,700 |
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Producing 1 MMCF/D |
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Mid-Continent |
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59,100 |
63,400 |
North Louisiana |
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56,000 |
64,200 |
South Louisiana |
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48,500 |
58,000 |
63,600 |
Rocky Mountains |
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62,500 |
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South Texas |
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56,200 |
52,300 |
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West Texas |
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47,200 |
55,600 |
Lower 48 states excluding offshore |
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52,400 |
55,900 |
61,700 |
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Producing 5 MMCF/D |
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Mid-Continent |
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63,900 |
North Louisiana |
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67,600 |
South Louisiana |
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51,300 |
66,500 |
South Texas |
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54,600 |
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West Texas |
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61,100 |
Lower 48 states excluding offshore |
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53,000 |
64,800 |
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Producing 10 MCF/D |
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North Louisiana |
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88,100 |
Offshore
Table 5 provides operating costs for offshore wells displayed by platform size and water depth.
Table 5. Annual Operating Costs for Gulf of Mexico wells in 2006 (Current US Dollars)
|
| Water Depth, feet |
Platform Size |
100-ft |
300-ft |
600-ft |
12 Slot |
9,337,100 |
9,624,300 |
|
18 Slot |
11,179,300 |
11,523,900 |
12,148,800 |
GOM Average |
10,258,200 |
10,574,100 |
12,148,800 |
Coal Bed Natural Gas Leases
Table 6 and 7 provide the 2006 lease equipment costs and operating costs for a 10-well Coal Bed Natural Gas lease.
Table 6. Equipment Costs for 10-well Coal Bed Natural Gas lease in 2006 (Current US Dollars)
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| Producing Depth, feet |
Area |
1,000 |
2,000 |
3,000 |
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Appalachia |
|
926,300 |
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Black Warrior |
|
621,500 |
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Powder River |
501,500 |
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San Juan |
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|
1,319,200 |
Table 7. Annual Operating Costs for 10-well Coal Bed Natural Gas lease in 2006 (Current US Dollars)
|
| Producing Depth, feet |
Area |
1,000 |
2,000 |
3,000 |
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Appalachia |
|
108,200 |
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Black Warrior |
|
127,800 |
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Powder River |
174,600 |
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San Juan |
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|
187,700 |
Water handling costs are a major factor in coal bed natural gas operating costs and partially account for the difference in operating costs.
Items Tracked
Table 8 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 8. Items tracked for Oil, Gas, or Coal Bed Natural Gas 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 | Tublar 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 |
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