Before a drilling program is approved it must contain an estimate of the overall drilling cost involved. When drilling in a completely new area with no previous drilling data available the well drilling cost can only be a rough approximation. In most cases however, some previous well data is available and a reasonable approximation can be made. A typical drilling cost distribution for a North sea Well is Shown in Table bellow.
Some costs are related to time and are therefore called time-related costs (e.g. drilling contract, transport, accommodation). Many of the consumable items (e.g. casing, cement) are related to depth and are therefore often called depth-related costs . These costs can be estimated from the drilling program, which gives the lengths or volumes required. Some of the consumable items such as the wellhead will be a fixed cost . The specialized services (e.g. perforating) will be a charged for on the basis of a service contract which will have been agreed before the service is provided. The price list associated with this contract will be a function of both time and depth and the payment for the service will be made when the operation has been completed.
For wells drilled from the same rig under similar conditions (e.g. platform drilling) the main factor in determining the cost is the depth, and hence the number of days the well is expected to take. Figure 10 shows a plot of depth against days for wells
drilled from a North Sea platform. It is interesting to note that of the total time spent drilling a well less than half is spent actually rotating on bottom (Table below).
More sophisticated methods of estimating well costs are available through specially designed computer programmes. Whatever method is used to produce a total cost some allowance must be made for unforeseen problems. When the estimate has been worked out it is submitted to the company management for approval. This is usually known as an AFE (authority for expenditure). Funds are then made available to fi nance the drilling of the well within a certain budget. When a well exceeds its allocated funds a supplementary AFE must be raised to cover the extra costs.