OIL, GAS DRILLING COSTS DOWN AS MUCH AS 30% FROM 2012, EIA SAYS

By Mark Passwaters  Monday, April 04, 2016 12:27 PM ET  snl.com

Upstream operators in five major oil and gas plays have been a able to slice 25% to 30% from their costs since 2012, the U.S. Energy Information Administration reported.

Working in conjunction with IHS Global Inc., the EIA studied the costs per well in the Eagle Ford, Bakken and Marcellus Shales and two plays in the Permian Basin. The findings of the study indicated that improved technology has allowed for more efficient drilling and completion, which has in turn reduced costs.

"Upstream costs in 2015 were 25% to 30% below their 2012 levels, when per-well costs were at their highest point over the past decade," the EIA said. The study showed that for the Permian's Midland Basin and the Marcellus, the cost to drill per foot of depth exceeded $200 in 2012 and drilling in the Eagle Ford exceeded $175 per foot. By 2015, all five plays were below $150 per foot, a level the EIA and IHS believe will be maintained through at least 2018.

In 2012, when the cost per well in all five plays averaged $8 million or more, the cost per lateral foot exceeded $800 in the Midland Basin, Eagle Ford and Marcellus. By 2015, the cost per lateral foot for all five plays was down to $600, with the Bakken as low as $400 per foot.

The agency said the decline in cost continued in 2015, but at a slower rate as producers began to experiment with deeper wells with longer laterals.

"[The changes] affected the onshore oil plays differently in 2015, with recent per-well costs ranging from 7% to 22% below 2014 levels," the EIA said.

The EIA found that differences in geology, well depth and water disposal options could cause the prices in each play to vary, but improvements in drilling and well completion were seen across the board.

"Greater standardization of these drilling and completion practices and designs across the industry should continue to lower costs," the agency said. "The drilling cost per foot, based on total depth, and the completion cost per foot, based on lateral length, are both projected to maintain these lower cost trends through 2018. Sustained lower upstream costs may affect near-term oil and natural gas markets, and ultimately, the prices of these fuels."