API reports US drilling costs jumped nearly 30% during 2000

WASHINGTON, DC, Nov. 30 -- Higher demand for oil and gas and rising prices spurred a sharp increase in US drilling expenditures in 2000, the American Petroleum Institute said Friday.

It said continued economic growth, closer to normal winter weather, and industry mergers and reorganizations also contributed to the cost increases.

The Joint Association Survey on Drilling Costs showed industry spent 29.6% more in 2000 to drill and equip wells than in 1999. Total drilling expenditures were estimated at $19.3 billion in 2000, compared with $14.9 billion the previous year.

For the 13th consecutive year, the industry spent more drilling for natural gas than for oil. In 2000, gas expenditures were 56% of the total drilling expenditures, clearly dominating oil's 23%. Operators spent $4.5 billion on oil wells, $10.7 billion on gas wells, and $4 billion on dry holes.

API said an overall emphasis on onshore development objectives, at all depth ranges, fueled some of the highest averages for cost per well and cost per foot ever.

Drilling and completing wells in steadily deeper waters, operators spent $7.1 billion offshore in 2000. The number of offshore wells drilled rose 13% and their costs climbed 7% from the previous year. Exploration in the US offshore remained confined almost entirely to the Gulf of Mexico, where drilling and completion activities accounted for 99% of all offshore expenditures.

Onshore, development activity doubled from the previous year largely due to oil activity concentrated in Kansas, eastern New Mexico, and central and western Texas, as well as gas activity -- especially coalbed methane work -- in northern New Mexico, Colorado, and Wyoming.

API said technological advances have made horizontally-drilled wells a viable option for field development. Operators spent $1.2 billion to drill 6.3 million ft of hole for 928 horizontal wells.

And it said production of coalbed methane has become an important source of pipeline quality gas. It said 3,752 coalbed methane gas wells were completed last year at a cost of $329 million.

All categories of drilling activity rose over 1999. Operators drilled 7,651 oil wells in 2000 (a 67% increase), 14,231 gas wells (50%), and 3,738 dry holes (10%), for a total of 25,620 (47%). Footage was 36 million for oil wells (57%), 77.8 million for gas wells (42%), and 22 million for dry holes (7%), for a total of 136 million (38.6%). Costs were $4.5 billion for oil wells (27%), $10.7 billion for gas wells (42%), and $4 billion for dry holes (6%), for a total of $19.3 billion (29.6%).

API said for all wells, the average depth was 5,308 ft, down 5.8%. Average cost for all wells was $754,567, down 12%. And average cost per foot was $142.16, down 6.5%.