Drilling Optimization

Drilling Costs

Mahmoud Farag Radwan

Subsurface & Integrity Operations Lead
https:\\www.linkedin.com/in/mahmoud-farag-radwan-a9266626
 Mahmoud Farag Radwan

Mahmoud Radwan is a Subsurface & Integrity Op. Lead with more than 15
years of experience in oil & gas industry. Mahmoud worked in Well
Engineering, Intervention, Integrity & Work-over at several companies,
Short including AMAL Petroleum Co. (AMAPETCO), KDT Global Solutions, CUDD Well
Control, Badr El-Din Pet. Co. (BAPETCO), Qarun Pet. Co. (QPC) and Wadi El-
Biography Sahel Petroleum Co. (WASPETCO).
Also, a freelance instructor at upstream Oil & Gas in Egypt & GCC since 2008.
Mahmoud received a BSc degree in Petroleum Engineering from Al-Azhar
University in 2007.
o Evaluating Sustainable Annulus Pressure (SAP) in Sour Wells and the Possible
Causes to Avoid Recurrence to the Well Integrity Annual Middle East
Conference in Abu Dhabi; UAE in Apr 2015
o Implementing NDT methods for maintenance and inspection to the Asset
Integrity Management North Africa Conference in Cairo; Egypt in Nov 2015
o Feasibility Evaluation of Using Downhole Gas-water Separation Technology in
gas Reservoirs with Bottom Water; paper number: SPE-183739-MS to the 20th
Middle East Oil & Gas Show and Conference in Mar 2017
Publications http://dx.doi.org/10.2118/183739-MS
o Managing the Operational Challenges in Corroded Wells through Well Integrity
Management System to the Improving Brownfield Performance Technical
Convention, in Cairo; Egypt in Dec 2019
o Safe and Economic Attractive Rigless Operations Using a Digital Slickline in
Unmanned Platform with Low Structure Loads and Spacing; paper number:
SPE-202857-MS to the Abu Dhabi International Petroleum Exhibition &
Conference (ADIPEC) in Nov 2020 https://doi.org/10.2118/202857-MS
 WELL COSTS
Well costs are expensive in today’s industry
and rise further as hole angle increases.

Mahmoud Farag Radwan

 WELL COSTS
If financial performance is to be
outstanding, then risks must be reduced
through knowledge.
This requires teamwork.

Risk

Knowledge Mahmoud Farag Radwan

Mahmoud Farag Radwan
 AFE - What is it?

• AFE - “Approval For Expenditure” or

Authorization for Expenditure
• This is generally a detailed cost estimate
which is submitted for management
approval to allocate money.
• Controlling costs, including estimating
future drilling costs, is a large part of the
Drilling Engineers’ responsibility.

Mahmoud Farag Radwan

 Item £ Cost No days Length Total
basis

Rig cost
catering
£40,000
£1,000
day
day
60
60
£2,400,000
£60,000 Rig costs
Modifications £100,000 well £100,000
Conductor £200 foot 250 £50,000
13-3/8" casing £150 foot 2500 £375,000
9-5/8" casing
7" Liner
Conductor accessories
£50
£30
£2,000
foot
foot
well
8500
3500
£425,000
£105,000
£2,000
Drilling Hardware
13-3/8" casing accessories £4,000 well £4,000
9-5/8" casing accessories
7" Liner accessories
5" tubing
£4,000
£2,000
£50
well
well
foot 11500
£4,000
£2,000
£575,000
Tangible Costs
Tubing accessories £2,000 well £2,000
Downhole safety valve £50,000 well £50,000
Completion packers £30,000 well £30,000
Subsea Christmas trees
Nipples
£500,000
£10,000
well
well
£500,000
£10,000
Completion Hardware
Control line £5,000 well £5,000
Completion Crossovers etc £10,000 well £10,000
Mud Chemicals £50 foot 11500 £575,000
Cement and additives £30 foot 11500 £345,000
Electric Logging £30 foot 11500 £345,000
Perforating £100,000 well £100,000
Directional drilling and surveys £5,000 day 40 £200,000
Rock bits £80,000 well £80,000
PDC/Diamond bits £200,000 well £200,000
Drilling Consumables
Mud Engineers
Casing Crews
£1,000
£800
£2,000
day
day
day
40
60
20
£40,000
£48,000
£40,000
Intangible Costs
Cementers £800 day 60 £48,000
Mud Loggers £1,000 day 40 £40,000
MWD Engineers £5,000 day 20 £100,000
Fishing Services
Liner Hanger engineer
Filtration [completion phase]
£500
£1,000
£1,000
day
day
day
60
5
20
£30,000
£5,000
£20,000
Variable Costs; people and
Miscellaneous Drilling Rentals
Geology office services
Onshore office services
£2,000
£1,000
£5,000
day
day
day
60
60
60
£120,000
£60,000
£300,000
consumables…etc.
Drilling Supervision £1,000 day 60 £60,000
Wellhead serviceman £1,000 day 12 £12,000
Onshore materials man £300 day 60 £18,000
Cuttings ship to shore £5,000 day 60 £300,000
Packer crew personnel £1,000 day 6 £6,000
Completions Engineer £1,000 day 25 £25,000
Daily Transport Costs £5,000 day 60 £300,000
Standby Boat £3,000 day 60 £180,000
Total AFE Cost £8,306,000
 Importance of Budgeting

Goal: deliver the Well to agreed technical and

financial specifications
Thus; must know the TRUE cost of each service
to effectively manage our business
Cost control = managing the well cost
Well Cost = verification of actual cost Vs
estimated cost, based on an agreed scope of
work
 Example of an AFE
AUTHORITY FOR EXPENDITURE
Block B8/38 8 1/2" Sidetrack

Project Summary:
This AFE details the costs associated with planning and engineering 3 development 8 1/2" Sidetrack wells (BA-02-HST2,BA-03-HST2 and BA-04-HST2) running 4" expandable sand screens in the 6" horizontal sections. The 8 1/2" sidetrack and build to horizontaland with a 6"geosteered section, mobilizing / demobilizing the Jack-
up drilling unit and execution of the three well project.

Project Cost: $ 4,569,527 AFE Number TH/2010/102A

Justification
Following the peer review held on the 8th and 9th March at Bangkok office, the decision was made to run a 4" ESS (Expandable Sand Screen) with a 230µ Screen into a 6" horizontal hole.

Budget Status
This AFE is part of the 2010 Production & Development Budget totalling USD 16,800k, which was presented at the August 2009 OCM.
The AFE for the horizontal Producer is estimated at USD 4,598k versus 5,200k estimated in the 2010 P&D budget.
The total AFE for the drilling phase 4 is estimated at USD 16,895k

Cost Estimate by Major Category - USD

Unit Cost
Qnty.

TANGIBLE COSTS

Downhole Completion Equipment 1 $ 1,232,297 $ 1,232,297

Other Tangibles 1 $ 77,321 $ 77,321

Casing 1 $ 119,460 $ 119,460

Tangible Sub Total $ 1,429,078

INTANGIBLE COSTS

Non- Tangible 1 $ 3,140,449 $ 3,140,449

Intangible Sub Total $ 3,140,449

TOTAL INTANGIBLE COSTS + TANGIBLE COSTS

$ 4,569,527

GRAND TOTAL $ 4,569,527

Approvals

……………………………………. …………………………………….
Project Leader: Regional Operations Director

……………………………………. …………………………………….
Finance Manager:

……………………………………. …………………………………….
General Manager: Authorised Partner
 Drilling Completion Total Days

Timing (days) 138 10 148

Well Cost Tangible Fixed

$ day cost Intangible Cost Total

$239,213 32,863,136 2,540,442 35,403,578

Sub Rate Drilling Completion Total 38,008 28,767,388 1,011,042

Code DESCRIPTION Drive
110 Drilling Rig Contractor T $58,900 8,128,200 589,000 8,717,200 8,717,200 8,717,200
115 Helicopters T $5,000 690,028 50,002 740,030 740,030 740,030
115 Supply Vessels T $26,000 3,588,000 260,000 3,848,000 3,848,000 3,848,000
120 Downhole Tool Services T $8,007 1,104,973 1,104,973 1,104,973 1,104,973
121 LWD/MWD Services T $13,096 1,807,272 1,807,272 1,807,272 1,807,272
125 Wire Line Logging F $9,486 1,392,828 11,105 1,403,933 1,403,933 1,403,933
135 Mud Engineering T $5,068 699,402 50,681 750,084 750,084 750,084
140 Cement Services T $2,924 403,555 29,243 432,798 432,798 432,798
845,930
145 Other Drilling Services T $5,716 788,773 57,157 845,930 845,930
145 Office support and OH costs T $0 0 0 0
150 Core Services F $0 0 0 0
557,042
155 Diving and ROV services T $3,764 519,404 37,638 557,042 557,042
165 Insurance F $2,365 326,351 23,649 350,000 350,000 350,000
170 Mud Logging T $3,866 533,508 38,660 572,168 572,168 572,168
190 Casing Running T $3,037 419,059 419,059 419,059 419,059
210 30" Conductor D $0 43,380 43,380 43,380 43,380
210 22" D $0 241,560 241,560 241,560 241,560

210 18" Casing D $0 305,505 305,505 305,505 305,505

210 16" Casing D $0 424,125 424,125 424,125 424,125
210 13.7/8" Casing D $0 420,200 420,200 420,200 420,200
210 13.3/8" Casing D $0 508,200 508,200 508,200 508,200
210 11.3/4" Casing D $0 0 0 0 0
210 10.3/4" Production Casing D $0 217,800 217,800 217,800 217,800
210 9.7/8" Casing (10 & 7.3/8) D $0 733,500 733,500 733,500 733,500
210 7.3/8" Contingency Liner D $0 0 0 0 0
210 5.5" Liner 32.7lb/ft D $0 369,000 369,000 369,000 369,000
210 Casing Accessories F $0 220,000 220,000 220,000 220,000
210 LinerHanger F $0 782,998 782,998 782,998 782,998
230 Cuttings Disposal Rental / Services Costs T $11,755 1,765,126 117,545 1,882,672 1,882,672 1,882,672
230 Cuttings Disposal Boat T $12,000 1,776,000 1,776,000 1,776,000 1,776,000
230 Cuttings Disposal Remediation Costs F $0 104,000 104,000 104,000 104,000
235 Fuel, lubes & coolant T $2,940 405,720 29,400 435,120 435,120 435,120
240 Supply Base Operations T $3,200 441,600 32,000 473,600 473,600 473,600
250 Fishing T $1,454 200,617 14,537 215,154 215,154 215,154
255 Wellhead Equipment F $0 643,598 643,598 643,598 643,598
255 Wellhead Equipment Rental & Services T $2,395 354,463 354,463 354,463 354,463
260 Bits D $5,183 715,283 715,283 715,283 715,283
265 Cement and Additives F $0 450,753 450,753 450,753 450,753
270 Mud Chemicals D $0 2,490,353 0 2,490,353 2,490,353 2,490,353
280 Liner Hanger Services D $4,783 0 47,826 47,826 47,826 47,826
0

TOTALS 32,863,136 2,540,442 35,403,578 5,625,149 28,767,388 1,011,042 35,403,578

 Cost Types
Five different cost types were
described;
1. Fixed
2. Depth dependent
3. Time dependent
4. Overhead (or Support)
5. Contingency

Mahmoud Farag Radwan

 Types of Cost - Fixed

• Costs in an estimate are generally divided into 5

major types.
• FIXED costs do not change with well depth or
duration.
• Examples;
 Surveying the rig location
 Mobilizing the rig to the wellsite

Mahmoud Farag Radwan

Types of Cost - Depth Dependent

• DEPTH DEPENDENT costs change with well

depth. The deeper the well, the greater these
costs become
• Examples;
 Casing and accessories
 Drill bits
 Drilling fluid

Mahmoud Farag Radwan

Types of Cost - Time Dependent

• TIME DEPENDENT costs

change with well duration.
• Examples;
 Drilling rig day rate
 Supply boats and
helicopters
 Salaries and consultant
fees
 Fuel

Mahmoud Farag Radwan

 Cost of Drilling Rigs
Offshore Onshore
Daily Rig Cost
1998 $90,000
1999 $40,000
2006 $95,000 Daily Rig Cost
2018 $65,000 1998 $60,000
(Single year contract) 1999 $30,000
2006 $30,000
2018 $25,000
(Single year contract)
Ultra Deep
Daily Rig Cost
1998 $180,000
1999 $180,000
2006 $200,000
2018 $160,000
(Single year contract)

JMA Mahmoud Farag Radwan

Types of Cost - Overheads

– OVERHEAD costs are not incurred at the wellsite.

They may be shared among several operations and a
portion of the cost is allocated to each well. Tend to
be time dependent.
– Examples;
• Office costs including secretaries, stationary etc.
• Logistic bases and supply depots.

Mahmoud Farag Radwan

Types of Cost - Contingency

Contingency costs provide for problems.

– The contingency cost = cost of problem x

probability of occurrence.

– Examples;
• Stuck pipe
• Fishing

Mahmoud Farag Radwan

Thank You

Mahmoud Farag Radwan