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    Development Phase

    September October 2005abalt solutions limited - 2005

    INTRODUCTION TO HYDROCARBON EXPLOITATION

    Introduction to Hydrocarbon Exploitation

    2005 Abalt Solutions Limited. All rights reserved

    Development Phase

    Well Costing

    DrillingTechnology-WellCosting

    2005 Abalt Solutions Limited. All rights reserved

    Well Economics

    Maximizing revenue by:

    Increase in probability of finding

    hydrocarbons.

    Controlling costs of Drilling and

    Production. Planning and Design of wells to produce

    at optimum flow rates with respect tosafety and reliability.

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    Development Phase

    September October 2005abalt solutions limited - 2005

    INTRODUCTION TO HYDROCARBON EXPLOITATION

    DrillingTechnology-WellCosting

    2005 Abalt Solutions Limited. All rights reserved

    Drilling Contracts

    Day Rate Incentive

    Bonus per foot

    Significant component of contractors revenue.

    Well drilled according to drilling programme.

    Contractor can advice on type of bit (not decide onit)

    Faster the drilling, more effective

    Requires high level of Supervision and adherenceto Operators Policies.

    Operator has control of drilling Provides material and equipment to drill the well

    except rig.

    DrillingTechnology-WellCosting

    2005 Abalt Solutions Limited. All rights reserved

    Drilling Contracts

    Footage Contract

    Rate per foot to pre determined depth, after

    which day rate format.

    Contractor supplies bits.

    Operator can take control anytime and revert to

    day rate. Contract specifies conditions for good well

    integrity.

    Suitable where downhole risks such as lostcirculation are low.

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    Development Phase

    September October 2005abalt solutions limited - 2005

    INTRODUCTION TO HYDROCARBON EXPLOITATION

    DrillingTechnology-WellCosting

    2005 Abalt Solutions Limited. All rights reserved

    Drilling Cost Categories

    Fixed Costs: Wellheads, bits, site preparationetc.

    Unit Costs: Bulk Barite , cement etc.

    Day Rate Costs: rig hire, rental tools etc.

    Some companies use Tangible and Intangible

    Costs

    Tangible costs are Unit and fixed costs.

    In Tangible costs are day rates.

    DrillingTechnology-WellCosting

    2005 Abalt Solutions Limited. All rights reserved

    Drilling Cost Categories

    To Minimize Drilling costs-

    Specify fit for purpose materials for well

    Minimize NPT

    Optimization of drilling times with respect tosafety and reliability

    Competitive prices on materials Minimize overheads.

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    Development Phase

    September October 2005abalt solutions limited - 2005

    INTRODUCTION TO HYDROCARBON EXPLOITATION

    DrillingTechnology-WellCosting

    2005 Abalt Solutions Limited. All rights reserved

    Day Rate Costs- Land Rigs

    1500Mud Logging services

    5000Electric Logging

    1200Mud engineering services

    2500Cementing services

    50,000Rig(2000 HP)

    25,000Rig(1000 HP)

    Cost/day($)

    The Costs above are a rough guide and depend upon market

    conditions and locations.

    DrillingTechnology-WellCosting

    2005 Abalt Solutions Limited. All rights reserved

    The Authorisation for expenditure is the budget for a welland prepared and signed by a senior manager from theOperator.

    It contains

    Project Description

    Summary of expenditure

    Partners shares

    Well breakdown costs

    AFE

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    Development Phase

    September October 2005abalt solutions limited - 2005

    INTRODUCTION TO HYDROCARBON EXPLOITATION

    DrillingTechnology-WellCosting

    2005 Abalt Solutions Limited. All rights reserved

    Drilling Time estimate

    Drilling time on hole, circulation, wiper trips ,tripping , side tracking , directional work and

    hole opening.

    Flat times spent on running and cementingcasing, make up BOP and wellheads.

    Testing and completion times

    Formation evaluation time

    Rig up and down

    Non Productive time (NPT)

    DrillingTechnology-WellCosting

    2005 Abalt Solutions Limited. All rights reserved

    Well Costs

    Rig Costs

    Tangibles

    Services

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    Development Phase

    September October 2005abalt solutions limited - 2005

    INTRODUCTION TO HYDROCARBON EXPLOITATION

    DrillingTechnology-WellCosting

    2005 Abalt Solutions Limited. All rights reserved

    Well Costs

    Rig Costs Cost of hiring drilling rig and associated equipments.

    Depends upon rig rate per day ($/day)

    Rig rate depends upon :

    Type of rig

    Market conditions

    Length of contract

    Days on well

    Mobilization and Demobilization of rig

    Supervision Other charges

    DrillingTechnology-WellCosting

    2005 Abalt Solutions Limited. All rights reserved

    Well Costs

    Tangible Costs Refer to products used on the well.

    Casing Tubing Completion equipment Wellhead accessories Bits Core heads Cement products Mud products Solid control consumables Fuel Other supply materials

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    Development Phase

    September October 2005abalt solutions limited - 2005

    INTRODUCTION TO HYDROCARBON EXPLOITATION

    DrillingTechnology-WellCosting

    2005 Abalt Solutions Limited. All rights reserved

    Non Productive Time

    Any time that has been spent for routine orabnormal operations which are carried out as a

    result of failure.

    It is important to realize that each step should

    follow preceding step without delay.

    Each step should take least possible time with

    good practise.

    DrillingTechnology-WellCosting

    2005 Abalt Solutions Limited. All rights reserved

    Non Productive Time

    Classification of NPT

    Repair Time

    Rectification time

    Client time

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    Development Phase

    September October 2005abalt solutions limited - 2005

    INTRODUCTION TO HYDROCARBON EXPLOITATION

    DrillingTechnology-WellCosting

    2005 Abalt Solutions Limited. All rights reserved

    Non Productive Time

    Repair Time

    Time spent on repairs on the rig and

    related equipment during which drillingoperations is shut down.

    Any operation that might be carried out

    to place the well in safe conditions beforeattempting repair and on completionreturning the well to former status.

    Waiting on spare parts, weather orpersonnel before normal drilling

    operations are carried out.

    DrillingTechnology-WellCosting

    2005 Abalt Solutions Limited. All rights reserved

    Non Productive Time

    Rectification time

    Time spent in overcoming downhole

    problems that delay operations.

    Some of the operations are :

    Freeing stuck pipeFishing lost cones

    Squeeze cement

    Well kill operation

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    Development Phase

    September October 2005abalt solutions limited - 2005

    INTRODUCTION TO HYDROCARBON EXPLOITATION

    DrillingTechnology-WellCosting

    2005 Abalt Solutions Limited. All rights reserved

    Non Productive Time

    Client Time

    Time spent on operations requested byclient that was not included in the drilling

    program earlier.

    These are not NPT, but indirectly linkedand might affect the AFE.

    Operations are

    Plugging back

    Extra coring

    Extra logging