The U.S. Energy Information Administration (EIA) released the results of a report on Wednesday that analyzed the costs associated with upstream drilling and production activity over the past several years, revealing that production costs have fallen since 2012.
The report was released as part of the EIA’s monthly Drilling Productivity Report. The study was conducted by IHS Global, Inc., to assess gas and oil well development in the Marcellus, Eagle Ford, Bakken and Permian Regions. The Midland and Delaware basins of Permian were analyzed separately.
The study found upstream drilling costs fell by 25 to 30 percent per well from 2012 to 2015. Within the last decade, per-well costs were at their highest in 2012. A correlation between a decrease in production costs and the advancement of drilling technology was also noted. New methodologies allow for more efficient and cost-effective drilling that allows for deeper, longer and more complex lateral wells.
IHS Global also discovered geological differences per region accounted for some fluctuations in per-well costs, with water disposal options, well depth and terrain serving as factors that affect cost, completion time and well performance. A push to standardize practices would further lower production costs for drilling companies.
Production costs are expected to continue to fall through 2018.
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