API Cites '07 Drilling Expenditure Surge of over $220B
Oil and natural gas industry spending on drilling and equipping wells in the United States surged again in 2007, hitting an all-time record high of $226.4 billion, more than double the previous record of $109.8 billion set in 2006.
The 2007 Joint Association Survey on Drilling Costs (JAS) found that the industry spent 106 percent more in 2007 -- the most recent year for which data was available -- to drill and equip wells in the United States than it did in 2006. All-time records also were set for average cost per well and average cost per foot in 2007, the survey found.
For oil wells, average per-well spending increased 82 percent to $4 million in 2007, compared with $2.2 million in 2006, with per-foot costs averaging $717 compared with $402 in 2006. The average cost per natural gas well was $3.9 million, up 105 percent over 2006's $1.9 million. Per-foot, natural gas well expenditures averaged $604 in 2007, up from $348 in 2006. Total oil well expenditures jumped 94 percent from 2006 levels to $72.3 billion from $37.3 billion, while natural gas well expenditures more than doubled to $119.1 billion, compared with 2006's $59.3 billion.
"Strong demand and historically high prices spurred increased competition for limited material and labor, and combined with record-high costs for steel, pushed up drilling costs," said Hazem Arafa, director of API's statistics department. "But despite a doubling of the cost to drill and develop wells, we also witnessed a rise in both the number of wells drilled, which increased 4 percent from 2006, and the average depth of those wells, which increased 9 percent. This demonstrates the industry’s commitment to developing our oil and natural gas resources."
Although oil exploration was especially strong in 2007, for the 20th year in a row the industry spent more drilling for natural gas than oil. In 2007, natural gas expenditures accounted for 53 percent of the total drilling expenditures, with oil accounting for 32 percent and dry holes the 15 percent balance.
The complete 2007 Joint Association Survey on Drilling Costs (JAS) (Order No. N90055) is available for sale electronically and in hard copy from API's Statistics Department, at (202) 682-8375. An annual electronic subscription is available through API DATA online.
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