2006 Drilling Expenditures at All-Time High

Oil and natural gas industry spending on drilling and equipping wells in the United States surged again in 2006, hitting an all-time record high of nearly $110 billion.

The 2006 Joint Association Survey on Drilling Costs (JAS) found that the industry spent 44 percent more in 2006—the most recent year for which data was available—to drill and equip wells in the U. S. than it did in 2005. Total drilling expenditures were estimated to be $109.8 billion in 2006, compared with $76.2 billion during the previous year. Increases in the number of wells and total footage drilled pushed the average cost per well and per foot to their highest levels ever.

,p>"This unprecedented level of spending clearly demonstrates the industry's commitment to actively invest in exploring for and finding new sources of crude oil and natural gas," said Hazem Arafa, director of API's statistics department.

In 2006, the industry spent $14.7 billion on exploration wells, a 19-percent increase from the previous year's $12.4 billion. Development well expenditures totaled $93.8 billion in 2006 compared with 2005's $63.8 billion, a 47-percent jump. Spending increased a robust 58 percent to $33.6 billion on development oil wells in 2006, while development gas well spending surged 72 percent to $53.7 billion.

Although oil exploration was especially strong in 2006, for the nineteenth consecutive year the industry spent more drilling for natural gas than oil. In 2006, gas expenditures accounted for 54 percent of the total drilling spending, up from 2005's 51 percent. Oil spending dropped to 34 percent of the total, down from 35 percent in 2005, while dry holes accounted for the spending balance of 12 percent.

The complete 2006 Joint Association Survey on Drilling Costs (JAS) (Order No. N90055) is available now for sale electronically and by the end of the month in hard copy from API's statistics department. Telephone (202) 682-8375 or (202) 682-8508. There is a discount for API members. An annual electronic subscription is available through ACCESS*API online.