A Comparison of Geothermal with Oil and Gas Well Drilling Costs

The costs associated with drilling and completing wells are a major factor in determining the economic feasibility of producing energy from geothermal resources. In EGS power plants, estimates place drilling costs as accounting for 42%-95% of total power plant costs (Tester et al., 1994) depending on the quality of the EGS reservoir. An earlier correlation first developed by Milora and Tester (1976) and later refined by Tester and Herzog (1990) created a drilling cost index based on oil and gas well data from the Joint Association Survey (JAS) on Drilling Costs and used this index to compare the cost of drilling hot dry rock (HDR) and hydrothermal wells to the cost of oil and gas wells drilled to similar depths. This study updates and extends their earlier work. Oil and gas well costs were analyzed based on data from the 2003 JAS for onshore, completed US oil and gas wells. A new, more accurate drilling cost index that takes into consideration both the depth of a completed well and the year it was drilled was developed using the JAS database (1976-2003). The new index, dubbed the MIT Depth Dependent (MITDD) index, shows that well costs are up to 30% lower for wells over 4 km (13,000 ft) deep than those based on previous indices. The MITDD index was used to normalize predicted and actual completed well costs for both HDR or EGS (Engineered Geothermal Systems) and hydrothermal systems from various sources to year 2003 US dollars, and then compare and contrast these costs with oil and gas well costs. Additionally, a model for predicting completed geothermal well costs, called WellCost Lite (Mansure et al., 2005), is explained and demonstrated. Results from the model agree well with actual geothermal well costs. The model is used to identify factors that lead to rapid, non-linear increases in well cost with depth, such as increases in the number of casing strings required as depth increases with a resulting increase in rig capacity (embodied in mobilization, demobilization and daily rental costs), costs of casing and cementing the well, and changes in the rate of penetration. GENERAL TRENDS IN OIL AND GAS WELL COMPLETION COSTS Tabulated data of average costs for drilling oil and gas wells in the US from the Joint Association Survey (JAS) on Drilling Costs (1976-2003) illustrate how drilling costs increase non-linearly with depth. Completed well data in the JAS report are broken down by well type, well location, and the depth interval to which the well was drilled. The wells considered in this study were limited to onshore oil and gas wells drilled in the United States. The JAS does not publish individual well costs due to the proprietary nature of the data. The well cost data is presented in aggregate and average values from this data are used to show trends. Ideally, a correlation to determine how well costs vary with depth would use individual well cost data. Since this is not possible, average values from each depth interval were used. However, each depth interval was comprised of data from between hundreds and thousands of completed wells. Assuming the well costs are normally distributed, the resulting averages should reflect an accurate value of the typical well depth and cost for wells from a given interval to be used in the correlation. In plotting the JAS data, the average cost per well of oil and gas wells for a given year was calculated by dividing the total cost of all onshore oil and gas wells in the US by the total number of oil and gas wells drilled for each depth interval listed in the JAS report. These average costs are tabulated in Table 1. Wells in the 0 1249 ft (0 380 m) and 20,000+ ft (6100+ m) depth intervals were not included because wells under 1250 ft (380 m) are too shallow to be of importance in this study, and not enough wells over 20,000 ft (6100 m) are drilled in a year to give an accurate average cost per well. Table 1. Average costs of oil and gas onshore wells drilled in the US during the year 2003 from JAS data for listed depth intervals. Drilling Interval (feet) Average Depth (meters) Average Depth (feet) Average Cost (Year 2003 US M$) 1250-2499 557 1826 0.227 2500-3749 964 3162 0.267 3750-4999 1329 4359 0.300 5000-7499 1912 6272 0.543 7500-9999 2613 8572 1.01