Annual Drilling Report GRI program reduces drilling learning curve, improves efficiency

Brian Gahan
Gas Research Institute,
Chicago

J. Ford Brett,
Jim Williams
Oil & Gas Consultants Inc.,
Tulsa

The Gas Research Institute (GRI) has developed sets of region-specific drilling practices to help operators improve drilling efficiency by minimizing the operator's time in learning curves.

These drilling practices were developed from analyses of both the successful and unsuccessful practices and technologies used in specific areas. The intent is to lower drilling costs by allowing an operator or contractor to benefit from the successes and mistakes made by previous drillers in an area.

Drilling for gas is costly. Because drilling normally accounts for 50-80% of total exploration costs and 40-70% of total development costs, reducing drilling expenses can have a significant impact on the total economic viability of a gas resource base. Lower overall discovery costs mean more economically producible reserves.

Some organizations drill gas wells more economically than others. In fact, studies show that drilling costs can vary as much as 50% for wells in the same geologic area with the same objectives. If all companies in an area learned to drill better, faster, and more cheaply, then performance would improve, reserves that are not economical today would become more so, and the demand for area drilling services would increase.

GRI's Successful Drilling Practices studies, conducted by Oil & Gas Consultants International Inc. (OGCI), aim to improve the performance of the industry as a whole. The project has goals of identifying the most successful drilling practices and documenting them in enough detail to make them useful. GRI wants operators to be able to use the study results to actually plan their drilling projects. Organizations should also be able to use the successful drilling practice results to benchmark their drilling performance.

Successful drilling practices

GRI's Successful Drilling Practices are proven techniques that result in the highest overall penetration rates and lowest cumulative drilling costs.

OGCI compared the drilling practices and performance of operators in certain regions. Each organization's operating procedures--from spud date to cementing the production casing--were analyzed to identify the practices that worked best in each area. All this information was combined into a prototype drilling operation plan (DOP), customized by region.

The best drilling practices from all of the successful operators were used to create a region-specific operations plan for drilling a prototype well. Experience curves show that drilling organizations do not learn at the same rate. Good drilling organizations spend 10-25% of their total budget on learning; poor organizations spend even more.1

Organizations that learn from their experience and share knowledge to improve the collective rate of learning are more successful and efficient. The learning curve case studies show rate of penetration (ROP in days) plotted against sequence drilled to indicate improvements in relative performance, if any (Figs. 1-6).

• Fast learning curve
  This North Sea operator maintained a fairly rapid rate of learning. This curve is the goal of any drilling region (Fig. 1 (24597 bytes)). The penetration rate, measured in days, drops for each successive well.
• No learning curve
  This Oklahoma operator had no baseline on which to establish performance (Fig. 2 (24177 bytes)). The organization did not share information. There was no measurable improvement in drilling efficiency.
• Applying new technology
  Learning does not stop when curves begin to flatten, however. In Anschutz Ranch, Wyo., new technology was shared throughout the organization to cut drilling time again, in contrast to the Oklahoma example (Fig. 3 (20812 bytes)).
• Slow learning curve
  This example has more variance between wells than the North Sea case (Fig. 4 (26230 bytes)). The sharing of experience was less efficient. If the same level of improvement could have been achieved in 5-10 wells instead of 30-40 wells, then 35% of the total drilling cost could have been saved.
• Forgetting curve
  If a few years elapse between projects, undocumented experience is lost (Fig. 5 (27401 bytes)). Had this organization not "forgotten" what it learned in 1977, it could have saved $3.9 million, or 50% of total cost.
• Losing key personnel
  In this Texas case, drilling experience rested with a few key people. When they left the company, they took their knowledge with them, and the company returned to the beginning of the learning curve (Fig. 6 (25694 bytes)). These graphs clearly show that no learning or slow learning is very expensive. On the other hand, consistent, shared learning can improve efficiency. Thus, sharing specific successful drilling information and techniques among operators and contractors in a region should raise the region's overall rate of success. Making this knowledge pool available to anyone drilling gas wells in the study areas should raise the region's overall rate of success.

Drilling study

The study initially concentrated on two basins: the Greater Green River in Wyoming and the Arkoma in Oklahoma. The methodology consisted of the following six steps:

1. Build a data base.
   In each study area, general information on wells drilled from 1990 to 1994 was obtained from Petroleum Information Corp.: spud data, total depth, rig release, operator and drilling contractor names, formations, and locations. The data base was built in Excel and Access with information ranked by ROP and cost per day.
2. Collect and analyze daily drilling reports.
   The operators of these recently drilled wells were asked to submit their daily drilling reports. Detailed information from these reports was used to refine the initial data base.

   Spud and rig release dates were verified, information gaps were filled, and additional parameters such as cost were added.

3. Identify successful drilling operations.
   The next task was to sort the gas well data base to find the top performers. This job was difficult because performance comparisons had to be based on the same drilling conditions. For example, high ROP might be the result of easier geologic conditions and not necessarily stellar drilling performance.
4. Select prototype well.
   To be a useful aid in well planning, the drilling practice description needed to be highly detailed and specific. Therefore, the DOPs were designed for drilling a specific prototype well. With several sets of successful offsets identified in each area, a specific drilling situation was selected to be used as the basis for the study. The prototype selection was based on the following criteria:
   • Meaningful results require a sufficient number of successful, comparable offsets.
   • Broad applicability requires the prototype drilling conditions to be able to be generalized to a wider area as much as possible.
5. Conduct interviews to collect additional data.
   The next task was to interview operators, contractors, and suppliers who worked on any of the set of offset wells that served as the basis for the prototype. The aim was to determine what these organizations did to achieve success.
6. Prepare drilling operation plans.
   All accumulated data were analyzed and compiled into a drilling operation plan (DOP) for each area. Feedback from the successful operators was then incorporated into the final report.

Cost savings

GRI predicts a 50% increase in imported petroleum during the next 10 years, and operators will see more cost competitiveness. Also, the cost of business is rising because of environmental regulations. Finally, reserves per well are depleting. Thus, operators must use the best drilling practices to maximize productivity and profitability. Another issue the study examines is whether successful practices should be shared.

Are these threats real? Can efficiency indeed create its own demand? Does an operator perform better alone or by sharing information?

Based on the data from the reports, shared information does increase the profitability of an area. Costs drop when information is shared.

Fig. 7a (85096 bytes) illustrates wells drilled by seven operators in the South Moxa Arch portion of the Greater Green River basin study region. The broken line denotes the learning curve for all of the wells except those drilled by one major operator. The solid line is the learning curve for all of the wells, including improvements that one major operator incorporated in 1993-1994. The bottom curve shows the major operator's learning curve (Fig. 7b (85096 bytes)). This operator initiated a concentrated effort to improve drilling efficiency by creating an alliance with a single drilling contractor and incorporating new technology--mainly improved polycrystalline diamond compact (PDC) bits and mud motors.

Performance resulted in a threefold increase in the slope of the Moxa learning curve. Table 1 (44028 bytes) shows the financial impact of these successful practices. Approximately 60% of the reduction in drilling costs was from actual changes in drilling technology, and 40% was just from alliances and planning improvements. Total cost savings were approximately $173,000.

If all the operators had improved at the same rate, overall area drilling costs would have declined substantially, increasing the economic viability of marginal Moxa reserves. In the Arkoma study area, where drilling costs can be prohibitive but reserves are extremely promising, the GRI drilling operation plan might be able to lower drilling costs and make the area more attractive.

Practical applications

GRI's Successful Drilling Practices study provides detailed data for specific U.S. regions. A Successful Drilling Practices workshop for the Greater Green River basin was conducted in June, and an Arkoma basin workshop was conducted in August. Four upcoming studies to be completed in summer 1996--Anadarko basin, onshore Gulf Coast, extended reach drilling in the Gulf of Mexico, and deepwater Gulf of Mexico--will provide additional information to help operators improve efficiency and reduce drilling costs in those regions.

The most practical potential application of the study is for operators to use the DOP to plan wells. The DOP begins with an overview of the well (basic well data, well goals, downhole drilling environment, evaluation requirements, successful offset wells, and well lithology). It proceeds with specific drilling programs: rig type, hole size and casing program, cementing program, mud program, bit program, mud motor program, bottom hole assembly program, mud logging program, and blowout prevention program.

The last half of the DOP covers drilling performance goals: average cumulative well costs, plots of days vs. depth, and plots of cost vs. depth. The DOP also describes hole intervals.

The DOP concludes with additional helpful information: equipment lists, a hole section trouble response table, and an abridged version of the well data base.

The successful practices detailed in these plans should help all companies drilling in a study area to improve their learning curve.

Future work

These DOPs will continue to be an up-to-date planning aid as long as operators cooperate by meeting the following requirements:

• Use the DOP as a benchmark or starting point for similar wells.
• Try to enhance the improvements.
• Document any improvements.
• Share improvement information.

OGCI will then further refine all six of the Successful Drilling Practices studies and their DOPs. In addition, OGCI's newly created Successful Drilling Practices library will include the most current information available on the most successful drilling practices in an area. This data library will be accessible for any operator who wants to improve his drilling operations.

The study demonstrates that consistent learning, with information shared within an organization and ideally with other operators, has a definite positive impact on a drilling organization's efficiency. Using successful practices--quantifiably superior processes such as the DOPs--long-term technical improvements can be identified. This greater efficiency, in turn, will lead to greater demand and drilling activity.

Reference

1.Brett, J.F., and Milheim, K.K., "The Drilling Performance Curve: A Yardstick for Judging Drilling Performance," Society of Petroleum Engineers paper 15362, presented at the 1986 SPE Annual Technical Conference and Exhibition, New Orleans.

 Table 1 ACTUAL DRILLING COST SAVINGS, SOUTH MOXA ARCH FRONTIER WELL Alliance & General drilling planning technology Improved improvements improvements PDC bit ($/Frontier well) ($/Frontier well) ($/Frontier well) Description of improvement -------------------------------------------------------------------------------------------------------------------------------------------- Minimize log suite when second well in section 5,000 Use 4 1/2 in. production casing vs. 5 1/2 in. casing 30,000 No well cleanup on single Frontier well 25,000 Optimize cement design 7,000 Use 8 5/8 in. vs. 9 5/8 in. surface casing 2,715 Drill less rathole on Frontier well 15,000 Change wellhead design 4,000 Locate production equipment closer to wellhead 460 Reduce drilling days by the drilling company 43,000 42,300 Reuse drilling mud on Frontier wells 5,000 Preplan/schedule rig mobilization 3,000 Reduce operator supervision/time on jobs 4,196 Cooperate within the alliance 2,500 Reduce average cementing location time 420 Purchase pit liners in lots of ten 1,400 Negotiate with water company to reduce price 6,000 Haul surface casing 300 Use 400-bbl fracmaster for cement water vs. 400-bbl upright 250 Switch vendors for casing dope 100 Use a single contractor to haul away all trash 425 Estimate avg.
 hole size from previous well data 1,750 Pay flat rate for casing crews 1,800 Pay contractor flat rate for cleaning casing 1,150 Set 2-3 conductors at a time 200 Use railhead in Rock Springs for casing delivery 2,400 Pump 10 vs. 40 bbl of chemical preflush 350 Reuse 1 in. cement pipe 110 Use zero or bare-bone automation 4,000 Compare prices of dirt contractors 6,000 Purchase fencing material in bulk 400 -------- -------- -------- Subtotal $68,211 $62,715 $42,300 Percentage of total 40% 36% 24% Total drilling cost reduction: $173,226 ======== 

The Authors