Oil & Gas Drilling

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The Ultimate Resource for Understanding Oil and Gas Drilling


The oil and gas industry is a dynamic and complex sector that plays a crucial role in the global economy. From exploration and production to drilling and completions, every step in the process is driven by economic factors. Understanding the economics of oil and gas drilling is essential for companies, investors, and stakeholders to make informed decisions and maximize profits.

In this comprehensive guide, we will delve into the intricacies of oil and gas drilling economics. We will explore the exploration process, the cost of geology and geophysics, the significance of seismic data, the expenses associated with drilling, and the total cost of exploration. We will also examine the development phase, the cost of production drilling, and the various factors that influence development costs. Additionally, we will discuss production techniques, recovery rates, and the impact of technological innovations on drilling economics.

The Exploration Phase

1. Geology: Unveiling the Secrets of the Subsurface

Geology is the foundation of the exploration phase. Geologists study large areas to identify potential hydrocarbon accumulations. They analyze source rocks, reservoir rocks, and impermeable overburden rocks to determine the presence of hydrocarbons. Geographical surface studies and subsurface maps help geologists deduce the characteristics of the subsoil. Geophysics, the measurement and interpretation of physical quantities of the subsoil, complements geology in the exploration process. (shameless plug:  Rogue Edge Members have access to oil production, gas production, and rigs for every Oil & Gas Play in the US)

2. Geophysics: Unveiling the Secrets of the Subsurface

Geophysics plays a crucial role in understanding the subsurface and identifying potential drilling locations. Seismic reflection, the main approach in geophysics, involves sending elastic waves into the subsoil and recording the reflected waves to gain insights into the underground structural formation. Seismic campaigns involve data acquisition, processing, and interpretation, contributing to the total cost of exploration.

3. Seismic Cost: Evaluating the Financial Investment

Seismic campaigns are a significant component of exploration costs. The cost of a seismic campaign includes field data acquisition, data processing, and interpretation. The total cost of a seismic campaign depends on factors such as the difficulty of access, desired coverage, and the area covered. The competitiveness of local markets also influences seismic survey costs. Despite the expenses, seismic data is essential for assessing the prospect’s interest and making informed decisions about drilling.

4. Drilling: Unlocking the Subsurface Potential

Drilling is the ultimate step in exploration, providing direct access to the subsoil. Drilling wells involves reaching the target depths and perforating geological layers. Different drilling techniques are used, such as attacking the rock with a rotating drill bit. Onshore and offshore drilling differ in terms of rig support, with offshore drilling requiring platforms or floating structures. Drilling costs vary depending on factors like depth, rig type, and geographical location. (shameless plug:  Rogue Edge Members have access to weekly rigs by basin with special focus on Oklahoma permits and completions)

5. Cost of Drilling: Factors Influencing the Economic Investment

Drilling costs include the rental of drilling rigs, supervision expenses, consumables, and other equipment required for drilling operations. The duration of drilling varies based on depth and hardness of the layers traversed. Exploration wells have a lower success rate, meaning that costs must be considered even if a well does not lead to a discovery. The cost of drilling represents a significant proportion of the total cost of an exploration program.

The Development Phase

6. Delineation and Reservoir Appraisal: Confirming the Discovery

Once a discovery is made, the focus shifts to delineation and reservoir appraisal. These processes involve gathering additional information about the reservoir boundaries, rock characteristics, and production conditions. Economic studies complement technical assessments to determine the commercial viability of the field and its alignment with the company’s strategy and financial resources.

7. Production Drilling: Exploiting the Reservoir

Production drilling differs from exploration drilling in terms of operation duration and control. Production wells are drilled faster, and completion times for connecting the producing area to the wellbore are considered. Well completion ensures the security of the wellbore walls. Techniques such as horizontal drilling and multi-drain drilling are employed to maximize production efficiency.  (shameless plug:  Rogue Edge Members know every week if rigs have increased or decreased by shale basin and play within the basins.)

8. Production Drilling Cost: Balancing Efficiency and Investment

The cost of production drilling is influenced by factors such as well completion requirements, drilling techniques, and environmental regulations. Horizontal wells have higher costs but increased productivity. Environmental considerations, such as waste treatment, can affect well costs. Offshore drilling requires the use of floating supports, which adds to the overall development costs.

9. Floating Supports: Enabling Offshore Production

Offshore drilling necessitates the use of floating supports. Shallow water depths can utilize fixed structures like jackets, while deeper waters require semi-submersible platforms, SPAR structures, or Floating Production Storage and Offloading (FPSO) vessels. The choice of floating support depends on water depth, field characteristics, and the need for autonomous production and storage capabilities.

10. Total Development Costs: Evaluating the Investment

Development investments encompass development drilling, production facilities, storage tanks, pumping units, and discharge systems. The duration of the development phase varies but typically ranges from 1 to 4 years. Development costs depend on factors like field location, depth, and oceanographic conditions. Identifying key parameters and conducting thorough evaluations are crucial for defining and optimizing the project’s profitability.


The economics of oil and gas drilling are multifaceted, influenced by factors spanning from exploration to production. Geology and geophysics provide insights into potential hydrocarbon accumulations, while seismic data helps assess the prospect’s interest. Drilling involves significant costs, with a success rate that must be considered. Development drilling and production techniques further contribute to the overall investment. Understanding these economic aspects is essential for stakeholders in the oil and gas industry to make informed decisions and navigate the complexities of drilling economics.

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Disclaimer: The information provided in this article is for educational purposes only and should not be considered financial or investment advice. Trading and investing in the energy market involves risks, and individuals should conduct thorough research and seek professional guidance before making any trading decisions.

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