Cost Control For Offshore Petroleum Exploration

Introduction Historically, Professional Cost Engineering has not played an integral role in drilling in general and offshore drilling in particular. As the average cost of each well drilled rises due to the necessity to explore increasingly inaccessible regions, we are seeing exploration drilling costs reaching the magnitude of small and mid-size production projects. Often, setting up a complete infrastructure including accommodation, transportation, and communication facilities remote areas to support a relatively small number of wells can easily send the cost of an individual well and its share of the infrastructure in excess of 100 M$. Esso Resources Canada Limited is presently involved in two areas that are remote from adequate existing infrastructure; these being the Canadian Beaufort Sea and the Canadian East Coast, and we are gaining experience in cost control of these unique environments. The process of cost control in these areas has seen major developments in the past five years and is recognized as an ongoing process in evolution. This paper gives a brief overview of the goals, methods, and results of our efforts to develop and implement adequate cost control systems for remote areas, specifically our recent East Coast Project which is operated by Esso Resources Canada Limited on behalf of a 12-company group. Background Esso Resources Canada Limited is the exploration and production branch of Imperial Oil Limited and has the responsibility for the discovery and development of new energy resources; oil, gas, coal, and heavy oil, as well as the utilization of existing resources. Historically, Esso Resources Canada Limited has focused its activity on the rich resources of the Canadian Western basin, including British Columbia, Alberta, and Saskatchewan. As these reserves decline due to production, new energy sources must be found to ensure continuity of revenue and feedstock for downstream demands. Esso Resources exploring Canada Limited has been actively the northern and eastern regions of Canada which aneye for production from these areas to supplement the dwindling production from traditional sources in the western basin. For over 20 years, Esso has been B major player in the exploration of the McKenzie Delta in the Canadian Beaufort area. More than 90 wells, at a cost in excess of 1 B$, have been drilled in this area, some of these costing in excess of 100 M$. Esso is a somewhat smaller player in east cost exploration, having drilled only two wells valued at approximately 50 M$ in 1979, and recently in 1985 as operator of a 12-company venture with a two-well program valued at 100M$ Due to the large costs associated with these programs, Esso has made an effort to apply cost engineering principles to the planning and control of these projects. This has resulted in the development of several workable systems that are unique to the exploration environment. DEFINITION OF THE COST CONTROL SYSTEM Cost control in the 1985–1986 east coast exploration project has followed traditional cost control procedures in that a basis was defined and a control estimate was developed with progress and final cost outlooks measured against deviations from the basis and control estimate.