WELL PLANNING

Major Components

The well planning process requires the coordinated effort of many individuals with various responsibilities. The well planning process flow chart (Figure 1,

Figure 1

Figure 2 ,

Figure 2

Figure 3 ,

Figure 3

Figure 4 ,

Figure 4

Figure 5 ,

Figure 5

Figure 6 , Figure 7 ) illustrates the extensiveness of the effort.

Figure 6

Figure 7

The major activities can be outlined as follows:

I. Well Selection (Figure 1)

II. Authorization for Expenditure (AFE) Preparation (Figure 2)

III. Organizing and Data Gathering (Figure 3)

IV. Well Design (Figure 4)

VI. Rig Design (Figure 5)

VII. Procedures (Figure 6)

VIII. Contract (Figure 7)

IX. Cost Estimate

Tasks & Responsibilities

Effective well planning requires good communication among the technical personnel responsible for its development and implementation. This section outlines the roles, responsibilities, and objectives of the following personnel:

Geophysicist; Geologist; Drilling Engineer;

Production Engineer; Reservoir Engineer; Drilling Manager; Drilling Superintendent; Drilling Supervisor; Logistics Coordinator; Loss Prevention and Safety Specialist; Environmental and Regulatory Specialist; Purchasing Specialist.

Geophysicist

The geophysicist’s role is to identify potential hydrocarbon-bearing structures from seismic data. Responsibilities include:

processing and interpreting seismic data to identify potential reservoir structures;

assisting in prospect evaluation, based on structure size and seismic reflection interpretation;

reporting formation thickness, structure tops, and bed orientation to engineers preparing the drilling program;

identifying critical anomalies that indicate potential drilling difficulties ( e.g. shallow gas hazards, bedded salt, abnormal pressures, and fault crossings ); estimating depths for these anomalies;

assisting in development of a logging program;

working with operations personnel to select a rig location;

specifying velocity survey and checkshot intervals.

The geophysicist’s goals are to:

identify substantial hydrocarbon-bearing structures

interpret seismic data to help the drilling engineers anticipate potential problems

Geologist

The geologist’s role is to predict the lithologic sequence of formations in proposed wells, and to identify formations as they are penetrated by

interpreting cuttings samples, log measurements, and other geological indicators. Responsibilities include:

conducting surface geology studies to identify lithology sequences from outcrops;

identifying gross surface features from aerial surveys to establish the possibility of subsurface trapping mechanisms;

reviewing offset well histories for use in interpreting seismic maps to develop a stratigraphic column;

conducting or monitoring source-rock studies;

assisting in thermal maturation studies;

preparing AFE cost request forms that provide a geological prognosis for the expected lithologic sequence;

helping planning logging, coring, and testing programs;

identifying potential hole problems, specifying formation and expected depth whenever possible;

providing onsite formation evaluation expertise.

The goals of the geologist include:

identifying potential reservoirs and predicting formation types and thicknesses of the zones of interest;

accurately interpreting the expected lithology in the planned well.

Drilling Engineer

The drilling engineer plays a number of roles in the well planning process. During initial evaluation of a prospect, he or she conducts preliminary studies and estimates well-costs. Once well AFEs are approved, the drilling engineer becomes the designer, coordinator, and monitor of the overall well program. The responsibilities of the drilling engineer include:

gathering and reviewing available data on previous drilling activity in the proposed areas of operation;

preparing initial cost estimates;

preparing specific well-cost estimates for Authorization for Expenditure packages

conducting an initial planning meeting with others involved in specific well projects to establish objectives for the well;

estimating expected formation pressures and fracture gradients;

anticipating and addressing the most likely drilling problems;

selecting casing sizes and setting depths;

providing the data necessary for submitting an application for a drilling permit;

resolving directional drilling requirements;

developing the drilling mud program;

designing casing strings;

preparing a hydraulics program;

recommending bottomhole assemblies and bits;

preparing cementing recommendations;

preparing step-by-step procedures for drilling operations;

preparing rig specifications prior to rig bid requests to assist in rig selection;

identifying necessary mud-processing and solids-control equipment;

preparing drilling-cost and drilling-time curves to plot predicted performance;

coordinating the well-planning activities of geoscience, purchasing, operations, environmental and regulatory, and other engineering groups to ensure that all aspect of well program development will meet schedule commitments.

The goals of the drilling engineer include:

providing accurate cost estimates;

designing well programs that satisfy well objectives;

reducing cost through the selection of high-efficiency equipment, systems, and practices;

ensuring safety through the recommendation of sound practices and thorough contingency planning;

Reservoir Engineer

The reservoir engineer’s role is to provide engineering analysis and support in all phases of reservoir evaluation. Responsibilities include:

assisting the geologist and geophysicist in interpreting reservoir size, characteristics, and potential reserves of the prospect;

assisting economic calculations based on prospect size, estimated reserves, production rates, and well cost;

assisting in the design of logging, coring, and testing programs;

assisting in the evaluation of data collected during drilling.

The goals of the reservoir engineer include:

accurately evaluating prospect potential;

maximizing the quantity and quality of reservoir data gathered during the drilling, testing, and completion of the well.

Production/Completion Engineer

The production/completion engineer defines the testing, stimulation, and completion requirements for the well. Responsibilities include:

predicting formation pressures and estimating production rates to assist drilling engineers in designing production casing;

preparing testing and completion programs for the subject well;

ensuring that formation testing is done according to the program, and supervising the testing;

providing the drilling engineer with a completion design;

providing the drilling engineer with an early outline of the potential stimulation design, including the maximum expected stimulation pressures;

helping the drilling engineer estimate testing, stimulation, and completion costs and time during AFE preparation;

providing the drilling engineer with a list of required completion and wellhead equipment necessary while the drilling rig is on location;

indicating corrosion-protection measures, if warranted;

identifying potential formation sensitivity to assist the drilling engineer in selecting the best mud program.

The goals of the production/completion engineer are to

maximize data collection during drilling to improve evaluation of potential production zones;

design a completion program that will most efficiently drain reservoir hydrocarbons.

Drilling Manager

The drilling manager must review the well plan closely, approve it, and assist the rig supervisors in its implementation. He or she is ultimately responsible for operations conducted at the rig site. The drilling manager's responsibilities include:

maintaining an approved drilling contractor list;;

supervising the compilation of rig bid specifications, rig bid requests, and bid evaluations;

supervising company rig supervisors on ongoing drilling operations;

communicating drilling-operations status to higher management, as required;

advising the drilling engineer regarding recommended drilling practices pertinent to the area of operations;

reviewing well plan procedures, practices, and equipment specifications;

making critical decisions concerning rig problems, based in part on the advice and support of the drilling engineers.

The goals of the drilling manager include:

drilling the well to targeted objectives safely and cost effectively;

coordinating the well plan implementation among engineers, rig supervisors, and contractors.

Drilling Superintendent

The drilling superintendent provides mid-level management support to the drilling manager and rig supervisor for ongoing drilling operations. Responsibilities include:

reviewing the daily drilling reports from assigned rigs, and providing advice and assistance concerning rig operations, as required;

advising drilling engineers on well plan preparation according to field experience in the area;

assisting the drilling manager in organizing schedules for rig assignment, time off, and training for rig supervisors;

reviewing regulatory requirements, and ensuring that company and contractor personnel at the rig are observing these requirements;

providing onsite inspection and support as required;

inspecting proposed drilling rigs and equipment for compliance with specifications.

The goal of the drilling superintendent is to ensure efficiency, safety, and cost control in all rig-site activity.

Drilling Supervisor

The drilling supervisor is responsible for the day-to-day operation of his or her assigned drilling rig. Responsibilities include

making day-to-day decisions on rig operations as the well is drilled;

supervising contractors and service company personnel on location;

following the recommended practices and procedures listed in the well plan as closely as possible, and providing feedback to the supervisors and engineers if problems with plan implementation occur;

conducting safety and well-control drills;

ensuring that contractor and service company personnel comply with regulatory stipulations;

maintaining accurate records of operations and cost;

providing daily reports detailing drilling progress, costs, current operation, mud properties, materials used and in inventory, hole deviation, etc.;

reviewing and signing all invoices for services and materials used at the rig;

placing orders for materials, equipment, and service company personnel with allowance of sufficient lead time;

communicating with drilling engineers for support in drilling optimization and in critical operations such as cementing, testing, completion, etc;

supervising location construction, rig move-in, and stockpiling of material at the beginning of new well activity;

providing feedback as to potential location problems;

supervising location cleanup after the well is completed or abandoned.

The goal of the drilling supervisor is to conduct well operations safely and efficiently.

Logistics Coordinator

The logistics coordinator provides support to the rig in the form of materials, equipment, transportation, communications, and invoicing. This role is especially critical in remote or overseas operations where supplies, communication, and regulations require additional planning and lead time. Listing specific responsibilities is inappropriate because of the variable nature of remote operations. They do involve the following support activities, often from an intermediate support facility between the office and the rig. The logistics coordinator must:

maintain equipment and material supplies by ordering with sufficient lead time;

maintain the communications system to ensure operation according to the well plan;

coordinate normal and emergency transportation to and from the rig;

coordinate customs clearances and official inspections to ensure regulatory compliance;

assist in maintaining and forwarding rig invoices, operations reports, etc. between the rig and the main office accounting department.

The goal of the logistics coordinator is to provide remote operations with the support needed to keep the rig running according to the well plan.

Loss Prevention/Safety Advisor

The safety advisor is a specialist staff support function. The safety advisor should provide input to the team in all areas of site selection, rig selection, operational safety considerations, personnel safety training, and rig safety. The safety professional's role includes serving as a liaison with governmental and industry agencies relative to safety, and ensuring compliance with all applicable codes, standards, rules, laws, and regulations as they apply to drilling activities.

As a staff support function, the safety advisor is responsible for providing management with professional, technical support to ensure compliance with applicable laws, codes, standards, and regulations. Responsibilities include:

determining the environmental and safety impact of the rig-site location on the surrounding properties;

investigating the drilling contractor's past safety and accident performance record;

reviewing all drilling contracts to ensure that the contractor's safety responsibilities are clearly defined;

reviewing ( with regard to safety ) the layout of mud pits, choke and blooey lines, high-pressure hoses and lines, BOP control panel location, etc.;

reviewing the contractor's plans with regard to rig electrical safety prior to spud to ensure compliance with applicable laws and standards;

reviewing all piping diagrams and equipment specifications for rig fire protection;

reviewing material safety data bulletins (or equivalent) for all chemicals to be used on the rig; and ensuring that (if acids and/or caustics are to be used) an adequate clear water source is provided for eyewash/emergency showers;

identifying specific hazards, and specifying personal protective equipment to be provided (e.g., breathing apparatus in a potential H2S atmosphere; survival suits in cold environments);

reviewing all contingency plans, station bills, and emergency shutdown systems;

reviewing safety programming (e.g., safety meetings, accident investigations, hot work permits), and outlining contractor safety training for all employees, including rig management, to ensure consistency with modern safety management concepts; this includes reviewing the contractor's safety manual.

reviewing plans for onsite potable water treatment, cooking and eating facilities, and noise-level documentation, to ensure compliance with applicable regulations;

attending the pre-spud meeting to ensure that all pressure tests have been completed, equipment (chains, wireline, etc.) has been inspected, fuel transfer and personnel transfer procedures are in place, and pit drills, etc. have been completed.

The ultimate goal of any loss-prevention effort is to minimize risk to personnel and property. The safety advisor should ensure that the standards and procedures outlined in the planning stage are strictly followed through the completion of the well.

Environmental and Regulatory Advisor

The environmental and regulatory advisor identifies, gathers, and submits the necessary permits and reports required by state and/or federal agencies for approval of a permit to drill the subject well. The responsibilities include

reviewing stipulations of lease sale and permit agreements and preparing copies of these stipulations for drilling engineers and operations personnel;

gather information from exploration and engineering groups for preparation of the exploration plan (if necessary) and the application for permit-to-drill documentation;

coordinating externally prepared documents such as the Rig Discharge (NPDES) permit, the Environmental Report, the Oil Spill Containment Plan, the Environmental Training Report, and the Hazard and Biological Survey;

providing the drilling engineer with a timetable of permit application and approval.

The goals of the environmental and regulatory advisor include:

providing support for timely preparation of required pre-spud permits and reports;

assisting the drilling engineers and operations personnel in identifying and complying with stipulations of lease and permit agreements.

Purchasing/Materials Coordinator

The purchasing/materials coordinator's primary role during the planning stages of a well is to give functional guidance with regard to obtaining critical materials. Primary responsibilities include:

supplying drilling engineers with information regarding availability, sourcing, lead time, and pricing of materials required for the well;

serving as a liaison between E&P groups to facilitate inventory and stock sharing during material shortages;

coordinating supplier selection for common items required by several units of organization to ensure supply and economic advantage;

coordinating material acquisition, delivery, and payment;

forecasting price and supply variations for general planning purposes;

assisting in quality-control programs, operation audits, claim handling, and task force procurement activity as requested by operating units;

working with engineers to secure competitive quotations on bid services and materials within specification;

reviewing requisitions and maintaining accurate records of procurement activities.

The goals of the purchasing/materials coordinator include:

providing timely support in the selection and procurement of required materials;

providing commercial support in procurement activity;

providing market intelligence as to which manufacturers offer the most competitive combination of material quality, service, price, delivery, and operating costs.

Budget Objectives

The items common to budget review and approval that are directly addressed by well planning are the preparation of cost estimates, and the subsequent development of well programs to meet the project objectives while staying within approved fund allocation.

Cost estimation is an engineering function, consisting of coordinating design parameters for material and procedures with cost expectations. Generally there are two levels of cost estimates:

Long-range cost estimates are prepared annually for planning purposes. These cost estimates are usually made without good control data, and may or may not include such items as contingency funds for inflation, expected price increases, and market conditions.

"Authorization for Expenditure", or AFE cost estimates are prepared with good supporting data and after a preliminary well design by the engineers.

The relative importance of well cost to overall exploration and production costs merits some discussion. Entering into a lease or drilling agreement may require commitment of tens if not hundreds of millions of dollars. Discoveries in remote areas could require additional hundreds of millions of dollars for establishment of a platform, a gathering facility, or a pipeline to get the fluids to market. How then should the cost of drilling the well, which may only total a few million dollars, be weighed against these other huge sums of money? How important is it to get the well cost estimates within 10% or even 25% of the final well cost?

One answer (if not the answer) is that regardless of an estimate’s accuracy, a well-cost commitment represents a real out-of-pocket expenditure. It depletes the available budget regardless of immediate outcome. A cost estimate that is too high could negate the chances for approval of a viable project. An excessively high well-cost estimate could require additional partners to absorb a portion of the risk at the cost of decreasing the operator's share of the potential profit. A high well-cost estimate that is approved does, in fact, withdraw available funds from other possible projects as well. The primary danger of a low well-cost estimate is that an investment may be made into a project that would not otherwise be undertaken, again misdirecting resources from other worthwhile projects. Cost overruns, whether due to poor estimates, poor performance, or unanticipated problems, could deplete available resources at the expense of projects not yet begun.

The need for accurate well-cost estimates is critical for budgetary planning. Exploration personnel may be frustrated when their efforts in developing a prospect are defeated by pessimistic well-cost estimates prepared by the drilling engineers. The only solution addressing both of these situations is to improve the working communication of the team members involved in a well program, and improve both the cost-estimation process and the preparation of drilling programs.

Prospect Selection

Production Wells

Production wells are usually identified by the need to maintain or increase production from an existing field. Also in this category are the secondary-recovery, water- or gas-injection, workover, and recompletion efforts that team preparing the well program for these wells usually includes the drilling engineer, the production geologist, the production engineer, the reservoir engineer, and the production operations superintendent assigned to the area. Their combined knowledge of the area should contribute to a well plan that is programmed toward efficiency in drilling, completion, and production.

The requests for well-cost estimates and well programs should be well documented. Cost estimates for both drilling and completion activities should be within 10% of actual, with little or no contingency factors built into the estimate.

Exploration Wells

Exploration wells usually require a great deal of geological and geophysical data gathering, processing, and evaluation. Detailed offset well data often is unavailable. The search for exploration well prospects can include the following general activities.

Topology Study Surface geological structures that indicate the tectonic or depositional activity necessary for formation of potential hydrocarbon-bearing reservoirs must be identified. These structures include:

anticlines; fault traps; salt domes; reef carbonates; sand-body lenses; Unconformities.

These structures may be identified in a number of ways. Existing aerial photographs and radar surveys often are used. Topographic maps can be created by use of sophisticated satellite photography, with infrared detectors, computer-enhancement techniques, and cameras that can photograph through clouds and ocean depths.

Seismic Evaluation: Seismic studies are made and evaluated by geophysicists to determine the subsurface character of the areas under study. A formation requires two mechanisms to qualify as a prospective reservoir. First, it must contain a reservoir type of rock, such as a sandstone or carbonate, with sufficient porosity to contain appreciable fluid volumes. Second, there must be a trapping mechanism that has allowed formation fluids to accumulate but not allowed them to dissipate into other formations.

Although interpretation of seismic data is the job of the geophysicist, the drilling engineers preparing the well plans often can benefit from studying the seismic maps. Shallow seismic or shallow "bright spots" on normal seismic could represent a shallow gas hazard. Other features could indicate formation type, abnormal pressures, faults, steep formation dips, caprocks, etc.

Surface Geology Study: In addition to the large-scale photographic studies of an area, local geological study can play an important role in identifying an exploration prospect. Local surface indications, such as oil or gas seepage, may identify a prospect. In cases where photographic study of topography gives broad indications of potential, local surface geology study contributes to the body of knowledge available by identifying possible lithology sequences. Surface outcrops of formations that should be penetrated as the well is drilled can give clues about rock characteristics such as porosity, composition, and density.

Actual drilling prospects will be selected by management after evaluation of profit potential. This simplified description of prospect identification is intended to give some background on the data generated by the geosciences group in the development of a well prospect.

Reservoir Potential Evaluation

The estimated reserves of the reservoir must be weighed against the estimated cost to produce those reserves. The calculated rate of return and degree of confidence in these estimated figures determine the economic viability of drilling the reservoir.

One critical feature of reserve estimation is the quality of available control data. Production fields have good control by way of section cores, sidewall cores, logs, and production tests. Production wells intended for optimum depletion of the reservoir can be targeted to specified sections and depths of the structure with confidence of expected production.

Exploration wells must rely on offset well information for reservoir characteristics that might be similar to those of the structure in question. Basically, the reservoir engineer must take the structure data from the geologists and geophysicists and prepare a reserve estimate based on assumed values for porosity, permeability, and volume of the structure containing hydrocarbons. Reservoir estimates are prepared by varying these major parameters to arrive at optimistic, pessimistic, and most-likely reserve volume and potential production rates.

Cost Estimation

In the preliminary stages of reservoir-potential evaluation, gross cost estimates for drilling, completion, and producing the reservoir are prepared. Production costs could be orders of magnitude greater than drilling and completing the wells.

The term "threshold reserves" describes the minimum volume of recoverable hydrocarbons necessary to cover the estimated cost of exploiting the reservoir while providing a suitable rate of return. The planning department serves as management's sounding board in weighing the figures calculated by the technical groups. Time becomes a calculation factor as present dollars must be weighed against inflation, expected oil and gas prices, and full field production costs. All of these factors could change drastically in the time span from initiation to on-line production of the hydrocarbons. Finally, the probability of success must be weighed against the potential profit.

Prospect Acquisition

The drilling engineer coordinating the well plan usually is not involved in the prospect acquisition process. It is essential that commitments be made clear, in writing, at the initial planning meeting by someone knowledgeable of the agreements. The drilling engineer should follow up on this aspect of well planning in the event that these commitments are not identified at the initial planning meeting. Compliance with the stipulations in these agreements in regard to program review, data copies, etc. are the responsibility of the project coordinator.

Acquisition of rights to drill a property follow no specific formula. Methods include:

bidding on leases open to all comers; individual arrangements made with private property owners; oint venture agreement to share in a new or existing operation; arm-in agreements with existing lease holders; rading of properties for cash, other properties, share of potential reserves, etc.; outright purchase of property, including mineral rights.

As signified by the dotted line on the well planning process flow chart (Figure 1), the timing or position of the prospect acquisition in regard to the other sections could be variable.

Figure 1

Aspects of prospect acquisition that may require special consideration in well planning are discussed below.

Joint Venture Agreements

These agreements may require any or all of the following:

partner approval of well plan with adequate review time allowed; attendance of partner representatives in initial, interim, and/or pre-spud meetings; partner representation during testing of possible production zone; copies of drilling reports, mud recaps, logs, cementing reports, etc.; utilization of specified equipment, procedures, service organizations, etc.; timetable for spudding, testing, or production as per scheduled commitments.

Private Property Owners

Agreements with private property owners may involve any or all of the following:

provision for a water well; location and road limitations; a specified date by which the well is to be spudded; land reclamation to original condition.

Location Selection

Location Selection is an event rather than a task. The prospective well is given a designation and a specific location at this time. Management has accepted the objectives and projected rate of return at the initial estimated gross costs. The next step involves preparing an official request for funds to drill the well.

AUTHORIZATION FOR EXPENDITURE (APE) PREPARATION

Introduction

AFE preparation requires a thorough geological and geophysical report, a cost estimate for drilling and completing the well, and an economic analysis of the proposal. The primary topics of cost-estimate preparation include:

definition of the location, objectives, and geological prognosis; cost and well design considerations; preparation of an abbreviated well plan for cost-estimation purposes; the methods and organization of cost estimation.

The quality of cost estimates and subsequent well plans can be improved if the following basic ideas are applied:

The supporting data must be as complete and accurate as possible, and must be available when it is needed;

The work effort must be organized for optimum efficiency; Available technology must be used to its full advantage.

These ideas should be used to make the most of the limited time available in preparing an abbreviated well plan and calculating estimated expenditures.

Geological Input

The geologists' clearly established and communicated objectives for the well can assist the drilling engineer in preparing the AFE cost estimate. Well Cost Request Forms should summarize the available geological data and specify expected coring, testing, and logging intervals. In addition to well identification and surface location, the following subsurface features and well planning requirements could assist the drilling engineer in his preparation of the well plan:

Lithology data

— Prognosis of stratigraphic column with formation names and type of formation rock

— Expected formation tops

— Expected formation dip ranges

Expected total depth

— Likelihood of drilling deeper Potential shallow gas hazard Anticipated pore pressures Potential production zones

— Type of reservoir rock

— Expected permeability and porosity

— Anticipated formation fluids, including acid gases

— Anticipated formation pressures

Expected coring intervals

— Conventional or sidewall cores Expected logging program

— Log types

— Log intervals

Expected intervals for formation testing

— Drill stem tests (DST), production tests (PT), or repeat formation tests (RFTs)

Potential hole problems (from offset well data)

— Lost-circulation zones

— Abnormal pressure

— Sour or acid gases

— Plastic salt beds

— Geothermal intervals

— Sloughing shales

— Other

List of nearest offset wells List of available offset well data

All potential hole problems—especially those on exploration wells with limited offset data—need to be discussed.

Although the geophysical summary is not normally a part of the geological information presented, it should be made available to the drilling engineers preparing the cost estimate.

Completion and Testing Requirements

The AFE cost estimate for an exploration well is normally separated into dry-hole and completion costs. The costs for drillstem tests and RFTs are included in the drilling costs. Production testing is a completion cost. Naturally, these costs can be more closely predicted if the well being drilled is a production well. In either case, for the benefit of better well-cost estimates, there needs to be close communication between the drilling engineer and the reservoir-

production engineers in establishing the planned testing and completion requirements and associated well costs.

For production wells, the production engineers should prepare the completion cost estimate for inclusion with the drilling engineers' drilling cost estimate. Completion costs are based on;

the estimated number of days, and the day rate, for operation; the type of completion (single, double, commingled, etc.); the tubing design (size, grade, connections, etc.); the expected method of stimulation (acidizing, fracturing, etc.); the formation consolidation (gravel packing) requirements; the need for remedial cementing for zonal isolation; tangible well costs for tubulars, equipment, and the wellhead; additional logging requirements to determine cement bond quality, zonal

isolation, etc.; the number of intervals to be perforated, and the perforation density; the need for sour-gas or acid-gas rated equipment; the expected production rates and pressures; the production mode (flowing, gas lift, pumping, etc.).

As with drilling costs, completion costs are usually estimated without the benefit of a comprehensive design. The actual completion program should be tailored to respond to the information gathered during drilling, testing, and logging.

Production engineers designing a wildcat testing and completion program must decide whether the well is to be made into a production well if a discovery is made. If so, plans must be made and costs estimated for the completion equipment, tubing, and wellhead. Quite often, an adequate design cannot be made until formation pressures, fluids, production rates, stimulation requirements, and other variables are evaluated. In these cases, the wildcat well is often designed as a testing conduit only, intended to evaluate the prospect and be abandoned.

If the wildcat has a substantial likelihood of success, and the formation characteristics are predicted with confidence, the wildcat may be planned like a production well.

In production wells, the production engineers have access to the reservoir data necessary to plan future completion programs. In wildcat applications, they need to have data from the geologist to plan the evaluation program. They in turn must provide the drilling engineers with information that affects the drilling design. Specifically, the drilling engineers require tentative plans concerning:

the type of testing required for specified zones; whether testing will be done through drillpipe or a test string; formation fluids and expected pressure (oil, gas, H2S, CO2, etc.); fracture or acid treatments of specified formations; maximum expected shut-in tubing pressures, fracture pressures, and

rates; the size of completion tubing string(s).

Drilling Considerations

Drilling engineers often must provide an AFE well-cost estimate without having the time to prepare a complete well plan. The request for the cost estimate is normally communicated through a letter from the exploration or production department specifying a required return date. Pertinent geological data is usually given on a Request for Well Cost Form, which accompanies the letter.

The task of preparing the AFE cost estimate may be considerably simplified if the previously prepared "budget" or "objectives" cost estimate was based on reasonably good data. The initial gross cost estimate is expected to be within 25% of the actual cost to drill the well. The AFE estimate is expected to be within 10%. This expectation of greater accuracy is primarily the result of better-defined geological parameters and a more detailed examination of drilling requirements. The drilling engineer must review the geological considerations as well as the completion and testing requirements outlined earlier, and prepare an abbreviated well plan.

In summary, the drilling engineer must:

verify data from geology; identify completion and testing requirements; review location considerations; outline expected formation pressures; review potential drilling problems; review directional plan considerations; select casing sizes and setting depths; identify likely mud program; prepare preliminary casing design; identify tentative wellhead requirements; review cementing requirements; predict drilling time from offset well performance.

Cost Estimates

Preparation of well-cost estimates requires research of offset well performance to review the problems encountered, the materials used, and the effectiveness of the well programs (mud, cementing, casing, etc.) attempted. Insufficient

offset data will necessitate heavy reliance on assumptions made from the geological prognosis, which also suffers from the lack of support data.

Offset data sources include:

commercial well data services that can supply drilling curves, bit records, casing setting depths, and mud type used; major hole problems are also listed;

service companies (mud, cementing, bit), which can provide cost information and general history for wells they serviced in the area;

in-house well histories for wells drilled in the area.

Once the general sources of information are researched, preliminary decisions are made by the drilling engineers regarding casing setting depths, tentative mud program, tangible equipment requirements, and expected drilling time. The next step is to begin listing the tangible and intangible cost items and assigning estimated costs to these.

There are two techniques that can assist in estimating costs once the preliminary design decisions are made. Both require substantial detail on the AFE cost listing. The basic reason for providing greater detail is that individual activities can be considered separately, which is more accurate than relying on "contingency" percentages or padded estimates to cover unestimated but anticipated well costs. The two techniques involve the use of graphs or computers to select the cost-per-well section for each of the major items. As long as the data generating the curve or the computer data input relate to well sections similar to that anticipated on the planned well, an average performance can be generated.

A system of coding items in the AFE and coding invoices to fit these categories is necessary to begin saving this data for in-house wells. Once implemented, this can also provide easy access to information concerning specific operation performance, problems, and services. The wells must also be categorized according to depth and type of well. Another potential benefit of this approach to cost estimating is that if engineers prepare the curves, review the data, and establish the comparison sections, a technician or clerk may be able to read off the curves or computer listings and do some of the manual data manipulation, allowing the engineers to review the generated costs and spend more time on the actual design of the program.

AFE Approval

Management approval of a project's AFE represents approval of the stated objectives and the cost to meet those objectives. Major changes to the project after the AFE has been approved may seriously affect the chances of meeting the new objectives with the allocated funds. Serious changes, such as a deeper total depth, additional testing or coring, or target relocation requiring serious

directional control, should be documented and explained, as later AFE supplements to the original approved cost allowance may need to be justified.

After an AFE has been approved, the project takes on a new perspective. The change in status is marked by a change in project coordinator. The exploration or production geologists or engineers who defined the prospect, documented its potential worth, and prepared a package for management approval must turn the project over to the drilling engineers for preparation of a drilling plan.