Table N1Lease Equipment Costs and Indices for Coal Bed Methane Production in Appalachia(10 Wells Producing 60 Mcf/d, Dewatering from 2,000Feet by Rod Lift)DollarsIndex(Current)(2002=100)Component20022006 2007 2008 2009 2002 2003 2004 2005 2006 2007 2008 2009Producing Equipment:Tubing.................. 40,500 77,700 77,000 108,20062,200 100 105 185 189 192 190 267 154Rods................... 27,700 37,100 43,000 57,100 56,600 100 104 113 126 134 155 206 204Pumps.................. 19,600 23,800 25,400 27,100 27,100 100 105 111 121 121 130 138 138Pumping Equipment......... 103,900 140,000 167,500 191,300 179,100 100 84 96 118 135 161 184 172Total or Index.....191,700 278,600 312,900 383,700 325,000 100 93 119 134 145 163 200 170Gathering System:Flowlines................... 108,200 164,200 182,700218,000 210,500 100 100 130 139 152 169 201 195Total or Index.....108,200 164,200 182,700 218,000 210,500 100 100 130 139 152 169 201 195Lease Equipment:Water Storage Tanks...........87,900 121,300 134,500 151,700 148,500 100 101 118 132 138 153 173 169Disposal Pump........ 23,800 33,700 35,100 38,200 39,500 100 108 114 121 142 147 161 166Electrification........71,100 125,100 125,900 133,500 116,600 100 106 131 161 176 177 188 164Subtotal or Index..182,800 280,100 295,500 323,400 304,600 100 104 123 142 153 162 177 167Total or Index.....482,700 722,900 791,100 925,100 840,100 100 99 123 138 150 164 192 174Non-tubing Total...442,200 645,200 714,100 816,900 777,900 100 98 117 134 146 161 185 176Table N2Direct Annual Operating Costs and Indices for CoalBed Methane Production in Appalachia(10 Wells Producing 60 Mcf/d, Dewatering from 2,000Feet by Rod Lift)DollarsIndex(Current)(2002=100)Component20022006 2007 2008 2009 2002 2003 2004 2005 2006 2007 2008 2009Normal Daily Expense:Supervision and Overhead.. 5,500 6,500 6,700 6,900 7,200 100 100 105 111 118 122 125 131Labor (pumper)............ 8,100 13,100 13,100 13,10013,100 100 100 101 126 162 162 162 162Auto Usage................. 3,800 4,800 4,800 5,000 4,200 100 103 118 116 126 126 132 111Chemicals.................. 0 0 0 0 0 0 0 0 0 0 0 0 0Fuel, Power & Water...............3,800 4,000 4,200 4,700 5,400 100 100 103 105 105 111 124 142Subtotal or Index......22,900 30,500 31,100 32,300 32,500 100 100 105 116 133 136 141142Surface Maintenance,Repair & Services:Labor (roustabout)................ 9,900 12,700 12,700 14,400 14,400 100 100 100 108 128 128 145 145Supplies & Services........... 6,800 8,600 10,000 11,100 11,200 100 100 100 106 126 147 163 165Equipment Usage................. 11,500 15,600 16,600 18,300 18,300 100 100 107 112 136 144 159 159Subtotal or Index......28,200 36,900 39,300 43,800 43,900 100 100 103 109 131 139 155156Subsurface Maintenance,Repair & Services:Well Servicing......... 4,300 6,900 7,500 7,600 8,500 100 100 121 121 160 174 177 198Remedial Services........... 0 0 0 0 0 0 0 0 0 0 0 0 0Equipment Replacement............2,500 3,300 3,500 4,100 3,700 100 104 120 132 132 140 164 148Production Logs........... 0 0 0 0 0 0 0 0 0 0 0 0 0Subtotal or Index......6,800 10,200 11,000 11,700 12,200 100 101 121 125 150 162 172 179Total or Index.................57,900 77,600 81,400 87,800 88,600 100 100 106 114 134 141 152153Table O1Lease Equipment Costs and Indices for Coal Bed Methane Production in Black Warrior(10 Wells Producing 100 Mcf/d, Dewatering from 2,000 Feet by Rod Lift)DollarsIndex(Current)(2002=100)Component20022006 2007 2008 2009 2002 2003 2004 2005 2006 2007 2008 2009Producing Equipment:Tubing.................. 40,500 77,700 77,000 108,20062,200 100 105 185 189 192 190 267 154Rods................... 33,500 46,500 55,200 72,000 69,000 100 104 110 130 139 165 215 206Pumps.................. 16,600 20,100 21,500 23,000 23,000 100 105 111 121 121 130 139 139Pumping Equipment......... 143,000 167,000 195,100 223,500 209,900 100 87 83 109 117 136 156 147Subtotal or Index......233,600 311,300 348,800 426,700 364,100 100 94 107 127 133 149 183 156Gathering System:Flowlines................... 101,800 148,700 160,700170,800 167,500 100 100 121 129 146 158 168 165Subtotal or Index......101,800 148,700 160,700 170,800 167,500 100 100 121 129 146 158 168 165Lease Equipment:Water Storage Tanks...........137,200 212,500 226,000 267,200 264,800 100 101 128 145 155 165 195 193Disposal Pump........ 24,900 36,000 38,100 41,400 43,200 100 107 121 127 145 153 166 173Electrification........ 71,500 125,800 126,800 134,500 117,800 100 106 132 161 176 177 188 165Subtotal or Index......233,600 374,300 390,900 443,100 425,800 100 103 129 148 160 167 190 182Total or Index.....569,000 834,300 900,400 1,040,600 957,400 100 99 118 136 147158 183 168Non-tubing Total......528,500 756,600 823,400 932,400 895,200 100 98 113 132 143 156 176 169Table O2Direct Annual Operating Costs and Indices for CoalBed Methane Production in Black Warrior(10 Wells Producing 100 Mcf/d, Dewatering from 2,000 Feet by Rod Lift)DollarsIndex(Current)(2002=100)Component20022006 2007 2008 2009 2002 2003 2004 2005 2006 2007 2008 2009Normal Daily Expense:Supervision and Overhead.. 8,000 9,400 9,700 10,200 10,000 100 99 105 110 118 121 128 125Labor (pumper)............ 8,300 14,200 15,600 17,10018,000 100 100 158 158 171 188 206 217Auto Usage................. 3,800 4,800 4,800 5,000 4,200 100 103 118 116 126 126 132 111Chemicals.................. 3,600 5,100 6,200 7,000 6,800 100 111 119 117 142 172 194 189Fuel, Power & Water...............7,200 9,000 9,600 10,900 11,000 100 103 107 114 125 133 151 153Operative Supplies........ 1,700 2,300 2,600 2,800 3,000 100 100 129 129 135 153 165 176Subtotal or Index......32,600 44,800 48,500 53,000 53,000 100 102 123 125 137 149 163163Surface Maintenance,Repair & Services:Labor (roustabout)................ 9,900 14,000 15,300 16,900 17,700 100 100 131 131 141 155 171 179Supplies & Services........... 6,800 9,500 10,400 11,400 12,000 100 100 129 129 140 153 168 176Equipment Usage................. 8,500 10,300 11,30012,400 13,100 100 100 104 104 121 133 146 154Subtotal or Index......25,200 33,800 37,000 40,700 42,800 100 100 121 121 134 147 162170Subsurface Maintenance,Repair & Services:Well Servicing .......... 12,200 20,700 24,700 27,400 23,400 100100 108 140 170 202 225 192Remedial Services........... 2,900 3,800 4,100 4,500 4,400 100 100 103 121 131 141 155 152Equipment Replacement............6,100 7,600 8,100 9,000 8,700 100 105 115 125 125 133 148 143Production Logs........... 400 600 600 600 700 100 125 125 125 150 150 150 175Subtotal or Index......21,600 32,700 37,500 41,500 37,200 100 102 110 133 151 174 192172Total or Index.....79,400 111,300 123,000 135,200 133,000 100 101 119 126 140 155 170 168

### Glossary

Home > Natural Gas > Publications > Oil and Gas Lease Equipment and Operating Costs 199 4 Through 2009



# Oil and Gas Lease Equipment and Operating Costs 199 4 Through 2009

Released: September 28, 2010
Next Release: March 2011



### Excel Spreadsheet Model - 1994-2009 XLS (1,178 KB)

Overview Oil and gas well equipment and operating costs, inc luding coal bed methane costs, stopped their upward trend from the 1990s and fell sharply in 2009. Th e extremely high oil and gas prices during the first half of 2008 followed by an unprecedented drop to very low prices by the end o f the year had a major impact on equipment demand. Operating costs tumbled also because fuel costs were reduced and well servicing rates fell in most areas. The exceptions were in C alifornia where electric rates continued to increas e, causing a one (1) percent increase in annual operating costs for leases produ cing from 12,000 feet. Operating cost for coal bed methane wells in the Appalachian and Powder River areas increased because
electric rates continued to climb. Due to the timi ng of the data collection, the cost reported here c ould be higher than the actual annual average for 2 008. However, some production costs (labor and equipment) are not as volatile as drilling, pipe, and other well completion costs, so the effect of the oil and gas prices on collected data may be lessened. Annual average electric rates and natural gas prices are u sed, which also helps to dampen cost variances.

Gas lease equipment costs increased 8 percent in 20 08 and decreased 4 percent in 2009. Gas lease oper ating costs increased 6 percent in 2008 followed by a 5 percent decrease in 2009. The increase in gas equipment costs was from the increases in the cost of steel items such as s afety valves, chokes, separators, and dehydrators.

Oil lease equipment costs were up 17 percent in 200 8 and dropped 11 percent in 2009. If tubing costs are excluded, costs increased 11 percent and decrea sed 3 percent, respectively. The oil lease operating costs rose 6 percent for 20 08 and fell 12 percent for 2009. Oil production eq uipment costs were affected by steel prices which r aised the cost for tubulars by 30- 40 percent in 2008 and then dropped by as much or m ore in 2009.

Offshore operating costs decreased by 4 percent in 2009 following the 7 percent increase in 2008. Wor kover costs increased 20 percent in 2008 and decrea sed more than 26 percent in

2009.

Coal bed methane operating costs increased 7 percen t in 2008, followed by decrease of 1 percent in 200 9. Coal bed methane equipment costs were up 16 per cent in 2008 but declined 10 percent in 2009. If tubing costs are excluded, equipment costs increased 13 percent for 2008 and d eclined 6 percent in 2009.

Coal bed methane data is summarized in Tables 23-25 of the accompanying Excel workbook. More detailed data can be seen in Tables N through Q in the work book. Oil and gas operating and equipping cost changes are graphicall y shown in Figures 1, 2, and 3, and described in th e Summary section below and in Summary Tables 1-22 in the workbook. More detailed data can be found in Tables A through M of the accompanying Excel workbook.

Background This report, with the accompanying Excel workbook, presents indexes and estimated costs for domestic o il and natural gas equipment and production operati ons for 2006 through 2009. Indexes only are provided for previous years. Coal bed methane indexes, added in 2002, are also avail able.

The costs of all equipment and services do not alwa ys represent an annual average because of the timin g of the data collection and industry cycles. Altho ugh mid-year costs are requested, they are not always available. Care sho uld also be used when comparing costs in rapidly de creasing or increasing demand markets (extreme oil and gas price volatility) because the reported costs may be higher or lower t han the actual annual average. Differences between the reported costs and actual annual average costs are likely to be dampened somewhat because some components, such as equipment and labor costs, are not as volatile as drilling r ig costs, for example, because there are alternativ es such as used equipment or scavenging equipment from marginal wells. Annual e lectric rates and natural gas prices are used, whic h also helps to dampen cost volatility.

Summary Figures 1 and 2 show real (1976 dollar) oil and gas prices, and real equipment costs and operating cos ts indexed to the base year of 1976 for natural gas and oil in the contiguous lower 48 states excluding the Federal offshore Gulf of Me xico. Figure 3 shows separately the real operating cost indexed to 1976 and the real gas price for th e offshore Gulf of Mexico platforms. (Real 1976 dollars were calculated usin g GDP Implicit Price Deflators from Global Insight. )

Figure 1 shows that the real costs of both natural gas equipment and operations have changed less over time than has the real price of natural gas. Real gas equipment costs are 12 percent higher and operating costs are 37 percent h igher than for the base year of 1976. The gas pric e in real 1976 dollars dropped below the record of $2.67 per thousand cubic feet (Mcf) set in 2005 and now rests at $1.20 per Mcf (a 107 percent increase since 1976). In nominal doll ars, natural gas prices averaged $6.42 per Mcf in 2 006, $6.39 per Mcf in 2007, $8.07 per Mcf for 2008, and only $3.71 per Mcf for 2009. By comparison, the average gas price in nomi nal dollars in 1976 was $0.58 per Mcf. 

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### Similarly, Figure 2 depicts oil prices in real 1976 dollars, and real equipment and operating costs fo r oil production indexed to 1976.

First purchaser oil prices averaged $59.60 for 2006 , $66.52 for 2007, $94.02 for 2008, and $51.50 for 2009 in current dollars.

In real dollars, the 77 percent increase in oil ope rating costs from 1976 to 2008 and the 22 percent i ncrease in equipping cost (in real 1976 dollars) ar e dwarfed by the 274 percent increase in the oil price from 1976 to 2008. The d ifferences are only slightly less dramatic after th e 46 percent drop in oil prices in 2009. The 1976 to 2009 change in the real dollar price of oil was 103 percent compared to an equipping cos t change of 7 percent (in real 1976 dollars), and a n operating cost change of 54 percent. 

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### Figure 3 shows the real oil and gas operating cost indexed to 1976 for Federal offshore Gulf of Mexico platforms. Gas prices for Louisiana in real 1976 dollars were used to represent offshore gas prices. The real gas price changes fr om 1976 were 391 percent higher in 2008 but fell 54 percent and were only 126 percent higher in 2009. The increase in the real operating cost index that began in 1976 and peaked in 2008 at 219 was primarily caused by a huge incre ase in the cost for transportation (helicopters and boats) and offshore rigs. The real operating cost index for 2009 went down 5 perc ent as a result of decreases in costs for transport ation and offshore rigs and was only 109 percent hi gher from 1976 to 2009. 

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### Results

Oil Leases Tables 1 and 2 contain the 2009 equipment costs and operating costs for a 10-well oil lease for the si x regions and the additional costs for secondary re covery in West Texas. Costs for
the Federal offshore Gulf of Mexico wells are not i ncluded in Tables 1 and 2.

Table 1. Equipment Costs for 10-well Oil Lease in 2009

(Current US Dollars)

Producing Depth

Region 2,000-ft 4,000-ft 8,000-ft 12,000-ft

California 2,034,500 2,405,000 3,237,200 3,923,000

Mid-Continent 1,123,700 1,605,900 2,519,500 2,972,700

South Louisiana 1,276,800 1,701,200 2,165,600 3,376,700

South Texas 1,166,700 1,601,800 2,005,000 3,300,900

West Texas 1,114,800 1,570,000 2,612,100 2,978,600

Rocky Mountains 1,178,400 1,633,700 2,584,400 3,033,100

Average 1,315,800 1,752,900 2,520,600 3,264,200

Additional cost for Secondary Recovery

in West Texas 5,187,400 10,198,800 23,697,100

Table 2. Annual Operating Costs for 10-well Oil Leas e in 2009

(Current US Dollars)

Producing Depth

Region 2,000-ft 4,000-ft 8,000-ft 12,000-ft

California 218,700 296,100 515,000 773,600

Mid-Continent 185,600 222,500 424,000 525,700

South Louisiana 238,500 338,500 408,800 631,100

South Texas 231,200 277,400 349,300 639,500

West Texas 170,000 203,700 302,300 473,900 

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### Gas Leases Tables 3 and 4 contain equipping and operating cost s for onshore gas wells displayed by depth, region, and per well producing rate. The tables contain b lanks because the rate-depth combinations are chosen for each region to reflect the majority of the wells in that region. Not all rate-depth combinations are found in significant nu mbers. The averages show that the equipping costs generally increase with depth at ea ch of the producing rates. Costs for the Federal o ffshore Gulf of Mexico platforms are not included i n Tables 3 and 4. Rocky Mountains 255,700 285,400 394,200 555,300

Average 216,600 270,600 398,900 599,900

Operating cost for Secondary Recovery

in West Texas 510,100 706,900 1,012,900

Table 3. Equipment Costs for 1 well Gas Lease in 2009

(Current US Dollars)

Producing Depth

Region 2,000-ft 4,000-ft 8,000-ft 12,000-ft 16,000-ft

Producing 50 Mcf/d

Mid-Continent 35,200 35,200

North Louisiana 34,700

South Louisiana 34,700 34,700

Rocky Mountains 38,700 38,700

South Texas 33,900 33,900

West Texas 30,400 30,400 44,100

Average 34,600 34,600 44,100

Producing 250 Mcf/d

Mid-Continent 37,400 48,600 81,100 103,400

North Louisiana 34,700 48,600 80,000

South Louisiana 34,700 49,100 81,100

Rocky Mountains 38,700 81,500 95,200 114,900

South Texas 33,900 48,300 80,400

West Texas 30,400 44,500 75,600 96,800

Average 35,000 53,400 82,200 105,000

Producing 500 Mcf/d

Mid-Continent 46,300 80,000 101,100 114,000

North Louisiana 48,400 79,100 100,200

South Louisiana 79,100 100,200 100,200

Rocky Mountains 91,200 92,500 112,200

South Texas 78,400 99,500

West Texas 73,900 95,000 111,100

Average 62,000 80,500 101,400 108,400

Producing 1 MMcf/d

Mid-Continent 114,000 114,000

North Louisiana 113,200 113,200

South Louisiana 113,200 113,200 113,200

Rocky Mountains 112,200

South Texas 112,500 112,500

West Texas 111,100 111,100

Average 112,900 112,700 112,900

Producing Depth

Region 2,000-ft 4,000-ft 8,000-ft 12,000-ft 16,000-ft

Producing 5 MMcf/d

Mid-Continent 137,500

North Louisiana 136,400

South Louisiana 136,400 136,400

South Texas 135,700

West Texas 134,000

Average 136,100 136,100

Producing 10 MMcf/d 

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### Offshore Table 5 provides operating costs for offshore wells displayed by platform size and water depth. North Louisiana 168,200

Table 4. Annual Operating Costs for 1 well Gas Lease in 2009

(Current US Dollars)

Producing Depth

Region 2,000-ft 4,000-ft 8,000-ft 12,000-ft 16,000-ft

Producing 50 Mcf/d

Mid-Continent 16,700 20,000

North Louisiana 16,000

South Louisiana 16,000 19,300

Rocky Mountains 23,800 27,600

South Texas 18,000 21,600

West Texas 13,700 17,700 24,000

Average 17,400 21,200 24,000

Producing 250 Mcf/d

Mid-Continent 23,700 33,500 54,900 68,000

North Louisiana 20,600 30,300 54,000

South Louisiana 20,600 30,300 53,700

Rocky Mountains 28,400 47,800 65,200 78,900

South Texas 22,600 31,700 55,900

West Texas 18,300 27,500 48,600 62,600

Average 22,400 33,500 55,400 69,800

Producing 500 Mcf/d

Mid-Continent 29,100 39,800 48,500 54,000

North Louisiana 27,200 38,600 45,400

South Louisiana 40,000 47,100 52,400

Rocky Mountains 46,500 52,400 62,200

South Texas 40,100 51,900

West Texas 31,600 42,600 48,000

Average 34,300 40,400 49,600 51,500

Producing Depth

Region 2,000-ft 4,000-ft 8,000-ft 12,000-ft 16,000-ft

Producing 1 MMcf/d

Mid-Continent 64,300 70,500

North Louisiana 60,200 69,300

South Louisiana 52,000 62,800 69,200

Rocky Mountains 79,600

South Texas 63,100 60,200

West Texas 55,000 62,700

Average 57,600 63,700 67,900

Producing 5 MMcf/d

Mid-Continent 68,900

North Louisiana 72,800

South Louisiana 54,100 72,000

South Texas 61,100

West Texas 64,800

Average 57,600 69,600

Producing 10 MMcf/d

North Louisiana 94,300

Table 5. Annual Operating Costs for Gulf of Mexico well s in 2009 (Current US Dollars)

Water Depth

Platform Size 100-ft 300-ft 600-ft

12 Slot 8,669,600 8,946,300

18 Slot 10,053,900 10,376,500 10,924,700

GOM Average 9,361,700 9,661,400 10,924,700 

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### Coal Bed Methane Leases At the end of 2009, coal bed methane remained at th e 2008 level of about 9 percent of U.S. dry gas pro duction. Coal bed methane reserves declined 5 perc ent in 2009 and are now at 8.5 percent of the total dry natural gas reserves. The importance of coal bed methane is expected to continue.

Table 6 and 7 provide the 2009 lease equipment cost s and operating costs for a 10-well coal bed methan e lease. Water handling costs are a major factor in coal bed methane operating costs and partially account for the difference in o perating costs.

Methodology The costs provided in this report are for represent ative lease operations with equipment and operating procedures designed by EIA staff engineers. Costs are estimated for representative 10-well oil leases producing by arti ficial lift; 1 flowing gas well per gas lease; or 1 0-well coal bed methane leases dewatering by artifi cial lift. The design criteria took into account the predominant methods of operation in eac h region. Individual items of equipment were price d by using price lists and by communicating with th e manufacturers or suppliers of the items in each region. The leading supply, serv ice, and contracting companies (active in one or mo re of the regions) were contacted every year (1976 through 2009) for local June prices for their component of equipment or operatin g function. The objective of this process is to ac quire prices that are representative for each regio n. The annual operating costs measure the change in direct costs incident to the production of oil and gas and exclude changes in in direct costs such as depreciation and ad valorem an d severance taxes.

Costs were determined for new equipment. Tubing cos ts are included for the oil wells but not for the g as wells. Care must be exercised when combining th ese equipment costs with drilling costs to obtain total lease development an d equipment costs because most drilling and complet ion cost estimates also include tubing costs. Dril ling and completion costs are not included for producing wells, but are included for secondary recovery injection wells.

Primary Oil Production Leases for onshore oil wells consist of 10 wells pr oducing by artificial lift into a centrally located tank battery. The depths of all wells on each of the leases are 2,000, 4,000, 8,000, or 12,000 feet.

Costs were determined for new equipment capable of handling 200 barrels of liquid per day per well for onshore primary operations. Tubing costs are incl uded. Care must be exercised when combining these equipment costs with drilling costs to obtain total lease development and equipme nt costs because most drilling and completion cost estimates also include tubing costs. Drilling and completion costs for the prima ry production wells are not included in this study. The artificial lift method selected was dependent on the type of lift found to be dominant for each depth in each region. The two ty pes of prime movers considered were electric motors and natural gas engines. Annual operating costs w ere estimated for daily production rates of 100 barrels of liquid per day p er well for each depth in each region of operation with 10 percent water content.

Secondary Oil Production Costs for secondary oil production in West Texas we re calculated for wells producing from depths of 2, 000, 4,000, and 8,000 feet. Each lease was assumed to have 10 producing wells, 11 injection wells and 1 water supply well. Costs for water storage tanks, injection plant, filtering systems, injection lines and drilling water supply wells and water injection wells are included. Equipment was designed to handle 350 bar rels of liquid per day per producing well. Gas eng ines used in primary operations were replaced by el ectric motors for secondary oil production. Some equipment for primary oil product ion was replaced with larger equipment to accommoda te the increased liquid volumes assumed for seconda ry oil production. Operational costs for secondary oil production are indicated for the increased liquid lift of 250 barr els of liquid per day per producing well (90 barrel s of oil per day) and for the water injection system.

Offshore Gas and Primary Oil Production Operating costs for the offshore Gulf of Mexico wer e estimated for 12- and 18-well fixed structure pla tforms. Maximum crude oil production was assumed t o total 11,000 barrels of oil per day from each platform. Maximum associated gas pro duction was assumed to be 40 million cubic feet of gas per day per platform. Note that the balance be tween gas and oil is more heavily weighted toward gas in offshore operations than in onshore leases. Operating costs were deriv ed for platforms assumed to be 50, 100, and 125 mil es from shore corresponding to water depths of 100, 300, and 600 feet, respecti vely. Meals, platform maintenance, helicopter and boat transportation of personnel and supplies, comm unication costs, insurance costs for platform and production equipment, and administ rative expenses are included in normal production e xpenses. Crude oil and natural gas transportation costs to shore were excluded, as were water disposal costs.

Gas Production Leases for gas wells were assumed to consist of one well producing into an onsite separator with two s torage tanks (a lease condensate sales tank and a w ater storage tank). Line heaters, dehydration units, and methanol injectors were included where needed. It was assumed that an y compression or gas treatment would be furnished b y the first purchaser or transporter. The cost data presented are based on the installation of new equipment and included item s needed from the wellhead to the outlet on the met er run for the gas stream and through the tank for liquid streams. Tubing costs were not included, nor were costs of equipment for disposal of produced water above nominal amounts of water entrained in the gas stream. Gas production rates of 50, 250, 500, 1,000 , 5,000 and 10,000 Mcf/d and well depths of 2,000, 4,000, 8,000, 12,000 and 16,000 feet were the assum ed volume and depth
divisions for the cost determinations. These volum es were selected because of different processing re quirements for each of these flow rates. Productio n records were used to determine the average production rate for each dept h in each region. The equipment and operating cost s for each of these average production rates were t hen calculated. For a broader view of each flow rate in each region at each depth , the equipment and operating costs of the next hig her and/or lower rates are shown. Costs were calcu lated for equipping gas wells at producing rates of 50 Mcf/d even though a new well coming on stream at this rate may not be economic. This low rate was selected to identify costs of pr oduction from stripper gas wells. Flow rates above 10,000 Mcf/d usually requi re custom design of equipment and are not priced in this report.

The depths of 2,000, 4,000, 8,000, and 12,000 feet were chosen to be compatible with data provided for oil production. An additional depth of 16,000 feet was added for gas equipment and operations because there is significant gas pro duction from this depth in some regions studied.

Coal Bed Methane Production The Environmental Protection Agency conducted a sur vey of coal bed methane producers in the U.S.A. Th eir resulting comprehensive report Technical Support Document for the 2006 Effluent Guidelines Program Plan

, December 2006 EPA-821R-06-018, provided informatio n on coal bed methane production and lease maintena nce procedures (specifically for water disposal). This report was adopted as the gu iding reference for the 2009 cost study and all pre vious estimates were revised to reflect this change

.

Leases for coal bed methane were assumed to consist of 10 wells dewatered by the predominant artificia l lift method employed in that area. The productio n depths and rates were chosen as representative for that area. The areas studied are Appalachia, Black Warrior Basin (Alabam a), Powder River Basin (Wyoming), and San Juan Basi n (New Mexico). The following table lists the average production depth, per well production rates, and dewatering method u sed in the study. Table 6. Equipment Costs for 10-well Coal Bed Methane lease in 2009 (Current US Dollars)

Producing Depth

Area 1,000-ft 2,000-ft 3,000-ft

Appalachia 840,100

Black Warrior 957,400

Powder River 666,200

San Juan 1,104,400

Table 7. Annual Operating Costs for 10-well Coal Bed Methane lease in 2009 (Current US Dollars)

Producing Depth

Area 1,000-ft 2,000-ft 3,000-ft

Appalachia 88,600

Black Warrior 133,000

Powder River 171,900

San Juan 194,500 

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### Revisions
Data used in this work are revised for at least one year. Late arrival of data necessitates using est imates in some cases, and in other cases, small ite ms have been combined to reduce reporting burdens on data suppliers. The cost data comes from leading supply, service, and contractin g companies in a region. If one of these companies should not be able to respond, a replacement company is identified. The replaceme nt company prices may vary slightly from the origin al company's prices. In order to collate the neces sary data, the costs to drill the water disposal wells, water supply wells and second ary recovery water injection wells are estimated si nce the source for the drilling costs (the Joint As sociation Survey on Drilling Costs) is two years behind. In general, since 1976, data gathering has become more challenging, in part due to the restructuring of the industry, and in part d ue to normal changes in product lists. Changes in equipment and operating practice s are adopted when they become common usage in an a rea. In this manner, improvements in productivity and technology are recognized, although gradually.

Items Tracked Table 8 indicates the more significant cost items t racked from year to year, beginning in most cases w ith the year 1976. Freight and taxes are also a pa rt of the equipment cost, as is the labor to install the equipment. Maintenance costs include replacement costs of some of the more commo n wear items. Dewatering

Method Per Well

Area Depth Gas Mcf/d Water Bbl/d

Appalachia 2,000-ft sucker rod 60 20

Black Warrior 2,000-ft sucker rod 100 43

Powder River 1,000-ft submersible 100 300

San Juan 3,000-ft sucker rod 500 20

Table 8. Items tracked for Oil, Gas, or Coal Bed Metha ne Lease Equipment and Operating Costs

Automobile Costs Oil transfer pumps

Communications costs - land Oilfield chemicals

Communications costs - offshore Oilfield maintenance - land Electric lease power Oilfield maintenance

- marine

Electric motors and controllers Packers

Electric labor - field Perforating

Electric materials

- field Pipe coating

Fences Plastic tanks Field structures - small Pumping engines - gas Fishing tools Pumping motors

- electric Miscellaneous fittings Pumping unit bases Gas compressors Pumping units Gas lift equipment Slick line work

- offshore

Gas sales meters Speciality tubing Gross national product deflator Submersible pumps Helicopter service Submersible hydraulic pumps

Hot oil service Sucker rods

Insulation Tubular goods - lease

Insurance

- offshore Tublar goods

- well Labor statistics - oil field Tugs and barges

Labor - clerical Valves, pumps, misc. - land

Labor

- supervisory Water filter cases

Labor - technical Water filters Large engine for hydraulic pumping Water injection pum ps Lease processing and storage equipment Well costs

- secondary recovery

Lubricants Well servicing - land

Marine food services Well servicing - offshore Natural gas prices Wellheads

Oil sales meters Work boats 

# Page 8 of 8 Oil and Gas Lease Equipment and Operating Costs 1994 Through 2009

11/11/2010 http://www.eia.doe.gov/pub/oil_gas/natural_gas/data_publications/cost_indices_equi pme

...Table P1Lease Equipment Costs and Indices for Coal Bed Methane Production in Powder River(10 Wells Producing 100 Mcf/d, Dewatering from 1,000 Feet by Submersible)DollarsIndex(Current)(2002=100)Component20022006 2007 2008 2009 2002 2003 2004 2005 2006 2007 2008 2009Producing Equipment:Tubing.................. 21,000 39,800 39,500 55,200 32,200 100 105 182 187 190 188 263 153Rods................... 0 0 0 0 0 0 0 0 0 0 0 0 0Pumps.................. 64,300 77,500 85,700 115,800 126,900 100 100 108 114 121 133 180 197Pumping Equipment......... 0 0 0 0 0 0 0 0 0 0 0 0 0Subtotal or Index......85,300 117,300 125,200 171,000 159,100 100 101 126 132 138 147 200 187Gathering System:Flowlines................... 144,200 202,400 235,200237,100 222,200 100 112 120 122 140 163 164 154Subtotal or Index......144,200 202,400 235,200 237,100 222,200 100 112 120 122 140 163 164 154Lease Equipment:Water Storage Tanks...........85,600 120,400 136,800 153,300 149,700 100 102 120 133 141 160 179 175Disposal Pump........ 23,600 34,400 38,500 40,900 42,200 100 112 119 125 146 163 173 179Electrification........ 56,900 94,000 94,700 102,500 93,000 100 108 126 153 165 166 180 163Subtotal or Index......166,100 248,800 270,000 296,700 284,900 100 106 122 139 150 163 179 172Total or Index............395,600 568,500 630,400 704,800 666,200 100 107 122 131 144 159 178 168Non-tubing Total374,600 528,700 590,900 649,600 634,000 100 107 119 128 141 158 173 169Table P2Direct Annual Operating Costs and Indices for CoalBed Methane Production in Powder River Basin(10 Wells Producing 100 Mcf/d, Dewatering from 1,000 Feet by Submersible)DollarsIndex(Current)(2002=100)Component20022006 2007 2008 2009 2002 2003 2004 2005 2006 2007 2008 2009Normal Daily Expense:Supervision and Overhead.. 5,200 5,900 6,100 6,400 6,400 100 104 108 110 116 120 125 125Labor (pumper)............ 6,600 9,400 15,000 15,000 15,000 100 123 129 129 142 227 227 227Auto Usage................. 2,300 2,900 2,900 3,000 2,500 100 104 117 113 126 126 130 109Chemicals.................. 0 0 0 0 0 0 0 0 0 0 0 0 0Fuel, Power & Water...............17,200 19,100 19,100 20,700 22,400 100 102 107 110 112 112 121131Operative Supplies........ 1,500 2,200 3,200 3,200 3,200 100 127 133 133 147 213 213 213Subtotal or Index......32,800 39,500 46,300 48,300 49,500 100 108 113 115 121 142 148152Surface Maintenance,Repair & Services:Labor (roustabout)................ 8,900 13,600 19,600 19,600 19,600 100 130 136 136 153 220 220 220Supplies & Services........... 5,700 8,700 12,100 12,200 12,200 100 128 133 135 153 212 214 214Equipment Usage................. 3,300 5,100 5,200 5,200 5,100 100 124 133 133 155 158 158 155Subtotal or Index......17,900 27,400 36,900 37,000 36,900 100 128 135 135 153 206 207206Subsurface Maintenance,Repair & Services:Well Servicing .......... 25,100 46,600 49,200 52,300 50,200 100100 110 140 186 196 208 200Remedial Services........... 5,700 10,700 11,100 11,600 11,100 100 100 112 142 188 195 204 195Equipment Replacement............11,800 15,000 16,300 22,700 24,200 100 100 110 119 127 138 192205Production Logs........... 0 0 0 0 0 0 0 0 0 0 0 0 0Subtotal or Index......42,600 72,300 76,600 86,600 85,500 100 100 110 135 170 180 203201Total or Index.................93,100 139,200 159,800 171,900 171,900 100 108 116 128 150 172 185 185Table Q1Lease Equipment Costs and Indices for Coal Bed Methane Production in San Juan(10 Wells Producing 500 Mcf/d, Dewatering from 3,000 Feet by Rod Lift )DollarIndex(Current)(2002=100)Component20022006 2007 2008 2009 2002 2003 2004 2005 2006 2007 2008 2009Producing Equipment:Tubing.................. 70,500 129,400 119,000 167,200 95,200 100 100 178 181 184 169 237 135Rods................... 46,400 64,600 74,100 97,400 96,600 100 104 111 129 139 160 210 208Pumps.................. 18,000 21,900 23,400 25,000 25,000 100 105 112 122 122 130 139 139Pumping Equipment......... 391,300 478,000 494,000 579,100 489,100 100 94 108 114 122 126 148 125Subtotal or Index......526,200 693,900 710,500 868,700 705,900 100 96 118 125 132 135 165 134Gathering System:Flowlines................... 27,300 38,700 43,100 48,500 47,600 100 104 125 132 142 158 178 174Subtotal or Index......27,300 38,700 43,100 48,500 47,600 100 104 125 132 142 158 178174Lease Equipment:Water Storage Tanks...........94,900 148,700 168,400 182,900 179,000 100 108 126 142 157 177 193 189Disposal Pump........ 23,600 34,400 38,500 40,900 42,200 100 112 119 125 146 163 173 179Electrification........ 77,900 140,200 142,300 149,700 129,700 100 106 134 164 180 183 192 166Subtotal or Index......196,400 323,300 349,200 373,500 350,900 100 108 128 149 165 178 190 179Total or Index.................749,900 1,055,900 1,102,800 1,290,700 1,104,400 100 99 121131 141 147 172 147Non-tubing Total679,400 926,500 983,800 1,123,500 1,009,200 100 99 115 126 136 145 165 149Table Q2Direct Annual Operating Costs and Indices for CoalBed Methane Production in San Juan Basin(10 Wells Producing 500 Mcf/d, Dewatering from 3,000 Feet by Rod Lift )DollarsIndex(Current)(2002=100)Component20022006 2007 2008 2009 2002 2003 2004 2005 2006 2007 2008 2009Normal Daily Expense:Supervision and Overhead.. 16,200 18,100 19,100 20,100 20,000 100 102 104 108 112 118 124 123Labor (pumper)............ 22,100 31,400 50,100 50,100 50,100 100 122 128 128 142 227 227 227Auto Usage................. 5,300 6,600 6,700 7,000 5,800 100 104 119 115 125 126 132 109Chemicals.................. 10,900 17,100 19,900 21,800 20,300 100 107 118 110 157 183 200 186Fuel, Power & Water...............21,600 24,400 24,500 27,800 26,600 100 106 108 115 113 113 129123Operative Supplies........ 1,500 2,200 3,200 3,200 3,200 100 127 133 133 147 213 213 213Subtotal or Index......77,600 99,800 123,500 130,000 126,000 100 110 115 117 129 159168 162Surface Maintenance,Repair & Services:Labor (roustabout)................ 8,900 13,600 19,600 19,600 19,600 100 130 136 136 153 220 220 220Supplies & Services........... 5,900 8,600 12,000 12,000 12,000 100 125 131 131 146 203 203 203Equipment Usage................. 3,300 5,100 5,200 5,200 5,100 100 124 133 133 155 158 155 155Subtotal or Index......18,100 27,300 36,800 36,800 36,700 100 128 134 134 151 203 203203Subsurface MaintenanceRepair & Services:Well Servicing .......... 9,200 16,300 17,100 18,200 17,400 100 100 109 136 177 186 198 189Remedial Services........... 5,700 10,700 11,100 11,600 11,100 100 100 112 142 188 195 204 195Equipment Replacement............5,500 15,900 16,000 16,400 16,000 100 100 105 216 289 291 298 291Production Logs........... 0 0 0 0 0 0 0 0 0 0 0 0 0Subtotal or Index......20,400 42,900 44,200 46,200 44,500 100 100 109 159 210 217 226218Total or Index.................116,100 170,000 204,500 213,000 207,200 100 111 117 127 146 176 183 178