Economic Analysis of Drilling Plans and Contractors by Use of a Drilling Systems Approach
Authors: Reynolds W.W. 
Published: December 2007

Summary
This paper discusses how the engineering simulator for drilling (ESD) can be used to make economic decisions that can guide management in the selection of drilling contractors and other drilling-related services. The simulation concept is described with details of the time-and cost-generating methods used by the ESD and a presentation of three examples that show the analytical capabilities of the simulator. The first example is an analysis of two diverse drilling well plans. The second example demonstrates how the ESD provides a rational basis from which a mud-company selection can be made. In the last example, the engineering simulator is used to measure the performance of two different rigs quantitatively. This example shows how rigs can be selected with the simulator and how the ESD provides the drilling engineer with the ability to make more optimum choices of drilling designs and cost estimates. The ESD also provides management with a yardstick for selecting between various proposed well plans and various contractors by defining accurately the proposed well plans and various contractors by defining accurately the factors that affect the bottom line.

Introduction
Generating well plans and selecting drilling-related contractors is usually done by engineers who postanalyze offset wells, develop a well plan, and present it to management. Contractors arc selected by various methods that are unique to a company's infrastructure and its way of doing business. Generating a 10,000-ft [3050-m] straight-hole well program with the older drilling optimization techniques could program with the older drilling optimization techniques could take an engineer up to a week just to design the mud program. bit selection, hydraulics, casing program, and other program. bit selection, hydraulics, casing program, and other drilling-related activities. Examining drilling options is usually impossible because of the time limitations of the normal day-today operations and the difficulty of using a hand calculator or a slow mainframe computer. The same holds true for the selection of the drilling rig and drilling-service-related contractors. There has been only a subjective and "price list" capability to evaluate contractors. The main criterion usually is based on performance and price. performance and price. The ability to optimize bottom-line costs and to give management clear technical options when selecting well plans or contractors can be obtained by analyzing the plans or contractors can be obtained by analyzing the entire drilling system. This is done by drilling a postulated well plan on an engineering simulator. This paper shows that the ESD is more than an engineering tool to aid drilling engineering studies. The simulator is an economic toot that can provide bottom-line costs for evaluation of various drilling plans and drilling contractors.

Simulation Concept
The theory behind detailed simulation for drilling is that the process of drilling can be modeled as a dynamic system subdivided into geology, drilling rig, wellbore, mud system, and drillstring (Fig. 1). Millheim and Huggins and Millheim described the development, structure, and functionality of the ESD. This paper discusses the time and cost components of the simulator in detail and does not elaborate on the other parts of the ESD. The first step in drilling a well is producing a plan. The time and cost estimates are usually the last items to be considered in the well plan because they depend heavily on the technical aspects of the plan. If done by hand, a properly prepared time and cost estimate may take as properly prepared time and cost estimate may take as much engineering work as designing the well plan. The ESD keeps an accounting record of the projected drilling time and resource usage during simulation, however, and generates a cost estimate by integrating these items with the particular well design.
Resource and Time Categories. The simulator divides cost estimating into two areas:resource usage andtime information.
Resource categories that are modeled include location and access, rig, rental equipment, mud, supplies, support services, cementing, and tangibles. The user specifies location and access costs by entering the permitting costs, the costs for the road and location, road and location maintenance costs, and location cleanup costs. Under the rig category, the simulator charges the estimated day work rate for the particular rig selected, allows the moving costs to be entered, and calculates the fuel consumption of the diesel engines. The mud category accounts for all the mud products used for the particular type of drilling fluid selected. This allows a mud vendor evaluation to be performed after any simulation. The supplies category accounts for the type and number of bits, shale-shaker screens, and other supply equipment used and attaches a price to each item during the simulation. The bit cost is a function of the manufacturer, size, and bit type.
JPT
p. 787