What is the total cost of an oil rig?

Integrated system to drill wells

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This article is about onshore equipment for boring holes into the ground. For offshore oil rig, see Oil platform . For drilling tunnels, see Tunnel boring machine . For handheld drilling tool, see Drill

Drilling the Bakken Formation in the Williston Basin Large hole drilling rig for blast-hole drilling

A drilling rig is an integrated system that drills wells, such as oil or water wells, or holes for piling and other construction purposes, into the earth's subsurface. Drilling rigs can be massive structures housing equipment used to drill water wells, oil wells, or natural gas extraction wells, or they can be small enough to be moved manually by one person and such are called augers. Drilling rigs can sample subsurface mineral deposits, test rock, soil and groundwater physical properties, and also can be used to install sub-surface fabrications, such as underground utilities, instrumentation, tunnels or wells. Drilling rigs can be mobile equipment mounted on trucks, tracks or trailers, or more permanent land or marine-based structures (such as oil platforms, commonly called 'offshore oil rigs' even if they don't contain a drilling rig). The term "rig" therefore generally refers to the complex equipment that is used to penetrate the surface of the Earth's crust.

Small to medium-sized drilling rigs are mobile, such as those used in mineral exploration drilling, blast-hole, water wells and environmental investigations. Larger rigs are capable of drilling through thousands of metres of the Earth's crust, using large "mud pumps" to circulate drilling fluid (slurry) through the drill bit and up the casing annulus, for cooling and removing the "cuttings" while a well is drilled. Hoists in the rig, a derrick, can lift hundreds of tons of pipe. Other equipment can force acid or sand into reservoirs to facilitate extraction of the oil or natural gas; and in remote locations there can be permanent living accommodation and catering for crews (which may be more than a hundred). Marine rigs may operate thousands of miles distant from the supply base with infrequent crew rotation or cycle.

History

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Antique drilling rig now on display at Western History Museum in Lingle, Wyoming. It was used to drill many water wells in that area—many of those wells are still in use. Antique drilling rigs in Zigong, China

Until internal combustion engines were developed in the late 19th century, the main method for drilling rock was muscle power of man or animal. The technique of oil drilling through percussion or rotary drilling has its origins dating back to the ancient Chinese Han dynasty in 100 BC, where percussion drilling was used to extract natural gas in the Sichuan province.[1] Early oil and gas drilling methods were seemingly primitive as it required several technical skills.[1][2] The skills involved the availability of heavy iron bits and long bamboo poles, the manufacturing of long and sturdy cables woven from bamboo fiber, and levers. Heavy iron bits were attached to long bamboo cables suspended from bamboo derricks and then were repeatedly raised and dropped into a manually dug hole by having two to six men jumping on a lever.[1] Han dynasty oil wells made by percussion drilling was effective but only reached 10 meters deep and 100 meters by the 10th century.[1] By the 16th century, the Chinese were exploring and drilling oil wells more than 2,000 feet (610 m) deep.[2] Chinese well drilling technology was introduced to Europe in 1828.[3] A modernized variant of the ancient Chinese drilling technique was used by American businessman Edwin Drake to drill Pennsylvania's first oil well in 1859 using small steam engines to power the drilling process rather than by human muscle.[1] Cable tool drilling was developed in ancient China and was used for drilling brine wells. The salt domes also held natural gas, which some wells produced and which was used for evaporation of the brine. Drake learned of cable tool drilling from Chinese laborers in the U.S.[4] The first primary product was kerosene for lamps and heaters.[5][6] Similar developments around Baku fed the European market.

In the 1970s, outside of the oil and gas industry, roller bits using mud circulation were replaced by the first pneumatic reciprocating piston Reverse Circulation (RC) drills, and became essentially obsolete for most shallow drilling, and are now only used in certain situations where rocks preclude other methods. RC drilling proved much faster and more efficient, and continues to improve with better metallurgy, deriving harder, more durable bits, and compressors delivering higher air pressures at higher volumes, enabling deeper and faster penetration. Diamond drilling has remained essentially unchanged since its inception.

Petroleum drilling industry

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 Oil rigs operational

 

 Natural gas rigs operational

Oil and natural gas drilling rigs are used not only to identify geologic reservoirs, but also used to create holes that allow the extraction of oil or natural gas from those reservoirs. Primarily in onshore oil and gas fields once a well has been drilled, the drilling rig will be moved off of the well and a service rig (a smaller rig) that is purpose-built for completions will be moved on to the well to get the well on line.[7] This frees up the drilling rig to drill another hole and streamlines the operation as well as allowing for specialization of certain services, i.e. completions vs. drilling.

Mining drilling industry

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Mining drilling rigs are used for two main purposes, exploration drilling which aims to identify the location and quality of a mineral, and production drilling, used in the production-cycle for mining. Drilling rigs used for rock blasting for surface mines vary in size dependent on the size of the hole desired, and is typically classified into smaller pre-split and larger production holes. Underground mining (hard rock) uses a variety of drill rigs dependent on the desired purpose, such as production, bolting, cabling, and tunnelling.

Mobile drilling rigs

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Mobile drilling rig mounted on a truck

In early oil exploration, drilling rigs were semi-permanent in nature and the derricks were often built on site and left in place after the completion of the well. In more recent times drilling rigs are expensive custom-built machines that can be moved from well to well. Some light duty drilling rigs are like a mobile crane and are more usually used to drill water wells. Larger land rigs must be broken apart into sections and loads to move to a new place, a process which can often take weeks.

Small mobile drilling rigs are also used to drill or bore piles. Rigs can range from 100 short tons (91,000 kg) continuous flight auger (CFA) rigs to small air powered rigs used to drill holes in quarries, etc. These rigs use the same technology and equipment as the oil drilling rigs, just on a smaller scale.

The drilling mechanisms outlined below differ mechanically in terms of the machinery used, but also in terms of the method by which drill cuttings are removed from the cutting face of the drill and returned to surface.

Automated drill rig

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An automated drill rig (ADR) is an automated full-sized walking land-based drill rig that drills long lateral sections in horizontal wells for the oil and gas industry.[8] ADRs are agile rigs that can move from pad to pad to new well sites faster than other full-sized drilling rigs. Each rig costs about $25 million. ADR is used extensively in the Athabasca oil sands. According to the "Oil Patch Daily News", "Each rig will generate 50,000 man-hours of work during the construction phase and upon completion, each operating rig will directly and indirectly employ more than 100 workers." Compared to conventional drilling rigs", Ensign, an international oilfield services contractor based in Calgary, Alberta, that makes ADRs claims that they are "safer to operate, have "enhanced controls intelligence," "reduced environmental footprint, quick mobility and advanced communications between field and office."[8] In June 2005 the first specifically designed slant automated drilling rig (ADR), Ensign Rig No. 118, for steam assisted gravity drainage (SAGD) applications was mobilized by Deer Creek Energy Limited, a Calgary-based oilsands company.[9][10]

Auger drills

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An auger drill is a spiral-shaped tool. Its main function is the drilling of holes in the ground and other materials - or surfaces such as ice, wood, etc. The design of an auger depends on the kind of material it's meant to drill into, hence there are different types of auger drills.[11] Auger drills come in varying sizes and can drill holes up to a depth of 95 ft below the ground. They are known to be quite versatile, saving time and energy during construction work or even personal projects.

Drill buckets

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A drill bucket, or auger bucket, is a drilling head that accumulates spoil inside and can be lifted from the hole periodically to be emptied.[12]

See also

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References

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Oil rig equipment is expensive due to the size and operations carried out by such large machinery. Purchasing a newly constructed drill rig is a huge investment. 

As such, you’ll want to be sure you have the right expectations before you begin searching for one to complete your assignment. This article will discuss just what a drill rig does and the estimated costs involved in the drilling process.

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What is a drill rig?

When you need a machine powerful enough to bore through the earth’s crust to retrieve minerals, gas, or any other natural resources, a drill rig will get the job done. Each rig is designed for the environment they’re operating in and the product being extracted. Those two factors greatly affect the cost of the rig you’re looking to purchase.

What is the average cost of a drill rig?

A standard land rig with 1,500 to 1,700 horsepower will cost between $14 million and $25 million to own. An offshore oil rig cost is much higher, starting at $20 million and going as high as $1 billion. Owning your drill rig will save you money in the long run, especially when considering the daily cost of operations.

How much does it cost to run a drilling rig per day?

Your daily rate depends on the rig type, distance from shore, drilling depth, and water depth. Onshore drilling rates range from $200,000 to $310,000 each day. Offshore drilling can cost between $600,000 to $800,000 per day.

Factors That Affect the Cost of a Drill Rig Construction

Several factors impact the oil rig cost, including construction, including materials, market conditions, equipment prices, and more. We’ll cover the basics, so you have a realistic expectation when searching for a rig price.

Market Conditions

Cost and demand go hand-in-hand. When there is a high demand for building new rigs, the cost rises because a limited number of shipyards can provide the service. 

For example, in the early 2000s, there wasn’t a demand for new rig construction, so rates were low. In the mid-2000s, demand increased, and prices rose, but after the 2008 recession, demand decreased. But the prices didn’t drop significantly as the recession wasn’t expected to last long. 

Material 

The materials used in making a drill rig are a key component in construction costs. The material used most, steel, comes in various strengths, and the stronger the steel, the higher it’s priced. When steel prices are low, rigs will be cheaper to produce; when steel prices rise, so do the costs of the rigs.

Concrete is another material that will raise production costs. It’s often used in environments containing salt water as a way of avoiding corrosion and rusting. Concrete usually costs about 7% to 10% more than steel. 

Service Cost

The cost of additional services needed for constructing wells will begin to add up. Phone bills and fees for transferring data are part of your communication cost. For those working offshore, rig positioning will be another fee. 

The cementing equipment and engineer have to be paid for their services also. Other services are wire line logging, drilling measurement, mud engineering, downhole motors, mud logging, and surveying the hole. 

Equipment Prices

There are two types of oil rigs, jackups, and floaters. Floaters aren’t attached to or resting on the seafloor. Jackups have support legs that allow the rig to be raised or lowered. Each type has different equipment to assist with the drilling process. 

The engines, generators, cranes, and other oil rig components are purchased from a third party and assembled by the rig builder. Non-drilling related equipment is about 30% to 60% of the total cost.

Since most of the parts used are made from steel, the fluctuations in the steel market will influence the rig’s price. Demand for the additional equipment to fit on the rig will also play a part in costs. 

Labor Costs

Where your rig is built impacts the labor costs, which affect the price of the drill rig. It’s estimated that labor is 10% to 15% of the total cost of the rig is built internationally. While the U.S. and Korea have similar costs, Singapore charges three times less. 

Each dollar spent on labor in the U.S. generates $3 in revenue, while in Singapore and South Korea, every dollar generates $7 to $10 in revenue. Since labor costs are typically lower internationally, the cost of your rig won’t be as high.

Allowances

Always expect and prepare for the unexpected by setting aside a portion of the budget for allowances. Once you start drilling, you can’t be sure what you’re going to find, and variances in the geological structure could require different equipment and delay the process. Both of these instances will increase the cost of the rig being used. 

Site Preparation

Preparing an area for drilling can mean building roads to the site. These roads need to support heavy machinery and can take 15 to 20 days to build. Preparation also varies based on the environment. 

Marshes, land, and offshore drilling all have their own preparation needs. It can take several weeks before drilling can begin, and each day spent getting the site ready comes with a hefty cost.

Drilling

The drilling depth and well complexity are primary cost influencers. Once the drill rig is moved into position, it can take a team of 30 to 40 companies to complete the process. Costs can easily top $4 million during the drilling phase and take about three weeks to finish. 

Rig Mobilization 

Positioning drilling rigs isn’t an easy task. It takes 3 to 5 days to move in and assemble a rig for well digging. Once the job is complete, the rig has to be disassembled and moved again. Rates hover between $100,000 and $350,000 depending on how far the rig is being transported. 

Drilling for Oil is Big Money

The oil industry is very lucrative, and the machines used to drill for the resource are not cheap. Oil rigs are heavy-duty machines needed to reach extreme depths. 

The harsh environments they’re in demand that they are built with the best materials available. If you need a drill rig, it’s important to keep in mind all the factors that contribute to the cost of the equipment so you can budget correctly. 

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