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Oil, gas drilling costs down as much as 30% from 2012, EIA says

Upstreamoperators in five major oil and gas plays have been able to slice 25% to 30% fromtheir costs since 2012, the U.S. Energy Information Administration reported.

Workingin conjunction with IHS Global Inc., the EIA studied the costs per well in the EagleFord, Bakken and Marcellus Shales and two plays in the Permian Basin. The findingsof the study indicated that improved technology has allowed for more efficient drillingand completion, which has in turn reduced costs.

"Upstreamcosts in 2015 were 25% to 30% below their 2012 levels, when per-well costs wereat their highest point over the past decade," the EIA said. The study showedthat for the Permian's Midland Basin and the Marcellus, the cost to drill per footof depth exceeded $200 in 2012 and drilling in the Eagle Ford exceeded $175 perfoot. By 2015, all five plays were below $150 per foot, a level the EIA and IHSbelieve will be maintained through at least 2018.

In 2012,when the cost per well in all five plays averaged $8 million or more, the cost perlateral foot exceeded $800 in the Midland Basin, Eagle Ford and Marcellus. By 2015,the cost per lateral foot for all five plays was down to $600, with the Bakken aslow as $400 per foot.

The agencysaid the decline in cost continued in 2015, but at a slower rate as producers beganto experiment with deeper wells with longer laterals.

"[Thechanges] affected the onshore oil plays differently in 2015, with recent per-wellcosts ranging from 7% to 22% below 2014 levels," the EIA said.

The EIAfound that differences in geology, well depth and water disposal options could causethe prices in each play to vary, but improvements in drilling and well completionwere seen across the board.

"Greaterstandardization of these drilling and completion practices and designs across theindustry should continue to lower costs," the agency said. "The drillingcost per foot, based on total depth, and the completion cost per foot, based onlateral length, are both projected to maintain these lower cost trends through 2018.Sustained lower upstream costs may affect near-term oil and natural gas markets,and ultimately, the prices of these fuels."