Along with technical preparations before drilling a well, cost estimation is one of the central activities leading up to an AFE (Authorization for Expenditure) approval. Traditionally, a single well cost estimate has been provided. However, in recent years a probabilistic well cost estimate, or at least an understanding of the potential well cost range, is required as a part of the internal procedures of the E&P companies.

In order to introduce and strengthen the application of probabilistic well cost estimation, a tool and methodology has been developed for use in Eni E&P drilling departments. The challenges encountered during the development of the methodology were to lower the threshold for drilling engineers to perform probabilistic well cost estimation and to systematize the corresponding workflow such that:

  • assessment of risks and uncertainties are made simple and transparent

  • alternative well designs can be compared in terms of cost uncertainties

  • the major risk drivers are understood

  • the results can easily be communicated to other parts of the organization

This paper aims at strengthening the argumentation for using probabilistic well cost estimation, give a brief overview of the underlying mathematics, present the full workflow as performed by a drilling engineer using the tool and give several examples of how the tool can be applied and communicated in a decision making setting. A case study is presented in order to illuminate the above points.


The petroleum industry faces growing pressure to reduce well construction costs. Well construction cost estimates have to a large extent been based on historical data, which mask serious risks in the project under consideration. The well construction cost estimation has been reflecting the uncertainty and the range of values that the well construction cost can take to a limited extent by only providing 10th and 90th percentile values in addition to the most probable value. Redesigning a well in progress can result in a poor well plan because of late notice and insufficient time.

The total time taken in well construction operations is subject to considerable uncertainty and risk factors due to limited knowledge concerning the geologic characteristics of the formation, technical difficulties and unexpected behaviour of human operators. This time represents 70 to 80% of the final well construction cost due to high costs of the daily rent of the drilling rig, see [1]. Well construction duration is therefore an important issue regarding budget planning.

This paper introduces a method for estimation of well construction cost and duration based on expert judgments in combination with experience data. The results provide the spread in the estimated values together with important values like for example the mean and the 10th, 50th and 90th percentiles. If several alternative solutions for the well construction are available, results from the well construction cost estimation can easily be compared.

This paper first presents traditional and probabilistic well cost estimation, and pinpoints advantages and disadvantages by the two methods. A mathematical description of probabilistic well cost estimation is provided. Then the work flow is described. Use of the method in a well cost risk management setting is presented, including examples of application. This is followed by a discussion on how the results should be communicated and used for decision making. An example case is then described in order to demonstrate the use of the probabilistic well cost estimation method in well construction planning. Finally a conclusive summary of the paper is given.

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