What is a development well?
A development well is drilled in a proven producing area for oil or gas production. He opposes a exploration well, which is initially drilled to find oil or gas in an unproven area. Consequently, dry or unsuccessful development wells are rarer than dry exploration wells. The chances of success increase when the development well is drilled to a depth likely to be most productive.
Key points to remember
- A development well is drilled after an area has been proven to contain oil or gas reserves and is usually the final phase of the oil drilling process.
- An exploration well is an effort to determine if oil or gas reserves are present.
- The probability of success increases as more wells are drilled in a given field.
- Development wells are more complex and expensive than exploration wells because they have a larger diameter and drill deeper.
- Over the years, technology has helped increase the success rates of exploratory drilling projects.
- Development wells are drilled with different objectives: production in flow, production of artificial lifts, injection of water or gas, monitoring of the performance of a well.
Understand a development well
The objective of the well drilling phase of an oil company’s development is to maximize economic production and recovery of known resources from a reservoir. reservations. The exploration well determines if oil and gas are present in a prospective reservoir. Since the geology and subsurface conditions are uncertain, the risks of complications are increased during exploratory drilling.
Energy companies spend significant resources identifying the best locations to drill wells, as a dry or unproductive well can be a significant expense. While exploration wells are designed to confirm the accessibility of reserves, development wells are drilled with various and different objectives, such as flow production, artificial lift production, water injection or gas and well performance monitoring.
The accounting treatment of development wells also differs from exploration wells. The costs of dry development wells are generally capitalized as an asset on the balance sheetwhile the costs associated with dry exploration wells are an expense for income statementaccording to International Financial Reporting Standards (IFRS) and the United States generally accepted accounting principles (GAAP).
Development Wells vs Appraisal Wells
The probability of a successful well increases as more wells are drilled in a oilfield. First it is necessary to divide the drilling program into stages, then it is possible to compare the success of wells in different areas.
Development wells tend to be the final phase of the oil drilling process. The four phases of the oil and gas extraction process are:
- Well development
- Abandonment of the site
Prior to drilling a development well, oil and gas companies generally drill appraisal and exploration wells. Appraisal wells are only drilled when there is a discovery, with the purpose of assessing the size and viability of the reservoir. Drilling techniques vary considerably.
Development wells have a much longer life cycle and operating period than appraisal wells. Additionally, development wells are normally larger in diameter and deeper than exploration wells, so they are also much more expensive and complex to drill.
The success rates of wells drilled during the exploration phase have improved dramatically over the past 50 years. For example, in the 1960s, exploration wells were only successful about 45% of the time, compared to development wells, which had a 70% success rate. By the 1990s, the gap had narrowed considerably, with exploration wells succeeding 62% of the time and development wells 67% of the time.
According to Energy and information Administration (EIA), The number of producing wells in the United States peaked at 1,029,588 wells in 2014 and has steadily declined to 936,934 wells in 2020, primarily due to lower oil prices and the decline in drilling activity.
U.S. oil production reached 12.9 million barrels per day in December 2019, and U.S. gross natural gas withdrawals reached 116.9 billion cubic feet per day in December 2019. Production oil and natural gas gross withdrawals in the United States both declined in 2020 due to lower demand related to COVID. -19 pandemic.
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