Technical Change and Petroleum Drilling Costs

Copp, E. Anthony
May 1974
Land Economics;May74, Vol. 50 Issue 2, p120
Academic Journal
The article asserts that drilling costs are a significant component of the total economic cost of finding, developing and producing oil or gas. Moreover, technological changes have reduced relative petroleum drilling costs and have acted to counterbalance the tendency toward long-run increasing costs characteristic of the petroleum industry. This has implications for the direction of efforts to arrest the rising cost of energy in the U.S. The article examines the role of cost saving technology in petroleum drilling. It examines whether technological progress is biased for alternative depth oil and gas wells. The article reviews drilling cost since 1956. It summarizes some of the advances in drilling technology, which has occurred over the past decades and estimates a model of petroleum drilling cost. It is observed that between 1956 and 1972 all classes and types of drilling dropped by more than 50 percent. As an indicator of rig efficiency, the average annual number of operating rotary rigs for a comparable period declined by some 60 percent while footage drilled per rig increased by more than 35 percent.


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