The cost of drilling an oil and gas well is back down to levels not seen since 2009, in the aftermath of the global financial crisis, according to a new report by the U.S. Energy Information Administration.
With a historic drop in crude oil prices, analysts say production costs are down 25 to 30 percent since 2012.
“Changes in technology have affected drilling efficiency and completion, supporting higher productivity per well and lowering costs, while shifts towards deeper and longer lateral wells with more complex completions have tended to increase costs,” the report reads.
According to EIA, which contracted with research firm IHS Global for the report, drilling costs in the Eagle Ford, Bakken, Marcellus, and Permian regions reached their highest level in a decade in 2012 after advances in hydraulic fracturing and horizontal drilling technology opened up shale deposits long thought too difficult to drill. With West Texas Intermediate averaging $94 a barrel, capital from banks and private equity firms poured into drilling.
But after crude prices started falling rapidly in the winter of 2014, the math changed.
Between 2014 and 2015, onshore drilling costs fell between 7 and 22 percent, EIA said.
And the reports predicts those declines will continue, with costs staying low through 2018.
“Sustained lower upstream costs may affect near-term oil and natural gas markets, and ultimately, the prices of these fuels,” the report concluded.