Drilling speed-the relevance of experience

Drilling expenses have increased sharply in recent years. The productivity of drilling operations - in terms of meters drilled per day - significantly influences exploration costs. Hence it is important to understand the factors that determine drilling productivity. In this study we analyze the effect of different types of experience or learning on offshore drilling productivity. The econometric analysis employs a large data set on exploration wells from the Norwegian Continental Shelf, covering most of its 45 year drilling history. Many other industries have a steep learning curve. A central question here is if learning effects also contribute to increased productivity in petroleum exploration drilling. Furthermore, to what extent do diseconomies associated with reservoir depletion effects and limited acreage counteract learning effects on productivity?

► We test hypotheses on effect of experience on drilling speed, using Norwegian well data. ► We find that congestion externalities and depletion effects on average dominate learning effects. ► Area experience is important when drilling deep. ► Previous local experience of the operating company is found to have a positive effect. ► Experience is found to be especially important when the litostatic pressure is high.