Oil well drilling is a costly operation. It takes a significant investment from identifying an oil-rich area to carrying out exploration activities. Regarding oil exploration, constructing an oil rig takes substantial time and money too. These facilities and other drilling equipment are the heart and soul of every exploration operation; hence, they require more significant investments.
An oil drilling rig is a highly sophisticated facility that incorporates different components for an efficient drilling operation. As such, it requires excellent forethought, organization, and teamwork. The cost of a typical oil rig ranges from about $20 million to $30 million. However, this value may vary greatly depending on contrasting factors, such as the depth of the well and the possible challenges that may result from the drilling process.
Before we go into these factors in detail, Total Oilfield Supply offers a selection of industry-standard oil rigs for all your oil exploration operations. We put the work in so you don’t have to. Contact us today, and our experts will be happy to assist you in selecting a rig that suits your needs.
What Is The Average Cost Of An Oil Rig?
There are two categories of oil rigs – onshore and offshore rigs. A standard onshore rig can cost between $15 million to $25 million. These include both fixed rigs and those attached to a truck. The increasing demand for onshore drilling can be attributed to a greater need for fossil fuels and hydrocarbon exploration worldwide.
Offshore oil rigs are significantly more expensive. This is because there are numerous factors to consider before building a facility in the middle of the ocean. An offshore oil rig could cost around $20 million for those employed in shallow water. However, the cost of rig platforms used in extremely deep water bodies could reach $1 billion.
Owning or constructing any type of oil rig requires a significant investment. However, it’s a worthwhile investment in the long run, particularly given the daily cost of operation.
Factors That Impact Oil Rig Cost
Typically, the price of an entirely constructed oil rig could range from about $20 million to $30 million, with the increase subject to current market valuation. However, the amount could skyrocket to build a specific rig based on particular requirements and needs.
Aside from the depth and complexity of an oil well, many other primary factors impact the cost of an oil rig. Considering these factors is critical as it could also affect other operational elements. Here are some essential factors;
The Market
Every product is subject to price fluctuations due to its current market valuation. In the context of an oil rig, the price of buying or constructing one depends on the current demand for oil rigs and the capacity of supplies to meet these demands.
This factor conforms to simple economics – more demand and less supply results in a higher price. However, the cost of an oil rig could be significantly reduced if the supply is greater than the demand. The demand for an oil rig arises when a company looks to improve its efficiency and utilization rates.
While there are several suppliers of fully constructed oil rigs, only a few shipyards are qualified to build a platform. For example, in the early 2000s, there was a high demand for oil rig platforms. While the cost of building a platform skyrocketed, the cost of owning floaters or jack-ups was significantly lower.
Material
Building an oil rig requires different costs, including materials and labor. As such, the price of an oil rig will also depend on the construction cost incurred by the rig’s complexity as well as the time and effort put into it.
Unsurprisingly, the materials used in rig construction have the most significant impact on cost. Steel is the most commonly used material for an oil rig. Concrete is also employed for platform constructions. As a result, the current price of these materials will determine the cost of an oil rig. Additionally, acquiring an oil rig from a location with an abundance of these materials will reduce the cost.
Operational Costs
The operational cost covers the service cost as well as the cost of labor and equipment. These are also essential determinants in rig construction costs.
According to experts, labor costs account for about 10-15% of the total investment, and the number of workers needed to complete the construction is down to the rig’s complexity. Complexity also determines the risk factors associated with the construction. More risky oil rigs like platforms incur a higher labor cost than typical land rigs.
Equipment used in the construction is also an essential component of an oil rig. This equipment includes cranes, floats, gears, positioning systems, generators, and even elevators. These components are typically purchased and transported to the oil well site. The prices of this equipment are subject to market value, level of demand, and transportation factors.
Finally, the service cost relates to all services required for the construction. Some of the primary service costs associated with an oil rig construction include;
- Rig positioning costs
- Communication
- Downhole motors cost
- Surveying
- Mud logging
- Wireline logging
- Drilling measurement cost.
Site Preparation.
On rare occasions, a commercial reservoir is discovered, necessitating the construction of a rig capable of carrying out all exploration processes, including processing and transportation. As a result, the cost of preparing an oil well site is added to the overall cost of building an oil rig.
For instance, a good road network is usually required in an oil rig. This would help ease transportation and accessibility within the rig.
Rig Transportation
Aside from a platform, most types of oil rigs do not need to be constructed on-site. Instead, they are built in parts, moved to the site, and assembled. The process of moving the rig parts and assembling them is called rig mobilization. This mobilization cost would depend on the distance from the supplier to the site. Typically, a normal rig mobilization takes about three days and costs between $150,000 to $400,000.
Oil exploration is a massive industry, and as such, the equipment used to engage in exploration processes does not come cheap. This is pretty understandable as these machines are capable of reaching extreme depths.
Hence, these rigs are built with the best materials to withstand extreme conditions associated with such depths. If you need an oil rig, you should adequately consider all the factors that affect its cost and budget.
Get The Best Oil Rigs At Total Oilfield Supply
At Total Oilfield, we provide professional oil exploration services to businesses throughout the United States. Our services include sourcing and supplying high-quality used equipment, including various types of oil rigs. One of our greatest assets is our ability to identify the best equipment to meet any need or budget. Hence, contact us today for high-quality oil drilling equipment at reasona