The cost of drilling a well in The Marcellus Shale has been declining.

This is important in this period of depressed pricing for natural gas.

It brings the point of profitability of these wells closer which could mean more wells drilled sooner than later.

By Jennifer Hiller

It’s been getting cheaper to drill and complete oil and gas wells since 2012.

A new report from the U.S. Energy Information Administration found that average well drilling and completion costs last year had fallen 25 to 30 percent below 2012 prices – the high point of the last decade.

The report, by IHS Global Inc., looked at four shale fields – the Bakken in North Dakota and eastern Montana, the Eagle Ford in South Texas, the Marcellus in Pennsylvania, and two Permian Basin shale plays (the Midland and Delaware basins) – as well as offshore federal Gulf of Mexico. IHS looked at 2006 through 2015, and made forecasts to 2018.

The price swings for drilling and completion have followed the price of oil – expensive in the early days of the shale boom when oil prices were high, and tumbling as oil prices fell.

Starting around 2011, an increase in drilling resulted in “shortages of supply and increased costs.”

“The oil price collapse of 2014 forced changes upon the market, including capital cost reductions, downsized budgets and more focused concentration on better prospects within these plays,” the report said.

Here’s how well costs dropped in recent years:

• Bakken well costs were $7.1 million in 2014, but $5.9 million in 2015.
• Eagle Ford wells averaged $7.6 million in 2014, but $6.5 million in 2015.
• Marcellus wells were $6.6 million in 2014, but $ 6.1 million in 2015.
• Midland Basin wells (in the Permian Basin) were $7.7 million in 2014, but dropped to $7.2 million in 2015.
• Delaware Basin wells (in the Permian Basin) cost $6.6 million in 2014 and fell to $5.2 million during 2015.

IHS expects rig rates to fall by 5-10 percent this year, but increase 5 percent in 2017 and 2018.

You can read the full report here.