A:

Average costs vary widely between different types of oil rigs, starting at around $20 million and ranging as high as close to $1 billion. The cost of oil rigs and drilling equipment invariably represents a very large capital expenditure for an oil producer.

One reason oil producers are willing to undertake the time and expense of doing extensive seismological surveys to determine proven and probable reserves available for recovery, prior to drilling, is because of the massively greater investment required in drilling equipment.

For land drilling, equipment represents one of the two major expenses for an oil producer, the other being the cost of establishing infrastructure access for roads, water and electricity. For offshore drilling, the much-higher cost of drilling equipment often represents nearly 90% of an oil producer's total investment.

The price of oil rigs for land drilling in the United States typically starts at around $18 million to $20 million and goes up to around $25 million, but it can be nearly twice that amount depending on the specific rig purchased. The least-expensive rigs are those classified as U.S. small footprint land rigs. U.S. shale-ready rigs tend to cost about $3 million to $5 million more than small footprint rigs. International land rigs, designed to meet a wider range of specifications that vary from one country to another, generally range from $25 million to $40 million.

The average cost for offshore rigs can be as much as 15 to 20 times greater than the average cost for land rigs. The least-expensive offshore rigs typically cost nearly $200 million. The average price for offshore oil-drilling rigs is approximately $650 million. The Brazilian energy company Petrobas, in a plan to replace leased U.S. and European rigs with its own fleet of offshore floating rigs, recently began producing offshore rigs estimated to cost up to $900 million each.

Rigs vary in price according to, among other things, the depth to which they are designed to drill, and in the case of offshore rigs, the depth of water in which they are designed to operate.

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