Average costs for types of oil rigs can vary widely, ranging from around $20 million to as high as $1 billion. The cost of oil rigs and drilling equipment invariably represents a considerable capital expenditure for an oil producer. The massively greater investment required in drilling equipment is one reason why oil producers are willing to undertake the time and expense of doing extensive seismological surveys to determine proven and probable reserves available for recovery before drilling.

Land vs. Offshore Rigs

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 higher cost of drilling equipment often represents nearly 90% of an oil producer's total investment.

Key Takeaways

  • The cost of drilling varies widely depending on the project and whether the project involves offshore or land drilling.
  • Equipment represents the main expenditure for land drilling.
  • Offshore rigs can cost 15 to 20 times more than land drilling rigs.
  • Costs of rigs also vary depending on the depth being drilled, as it typically costs more to drill deeper holes.

The price of oil rigs for land drilling in the U.S. typically starts at around $18 million to $20 million and rises to around $25 million, but it can be near 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.

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. It typically costs more to dig deeper and extract the oil.

Day Rates

Day rates, which represent the daily costs of renting a drilling rig, are often used when calculating rental costs of drilling rigs. In this arrangement, the drilling contractor provides the rig, the personnel, and other incidentals, while the operator of a drilling project pays a daily rate for the services and equipment. The daily rate is typically a flat fee per contract, so the day rate is computed by dividing the total value of the contract by the number of days anticipated to complete the project.

Following the oil crisis that began in 2014, offshore rig firms believed that a recovery on the rig rental market was taking place in 2018 due to increased demand, with average prices projected to rise above $200,000 per day.