Authority For Expenditure (AFE)
Definition - What does Authority For Expenditure (AFE) mean?
Authority For Expenditure (AFE) is the budgetary quotation that the operator prepares and handovers to the Exploration and Production organization that has been awarded the E&P contract for the lease. Authority For Expenditure can also be referred as the total estimated cost of a well. Any failure in timely approval of AFE may result in cancellation or delays of the proposed well drilling program.
Petropedia explains Authority For Expenditure (AFE)
When the oil or gas production permit is approved to any E&P organization on a particular lease, an operator is contracted by E&P organization that prepares a budgetary quotation for expenses in drilling program to a particular depth, labor cost, rig cost, cementing and casing cost, etc., which collectively is known as Authority For Expenditure (AFE). In AFE following items represents major cost estimates:
- Time taken for a drilling program up to prescribed depth by an E&P organization.
- Survey cost and location preparation cost
- Cost for contracting a drilling rig for a certain time period.
- Lubrication required or drilling fluids cost.
- Drilling Equipment (If rented)
- Well cementing cost
- Support services cost
- Machinery transportation cost
- Supervision and administration cost
- Wellhead and well completion equipment cost
- Hydrocarbon gathering and transportation infrastructure development cost