Brownfield drilling service price

IBISWorld expects brownfield drilling service prices to rise by 14.5% in 2023-24, to $398.95 per metre. Elevated commodity prices are set to support exploration activity and drive demand for drilling services over the year, while tight labour market conditions are projected to place upward pressure on labour costs. Brownfield drilling activity reached 8.1 million metres drilled in 2022-23, with this number projected to fall in 2023-24 as rising input costs and labour shortages push drilling service prices higher and business confidence remains negative.

Brownfield exploration expenditure has increased over the past five years as mining companies have sought to sure up existing discoveries and increase the productive life of operating mines. Gold accounts for over 30% of total exploration expenditure in Australia. High gold prices have supported exploration drilling for the commodity, with some gold miners seeking to extend production at ageing mines. Exploration drilling expenditure on other commodities like iron ore and coal has also grown over the period. Brownfield exploration expenditure has grown across all states over the past five years. Although starting from a small base, Victoria has experienced the strongest growth over the period. Western Australia dominates brownfield drilling expenditure, with expenditure in the state reaching $1.7 billion in 2022-23 (latest available data) and accounting for over 60% of total brownfield exploration expenditure.

Operating costs for drilling companies have increased over the past five years, which has flowed through to higher prices for drilling services. Restrictions during the COVID-19 pandemic caused brownfield drilling costs to fall in 2020-21. However, a rebound in commodity prices, tight labour market conditions and global supply chain issues have since caused drilling costs to rise. The Russia-Ukraine conflict also created disruptions in global energy markets, sending energy prices higher, while supply chain disruptions caused by the COVID-19 pandemic led to equipment shortages. These factors have placed upward pressure on operating, purchase and equipment hiring costs for drillers. Overall, IBISWorld forecasts brownfield drilling service prices to rise at a compound annual rate of 12.6% over the five years through 2023-24.