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Home Industry

Oil And Gas Drilling Set For A Multi-Decade Low In 2020 | OilPrice.com

July 15, 2020
in Industry
Oil And Gas Drilling Set For A Multi-Decade Low In 2020 | OilPrice.com
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The COVID-19 pandemic has stymied oil and gas activity, a phenomena which has now affected the drilling market both in terms of wells drilled and in terms of related demand for drilling equipment. A Rystad Energy analysis shows the number of drilled wells globally is expected to reach around 55,350 this year, the lowest since at least the beginning of the century.

The decline is a staggering 23% fall from 2019’s number of 71,946 wells. Our forecast, which extends to 2025, does not find it likely that last year’s number will be met or exceeded within the considered time frame. Drilled wells are expected to partly recover to just above 61,000 in 2021, as governments ease travel restrictions, boosting oil demand and prices. Then numbers will rise further to just above 65,000 in 2022 and remain just below 69,000 until the end of 2025.

North America is likely to be most affected, with the country’s rig count already down to historic lows just a few months into the downturn. Although modest recovery is possible in 2H20, drilling activity will remain more than 50% below the levels seen at the same time last year.

From the 55,350 wells to be drilled in 2020, 2,238 are offshore and 53,112 onshore. Before Covid-19 struck, Rystad Energy had expected total wells to rise year-over-year to 74,575, of which 2,896 would be offshore wells and 71,679 onshore wells.

“Both new wells and drilling lengths will be pared down as E&P’s scale down investments, affecting the entire supply chain associated with these services. This includes drilling tools, which will decline by 35% in 2020 compared to 2019,” says Reza Hassan Kazmi, energy services analyst at Rystad Energy. Related: The Race To Complete The World’s Most Controversial Pipeline

When looking at drilling tools, we include blowout preventers (BOPs), downhole drilling tools, drill bits, drill pipe, jars, drill collars and other drilling tools except downhole pumps used for artificial lift, under the generic service segment.

Drilling length, another key driver for drilling tools, especially for drill pipes, drill collars, heavy-weight drill pipes and drill bits, is also estimated to drop by 25% this year before improving in 2021. At a more granular level, such as the regional or country level, the percentage decrease in wells will not always result in a proportional reduction in total drilling lengths, as drilling depths per well could greatly vary between different regions and countries.

From the demand standpoint, we expect that onshore and offshore purchases for drilling tools will drop from $16 billion in 2019 to $10 billion in 2020. Besides North America, Africa and Russia will be the biggest contributors to this loss, where purchases will drop by 36% and 27% respectively this year.

Russian operators are likely to delay the drilling of new wells on mature assets to ensure compliance with agreed production cuts, while Sonatrach will cut back most of its spending on projects such as Hassi Messaoud and Tin Fouye-Tabankort. In the medium term however, as major E&Ps resume developing…



Read More: Oil And Gas Drilling Set For A Multi-Decade Low In 2020 | OilPrice.com

Tags: COVID-19drillingGasMultiDecadeoilOil Pricesoilfield servicesOilPricecomsetShaleU.S.Upstream

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