S&P: US land drilling for gas to increase throughout year

By OGJ editors
HOUSTON, Aug. 5 -- US natural gas exploration and production companies—faced with high depletion rates from existing wells and struggling to maintain production levels—are apt to increase land drilling activity throughout this year, Standard & Poor's said in a recent survey.

Although high oil and gas prices have existed since last year, it's only been in recent months that the prices have led to higher US drilling activity, S&P' said in its latest "Industry Survey on Oil & Gas: Equipment & Services."

"With natural gas well depletion rates of almost 30% in most areas of the nation, it has been a major challenge to maintain, let alone increase, US natural gas production," said John Kartsonas, an S&P analyst.

"S&P expects land drilling activity to increase throughout 2003, achieving utilization rates of nearly 87%. We also foresee land-drilling margins improving during the second half of the year. But so-called deep shelf production, from reservoirs deeper than 15,000 ft in the Gulf of Mexico's Outer Continental Shelf, may be one of the most attractive sources of additional natural gas supply," Kartsonas said.

The US Minerals Management Service reports that the gulf produces 25% of US gas, and the volume produced on the shelf has declined to an estimated 3.36 tcf/year in 2002 from 4.76 tcf/year in 1997.

Of the deep wells drilled in 2001 and 2002, only 77 were completed. But an MMS spokesman told participants at this year's Offshore Technology Conference that encouraging test results have been reported from some of those deep completions (OGJ Online, May 6, 2003).

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