DRILLING MARKET FOCUS: Drilling activity expected to increase in 2004

Oct. 20, 2003
Analysts and oil service companies predict an increase in drilling activity for 2004.

Analysts and oil service companies predict an increase in drilling activity for 2004.

In a Sept. 19, 2003, research brief, James Wicklund, an oil services analyst in the Houston office of Banc of America Securities LLC, New York, forecast 15% growth in US drilling activity for 2004.

Bernard Duroc-Danner, chairman and CEO of Weatherford International Ltd., Houston (WFT), was more conservative in suggesting only 10% growth in US drilling in 2004, in his presentation at the 2003 Banc of America Securities 33rd Annual Investment Conference last month.

US activity accounts for 34% of WFT's revenue, and Duroc-Danner said that the firm will be shifting its attention internationally, citing market saturation in the US. He had optimistic projections for Russian drilling in 2004, where WFT expects underbalanced drilling to have a significant impact (as it has had in the Middle East), envisioning "a growth market for at least the next 3 years" in Russia.

Earlier last month at the Lehman Bros. CEO Energy/Power Conference, Duroc-Danner announced that WFT's R&D spending peaked in 2003 at $80 million; he estimated a slight reduction to about $75 million in 2004 and $72 million in 2005.

WFT expects the market size for various drilling technologies to increase fivefold in the next 5 years. It projects increases in technology spending for:

  • Expandables to $1.2 billion from $100 million.
  • Intelligent wells to $600 million from $100 million.
  • Underbalanced drilling to $1.5 billion from $ 450 million.
  • Drilling with casing to $300 million from $25 million

WFT operates in 108 countries and had an annualized 2003 revenue of $2.4 billion through Sept. 4.

Baker Hughes Inc., Cooper Cameron Corp., and Noble Drilling Corp., all of Houston, are optimistic about future drilling activity in West Africa, but analyst Wicklund claims "the attractiveness of deepwater has been overplayed."

Canada

British Columbia has accounted for the lion's share of western Canada's 40 leading gas wells since January 2000, rather than Alberta, the traditional hotbed, according to a new study by FirstEnergy Capital Corp., Calgary. The report states that recent breakthroughs in horizontal-drilling techniques have improved the success of drilling for deeper gas in British Columbia.

EnCana Corp., Talisman Energy Inc., Canadian Natural Resources Ltd., Murphy Oil Co. Ltd., BP PLC, Devon Canada Corp., El Paso Corp., Burlington Resources Canada Ltd., and Anadarko Canada Corp., all headquarted in Calgary, are among the firms with active drilling programs in western Canada.

Burlington completed more than 300 wells in first quarter 2003, including a successful exploratory well in the Mackenzie Delta. Burlington expects to drill a total of 800 wells in 2003, and 1,000 wells in 2004.

Indo-Pacific's SPDL1 rig was drilling at the Cheal-1 site, onshore Taranaki PEP 38738, in June 2003 and tested gas in July; Mt. Egmont in the background. Photo by Joe Johnston. Wellington, New Zealand.
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Imperial Oil Ltd., Toronto, and partner Talisman abandoned the multimillion-dollar Balvenie well off the Nova Scotia coast in early September.

It was spudded in July, in 1,800 m water, 45 km southwest of the Sable infrastructure. The Sable offshore energy project is the only producing development off Nova Scotia, producing about 500 MMcfd gas.

After being drilled to a total depth of 4,750 m, "the [Balvenie] well didn't encounter hydrocarbons in commercial quantities," said Imperial spokesman Hart Searle. Neither Imperial nor Talisman divulged the cost of drilling the well, but other wells in the area have cost $55-73 million. "We are continuing to look at opportunities on the East Coast," Talisman Vice-Pres. Nigel Hares said at the Peters & Co. Ltd. 2003 North American Oil & Gas Conference in Toronto last month.

Talisman had better luck in western Canada earlier this year, drilling the top gas well in the west in the first 5 months of 2003, in the Bullmoose area, British Columbia. Imperial anticipates drilling for significant gas reserves in the Mackenzie Delta.

Speaking at the same Toronto conference, Imperial Senior Vice-Pres. Paul Smith said that Imperial would continue to focus on three major areas: Alberta oil sands, Mackenzie Delta and Beaufort gas, and East Coast gas.

Imperial completed a feasibility study for the Mackenzie gas project delineating three fields; the largest (Taglu) contains an estimated 3 tcf. Imperial will spend the next 3-4 years further defining the project, and the design and construction phase, including drilling and construction of the proposed Mackenzie Valley pipeline, will take another 3-4 years.

Production of Mackenzie gas is not expected until 2012. Imperial is Canada's largest integrated oil company and a major producer of crude oil and natural gas.

US gas

At the Montana Natural Gas Summit last month, Ron Edelstein, directory of regulatory affairs for the Gas Technology Institute, Des Plaines, Ill., said that 25,000 new wells must be drilled annually to meet the increased national demand for natural gas. He said that increased gas drilling operations lag 6-12 months behind natural gas price spikes and that wells drilled now are depleted faster than in the past.

The Wawiri-1 rig was drilling in the onshore Taranaki Basin, petroleum exploration permit (PEP) 38753, September 2003. Photo by Joe Johnston, provided by Indo-Pacific Energy Ltd., Wellington, New Zealand.
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Edelstein advocated increased coalbed methane drilling as well as drilling in now-restricted areas including the Rocky Mountain front in Montana, on federal lands and offshore. "We have to be able to open up these well sites in areas that are now restricted in order to heat and power our nation," he said.

US staffing

At Parker Drilling Co., Houston, the resignation of Vice- Pres. of Operations Thomas L. Wingerter was announced Sept. 12, and the appointment of his successor, John R. Gass, was announced Sept. 16.

This followed the Sept. 11 collapse of the Parker 14 J jack up rig in the Gulf of Mexico (OGJ Online, Sept. 12, 2003). The rig is a Baker Bigfoot, built in 1979 in Singapore, and was working for Manti Operating Co. in Chandeleur Sound Block 27. Parker spokesperson Rose Bratton said, "There is no relationship between Mr. Wingerter's resignation and the incident on 14J; the timing is coincidental, and the change was planned."

Parker manages 37 rigs worldwide, of which 19 were busy (drilling, workovers, or undergoing modifications) as of Sept. 18.

On Sept. 17, Kerr-McGee Corp., Oklahoma City, announced that it would reduce its US workforce by 7-9% (200-250 employees) through early retirement and layoffs. Company officials said they expect to save $30 million annually in salaries and benefits. Kerr-McGee currently operates eight offshore rigs, including four semisubmersibles and a drillship in the Gulf of Mexico, two jack ups in the Far East, and a semisubmersible in the North Sea.

Down under

Drillsearch Energy Ltd., Sydney, and Santos Ltd., Adelaide (operator), will begin a four-well drilling program in Tintaburra, southwest Queensland next month. The wells are part of an exploration program that will continue through 2004. Managing Director of Drillsearch, Philip Kelso, said, "The Tintaburra block contains significant proved undeveloped oil reserves and exploration upside. It is anticipated these wells will build Drillsearch's oil reserves and its production in southwest Queensland."

New Zealand's Associate Minister of Energy, The Honorable Harry Duynhoven, said in a public lecture Aug. 27th, "Shell's recent announcement that it will not be participating in new exploration initiatives in New Zealand is unlikely to have a major impact on upcoming drilling plans." Drilling plans include onshore and offshore drilling permits issued to a number of different operators in the Taranaki and East Coast basins.

Duynhoven did concede that "Shell's decision will, however, impact on the industry's ability to have one single company underwrite the mobilisation of offshore drilling rigs to New Zealand. As a result, it is likely that the industry will have to be prepared to work together in a more co-operative fashion to jointly commit to facilitate the use of offshore rigs in the future."

According to data from the Crown Minerals section of New Zealand's Ministry of Economic Develoment, based in Wellington, there are three operators currently drilling six wells offshore in the Taranaki basin: Shell Todd Oil Services (STOS); Transworld Oil Ltd., Bermuda; and OMV New Zealand Ltd., a subsidiary of Austrian-based OMV Aktiengesellschaft. Only three wells were drilled offshore Taranaki in 2002, by Conoco (UK) Ltd. and STOS.

Onshore drilling in the Taranaki continues, with 11 wells currently drilling in third quarter 2003. Among the operators are Indo-Pacific Energy Ltd., incorporated in Yukon, Canada, but based locally in Wellington; Swift Energy New Zealand Ltd., a subsidiary of Swift Energy Co., Houston; and New Zealand Oil & Gas, Sydney.