Drilling pace strong across US, Canada

July 7, 2003
pDrilling in the US is surging, especially land wells, after a notably slow start in the first quarter of 2003.

Drilling in the US is surging, especially land wells, after a notably slow start in the first quarter of 2003.

Some indications are that operators could drill as many as 20-25% more wells this year than they did in 2002.

First half estimates also indicate that operators in Canada will experience one of their busiest drilling years ever.

Drilling in the rest of the world outside the US and Canada in January through May was up marginally.

Here are highlights of OGJ's midyear drilling forecast for 2003:

•Operators will drill 33,576 wells in the US this year, a large increase from the estimated 25,945 wells OGJ estimated were drilled in 2000 (OGJ, Jan. 27, 2003, p. 82).

•All operators will drill 3,044 exploratory wells of all types, a sharp gain from an estimated 2,411 such wells drilled last year.

•The count of surveyed rotary rigs compiled by Baker Hughes Inc. will average 985/week this year versus 830/week in 2002.

•Operators will drill nearly 17,000 wells in western Canada, up from an estimated 14,000 drilled there last year.

Slow start gives way

OGJ, in its early year forecast, estimated that operators would drill 25,840 wells in the US in 2003 (OGJ, Jan. 27, 2003, p. 82).

Many companies had announced large year-to-year budget increases, but the higher spending levels were not reflected in the rig count, number of permits to drill issued, or other field indicators by the time of that forecast.

In fact, the run-up in the first quarter rig count was the largest in 15 years, and almost all of that occurred in March (OGJ, May 5, 2003, p. 63). The first quarter is traditionally a time of decline in drilling.

By June, however, drilling had accelerated enough that operators began to confront price increases for oil country tubular goods (OGJ Online, June 18, 2003).

OGJ's higher midyear estimate for full-year results is based mostly on real increases and expectations of further growth in land drilling (Tables 1 and 3).

For instance, Pioneer Drilling Co., San Antonio, said its land drilling day rates in South and East Texas did not rise in the quarter ended Mar. 31 and remained substantially lower than day rates a year earlier. The company said it has been bidding at higher day rates since Mar. 31.

Rowan Cos. Inc. reported that 31 offshore rigs departed US gulf waters in January 2001-April 2003 and that 19 more are likely to leave through 2004 (OGJ, June 2, 2003, p. 45).

Click here to enlarge image

The US rig count averaged 1,156 in 2001, 918 in 2000, and 625 in 1999, according to Baker Hughes (see table, OGJ, Jan. 27, 2003, p. 76). It averaged 811 through May 2003 and stood at 1,059 as of May 30.

Canada's outlook

Canada averaged 32% more active rigs in January through June 2003 than in the first 6 months of 2002, according to Baker Hughes.

OGJ reckons that about 85% of the wells that will have been drilled in Canada in 2003 are seeking gas. However, drilling of wells in steam assisted gravity drainage (SAGD) projects is on the rise.

The Alberta Energy & Utilities Board disclosed that the province averaged 829,000 b/d of raw bitumen production in 2002, compared with 660,400 b/d of conventional oil production. Bitumen output first surpassed conventional oil in 2001.

The EUB sees bitumen production tripling by 2012, whereas conventional output is declining.

Most of the production growth the next few years is expected to be in SAGD projects which involve the drilling of numerous wells.

Click here to enlarge image

Around a dozen wells deepwater exploratory wells are on tap off Nova Scotia in the next 2 years, including a number in 1,000-3,000 m of water in the Scotian salt province.

Eastern Canada land drilling includes Ontario, where provincial figures show operators spudded only 17 new wells in January through May. Talisman Energy Inc., Calgary, bid a combined $36,000 in late April for 26 tracts of 255 ha each for drilling in Lake Erie off Ontario, where it has extensive gas production operations.

Outside US, Canada

Rig activity in the rest of the world outside the US and Canada averaged 755 rigs/week in the first 5 months of 2003, up a lackluster 2.6% from the same period of 2002 (Table 2).

Rounding out North America, Mexico was up sharply to 82 rigs/week in the 2003 period.

Chief changes elsewhere in the Western Hemisphere were a good rebound in Argentina and an unsurprising drop in Venezuela.

Click here to enlarge image

Major changes by continent were Middle East up 18% to 212 rigs/week, Asia-Pacific up 13% to 179 rigs/week, and Europe off 14% to 82 rigs/week.

The Middle East gains came in Egypt, Oman, and Pakistan. A good gain in India bolstered the Asia-Pacific increase.

Europe's main loss was a 34% drop in UK drilling to 19 rigs.