G. Alan Petzet
Exploration Editor
U.S. well completions will post a strong increase in 1991 unless oil prices drop sharply.
Gas drilling supported by federal tax credits will remain active in 1991. But the high crude oil prices that revived shallow oil drilling in second half 1990 may not persist.
Oil & Gas Journal's latest estimate is that the industry drilled more wells in 1990 than either the 31,700 estimated in January 1990 or the 34,320 forecast in July 1990.
January through November figures, latest available at the time of OGJ's drilling forecast, indicated that more than 43,000 permits to drill would be issued in the U.S. during 1990.
The permit totals were especially high in states where coalbed methane and tight gas sands drilling, supported by tax credits, are most widespread.
For most of the year operators were trying to meet a yearend 1990 deadline to spud such wells to ensure that gas sold from them during the 1990s would be eligible for the tax credits. Filing of intents to drill toward that end, therefore, was brisk.
In October Congress extended the drilling permit through yearend 1992 and the eligibility period through 2002.
Conventional gas drilling remains in the doldrums. Gas prices probably won't rise enough to boost drilling in 1991.
Here are highlights of Oil & Gas Journal's early year U.S. drilling forecast for 1991:
- The active rotary rig count will average 1,100, compared with 1,010 in 1990.
- Operators will drill 39,172 wells, compared with 36,706 completions in 1990.
- They will drill more than 6,700 wildcats, compared with more than 6,300 in 1990.
- They will drill nearly 177.5 million ft of hole, and well depth will average 4,531 ft.
- Major operators will drill 5,933 wells, down 6.6% from 1990, mainly because their coalbed methane programs in Alabama, Colorado, and New Mexico are winding down.
- Drilling in western Canada will total 6,439 wells in 1991, compared with 6,159 completions in 1990.
DRILLING ON UPSWING
OGJ's estimate of 36,706 completions for 1990 is 6.9% higher than the July estimate and 15.8% higher than the January 1990 estimate (OGJ, Jan. 29, 1990, p. 64; July 30, 1990, p. 72).
The number of permits to drill, as measured by Salomon Bros. Inc., started off low but increased erratically later in the year.
The number of permits issued in 29 states remained below 3,000/month in January through March, then reached almost 4,000/month during October and never fell below 3,000/month through November.
In fact, 3,976 permits were issued during October, 61.8% more than in March and the most issued in a single month since February 1986.
Through the year's first 11 months, 18.5% more permits were issued than in the same period of 1989. The 1990 average through November is 3,100/month.
Figures from Petroleum Information Corp. for January through November 1990, extrapolated to a calendar year, indicated that operators filed more than 43,000 intents to drill during the year in all states. PI tracks more states than does Salomon.
In 1991 as in 1990, operators plan heavy development campaigns in California heavy oil areas; coalbed methane, Devonian shale, and other tax credit supported gas; and oil and gas in the Gulf of Mexico.
OIL DRILLING GROWTH
High oil prices in second half 1990 and start of construction of pipelines to transport gas for use in thermal enhanced oil recovery projects have boosted drilling in California heavy oil fields.
OGJ estimates that 2,510 land wells were drilled in California during 1990 and that another 2,835 will be drilled this year. The July 1990 estimate for California land drilling was 1,640 wells.
Drilling also has been up sharply in other shallow oil areas and regions where horizontal drilling is active.
North Louisiana operators completed an estimated 830 wells in 1990, compared with an estimated 700 in 1989. They plan 850 wells this year.
Shallow oil drilling increases are expected in eastern and western Kentucky, Pennsylvania, Illinois, Texas Railroad Commission Dists. 7C and 8, and Southeast New Mexico.
Oil drilling will be up in not-so-shallow Nebraska and Utah.
In South Texas Dist. 1, completions are estimated to have more than doubled in 1990 vs. 1989, due mostly to Upper Cretaceous Austin chalk horizontal drilling. But drilling may begin to level off in the area this year.
North Dakota oil drilling, much of it due to Mississippian Bakken shale horizontal work, posted a good gain in 1990, and growth is expected this year.
Completion totals in Oklahoma and Kansas are expected to change little in 1991 from 1990 and 1989.
SHALLOW GAS SURGES
Several states are experiencing record well totals from shallow gas drilling.
An annualized 2,600 permits to drill were issued in Alabama in 1990, far more than double the 1989 number. OGJ forecasts that 2,310 wells will be drilled there in 1991, compared with 2,025 in 1990.
Upper Cretaceous Fruitland coalbed methane drilling remains very busy in the San Juan basin of Northwest New Mexico and Southwest Colorado. Operators completed an estimated 1,770 wells there in 1990. OGJ predicts 1,909 wells for 1991.
Coalbed methane and Devonian shale drilling is raising completion tallies in Wyoming, West Virginia, Virginia, and Montana.
It appeared until late 1990 that a federal tax credit for coalbed gas from wells drilled by yearend would expire, and operators in the Black Warrior basin and other shallow coalbed methane areas rushed drilling programs to qualify.
Many of the rigs used to drill shallow coal gas wells are not counted by the large service companies.
Conventional gas completions picked up in 1990 in the Gulf of Mexico off Louisiana and Texas. OGJ estimates 540 completions for 1990 and forecasts 575 wells for 1991 off Louisiana and 130 completions for 1990 and 145 wells for 1991 off Texas.
CANADIAN OUTLOOK
OGJ expects Canadian drilling to climb to 6,439 wells in 1991, up 4.5% from the estimated 1990 pace.
Oil drilling is languishing in western Canada, but shallow gas programs have lifted completion totals.
Horizontal drilling is growing rapidly in Alberta and Saskatchewan, and an average of about 100 wells/year is expected for 1990 and 1991.
One major oil company reported having drilled one well in the Beaufort Sea in 1990, but no surveyed operator listed plans to drill there this year.
Off eastern Canada, five Cohasset/Panuke field wells are due in 1991, but Hibernia development will not start until later in the 1990s.
Copyright 1991 Oil & Gas Journal. All Rights Reserved.
