About 50,000 U.S. oil wells will be plugged during 1994 if oil prices remain about $14/bbl for West Texas intermediate for the year, forecasts Spears & Associates, Tulsa.
As many as 50,000 additional wells may be idled but not plugged during the year.
Under this scenario, Spears said, the number of U.S. oil wells on production may slide from about 590,000 at present to less than 500,000 by yearend 1994. By comparison, Spears estimates about 15,000 wells were plugged during 1993. And when WTI spot prices fell from an average $28/bbl in 1985 to $14.50 in 1986, about 34,000 oil wells were plugged.
Fewer producing oil wells, combined with a drop in drilling activity, will cause U.S. oil production to fall about 525,000 b/d in 1994, compared with a drop of 370,000 b/d in 1993.
Because U.S. oil demand is rising, imports will rise about 750,000 b/d in 1994 under this scenario.
The increased number of abandoned wells will affect not only oil producers but service and supply companies as well. That's because equipment salvaged from wells marked for plugging can be used on remaining active wells, thus leading to fewer purchases from suppliers. What's more, plugged wells no longer need equipment and services such as pumps, tubing, rods, and workovers.
Total spending on oil well related service and workover operations, including overhead expenses, is estimated to fall 13% under this scenario from $15.6 billion in 1993 to $13.6 billion in 1994, Spears said.
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