Although Rystad Energy said a modest recovery is possible in second-half 2020, the firm still sees global drilling activity remaining more than 50% below 2019 levels. (Source: Hart Energy)
Oil and gas drilling is set for a “staggering” decline this year, said Rystad Energy which expects global drilling activity to reach at least a 20-year low in 2020.
Rystad Energy released analysis on July 14 showing the number of drilled wells globally this year will reach around 55,350—the lowest level since at least the beginning of the century, according to the energy consulting firm.
“The decline is a staggering 23% fall from 2019’s number of 71,946 wells,” the firm said in its release.
Previously, Rystad Energy had expected total number of wells drilled globally in 2020 to rise year-over-year to 74,575. However, its previous forecast was made prior to the COVID-19 pandemic, which has largely stymied oil and gas activity for the year.
Although a modest recovery from the COVID-19 related downturn is possible in second-half 2020, Rystad still sees drilling activity remaining more than 50% below the levels seen at the same time last year.
Further, the firm not only noted the downturn’s effect on the drilling market in terms of wells drilled but also the toll it has taken on demand for drilling equipment.
“Both new wells and drilling lengths will be pared down as E&P’s scale down investments, affecting the entire supply chain associated with these services,” Reza Hassan Kazmi, energy services analyst at Rystad Energy, said in the firm’s release. “This includes drilling tools, which will decline by 35% in 2020 compared to 2019.”
North America is likely to be the most affected, the firm added noting the region’s rig count has already sunk to historic lows.
Looking forward, though, Rystad said onshore markets are expected to recover as early as 2021 and grow at a rate of 7% annually towards 2025. Meanwhile, offshore markets will see some highs and lows and will maintain an overall flattish level towards 2025.
The firm also projects the U.S. to remain a “hotspot” for spending on drilling tools, with more than 80% of spending on shale drilling. The Permian Basin and the Appalachian Basin are expected to drive 60% of total shale spend on drilling tools followed by some conventional activity in other basins, according to the firm.
Offshore, Rystad said Norway is expected to top the list for drilling tools spending with Troll, Balder/Ringhorne and Johan Sverdrup driving the demand.
Rystad added that, despite the overall stagnant growth, Brazil, Australia and China will continue to offer “exciting opportunities” in the short-term with 20% to 40% growth prospects for offshore drilling in these countries. The firm also notes the U.K., Guyana and Mexico “look promising” in the medium- to long-term.
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