September 2020

First oil

An historical year in many respects
Kurt Abraham / World Oil

How many of you, our faithful readers, are sick and tired of the year, 2020, and would like to see it go away tomorrow? No doubt, the vast majority of you feel that way, and who could blame you? It has been a maddening mix of Covid-19, shutdown economies, ineffective politicians, social unrest in some countries, crazy weather (hurricanes and wildfires), and a global E&P market that defies description. In these ways and more, 2020 has been a year for the record books—one that we all would like to forget.

And yet, given that this September edition contains our mid-year forecast, we would be remiss in not citing some examples of historical milestones that this year, and the global E&P market are setting or breaking. It may be 98.5% negative, but it still should be documented.

U.S. milestones. To us at World Oil, 2020’s most significant mark is our forecast that the U.S. will drill its fewest number of wells in 122 years, back to 1898, which had just 8,644 wells. Granted, operators will have to slide under the 12,170 wells drilled in 1933 (height of the Great Depression) and the 11,716 wells recorded in 1931, but we think our forecast of 10,821 is likely to beat those hurdles. On a positive note, we are gratified that we can track activity back to when Colonel Drake drilled his first well in Pennsylvania, in 1859. It is a testimonial to our archives that we can do this.

Then we have the all-time, record-low, U.S. rig count. Back in 2016, the count hit its lowest point since Baker Hughes began counting rigs in 1944, when just 404 units were tallied on May 20 and 27. However, this year, on May 8, the 2016 record was smashed, when the U.S. count lost 34 rigs, to settle at 374. And then the record-lows kept coming, week after week, until it bottomed out at 251 on July 24 and 31.

If this forecast holds, then the number of wells drilled this year in Texas will be the lowest in at least 60 years, going back to 1960, per Railroad Commission statistics. And in Oklahoma, the forecast total will be the lowest in more than 40 years, at least.

Never before has U.S. production fallen so far, so fast. In one month, from April to May, U.S. operators raced to shut in thousands of wells, in response to cratering oil prices. The result was a nearly 2.0-MMbopd drop, from 11.990 MMbopd to 10.001 MMbopd.

International milestones. Plenty of historical stats are being set this year outside the U.S. In Canada, if the Canadian Association of Petroleum Producers’ (CAPP) forecast of 3,108 wells drilled is realized, that would be the lowest total in 53 years, going back to 1967, when 3,021 wells were tallied. Again, using CAPP data, Alberta could finish this year at the lowest point since 1957, when 1,450 wells were drilled.

In the North Sea, the 18 rigs counted in April and July is the lowest figure in the 38 ½ years of data that Baker Hughes has online. In the UK overall, if our forecast of 66 wells holds up, it will be the lowest total in 54 years, back to 1966, which had 32 wells and was just the third year (at that time) of UK offshore drilling. So, 2020 will be the fourth-lowest year in UK offshore history.

In Venezuela, the count has been just one rig in June through August, and is also a record for the 38 ½ years that Baker Hughes has online. This, in a country that once had 81 rigs running as recently as 2013.

This statistic will get your attention: We believe that this will be the first year that Chinese drilling exceeds that of the U.S. This is highly likely, given that we are predicting just 10,821 wells in the U.S. and 17,120 in China—that leaves a lot of margin, even if we’re wrong by several thousand wells!

Suffice to say, 2020 will be remembered as one of the most historical, record-setting years in E&P history, most of it not good!

About the Authors
Kurt Abraham
World Oil
Kurt Abraham
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