First oil: Muddling through the rest of 2024 with enthusiasm for 2025

We have just completed our annual summer/mid-year forecast, results of which are in this issue. Based on the numbers from that forecast, along with some anecdotal evidence from talking to industry professionals at recent conferences, I think it’s fair to say that the upstream industry (particularly in the U.S.) is maintaining the status quo for the remainder of 2024, with great enthusiasm building for 2025.  

Indeed, our forecast indicates that U.S. activity will remain flat through December, and then an upturn should slowly build in early 2025. International activity is showing very modest growth this year, but there appears to be significant upside potential for 2025, particularly in certain offshore/deepwater plays like Guyana, Suriname, Namibia, Brazil, etc., along with the Middle East and parts of the Far East.  

Building on what I mentioned in last month’s column, there continues to be significant optimism among industry professionals for a breakout year in 2025. In addition to the two events that I attended in Houston during August, I have subsequently participated in Gastech (also in Houston, Sept. 17-20) and the SPE Annual Technical Conference & Exhibition (Sept. 23-25) in New Orleans. In all cases, in talking with industry personnel, they feel that the industry is riding a prolonged wave of technical innovation that is making many more projects technically feasible. Many folks point to the continued demand for hydrocarbons globally and the potential for expanded usage in countries where the populations are gaining greater access to supplies. Remarkably, some professionals think the fundamentals are strong enough that it doesn’t matter which candidate wins the U.S. election or whether Canadian Prime Minister Justin Trudeau remains in power (he just survived a “no confidence” vote in Parliament on Sept. 25). 

On the latter item, this editor will have to strongly disagree. Despite Vice President Kamala Harris’ protestations that she really isn’t against fracing and offshore drilling, many of us know that this disingenuous opportunist will say anything to get elected. And your common sense should tell you that Harris and her imbecilic running mate, Minnesota Gov. Tim Walz, cannot change their stripes. Furthermore, if there’s one thing the upstream industry should have learned over the last 40 years, never underestimate the ability of government to screw things up when it comes to oil and gas. It’s true in the U.S., and it’s true in Canada, as Mr. Trudeau demonstrates on a regular basis (see our Canadian contributing editor’s article for more details). It’s also true in the UK, where the Starmer regime seems hell-bent on dismantling North Sea activity and infrastructure, in the name of the planet.  

But let us not distract from the findings of our mid-year forecast. 

A quick summary of our forecast and its findings. As alluded to at the beginning of this column, our forecast sees more of the same in the U.S. during the remainder of 2024. But there appears to be some momentum building for 2025. During second-half 2024, we expect U.S. drilling to slip another 2.8% and total 8,535 wells. This means that overall, 2024 will total 17,320 wells, a 7.1% decline from the 18,645 wells drilled during 2023. Somewhat surprisingly, footage drilled is falling off at a higher pace than the well total, losing 4.5% during the second half. This is due to a trend of drilling shallower wells in places like Kansas and Louisiana.  

Comparing total footage expected in 2024 (257.2 MMft) versus the amount drilled in 2023 (270.1 MMft), the decline is 4.8%, noticeably less than the decrease in actual wells drilled. That’s because U.S. operators, during 2024 as a whole, are still drilling longer laterals in their horizontal wells than they did in 2023. And this is the reason that the U.S. has managed to maintain oil production growth this year. I should point out that even in the mediocre second half of 2024, Texas District 8, the heart of the Permian basin, is basically maintaining its first-half pace, losing just three wells. For more details, please turn to the U.S. forecast article in this issue. 

In Canada, to the best of our ability, we expect drilling to be up 7.9%, at 6,265 wells. There is always the possibility that operators will disappoint us and underperform that expectation. It certainly has happened before, and more than once. Nevertheless, the Canadian rig count is modestly outperforming the 2023 level, and we think this will continue, enough to reach our forecast number. Additionally, Canada, much like the U.S., continues to reach new highs in oil production. Last year, the country averaged 4.594 MMbpd, up 1.1% from the 2022 level. The Canadian industry is to be commended for persevering in its efforts despite the foolishness of the Trudeau administration. Please turn to our veteran Canadian contributor’s fine article in this issue for more details on that country’s E&P progress. 

And on the International front outside the U.S and Canada, we predict that global drilling will total 59,746 wells, down 1.2%. But we should point out that the decline is mostly due to the U.S. If you leave out the U.S., then world drilling is up 1.4%, at 42,426 wells. This follows on a 4.1% gain to 41,844 wells outside the U.S. during 2023. Yes, six of the eight regions that we track are experiencing small drilling declines this year. But on the other hand, the important markets in the Middle East and Far East (including China) will be up 7.7% and 2.7%, respectively. We could easily see activity turning positive during 2025 in the South Pacific, Africa and North America.  

Regarding crude and condensate production, the world output grew 0.6% in 2023, to 82.5 MMbpd. Four of the eight global regions posted increases, and most of them were not small gains. These include North America (up 5.9%), South America (up 8.6%), Africa (up 3.4%) and the Far East (up 1.1%). One should point out that the Middle East was down 3.4%, principally because of OPEC+-mandated production cuts to support prices. It’s hard to believe that these output cuts will remain through all of 2025. For more details, please turn to the International forecast article in this issue. 

IN THIS ISSUE 

Special focus: Upstream Practices. This month’s lead theme includes a wide range of topics among four articles. In the first article, authors from Texas Institute of Science describe a groundbreaking General Bond Log Interpreter (GBLI) is capable of interfacing with all cement bond logging tools and performing automated interpretation at >90% accuracy. In a second feature, the CEO of Neo Oiltools discusses how, in the drive for savings and efficiency in the oil patch, mitigating drilling dysfunctions caused by near-bit vibrations is crucial to increasing weight on bit (WOB), which leads to gains in ROP without compromising the drill bit or damaging the BHA. In a third article, an ABS author explains that by looking at inter-related metrics and how they impact the bottom line, industry personnel can understand the impact of maintenance and reliability on ROI. Finally, NOV authors describe how an automated iron roughneck and advanced robotics system can work together to enhance rig floor operations. 

E-Drilling & Rigs: Decarbonizing drilling operations using more efficient electrical utility power.  In this article that overlaps with our lead theme of Upstream Practices, authors from Canrig Drilling Technologies discuss how electrification has proven to be effective in lowering costs and the carbon footprint of drilling operations. This article provides technical analysis of highline (grid) power utilization on rigs through the lens of an innovative technology that connects a rig to a power grid, reducing Scope One emissions to nearly zero.  

Global Mid-year Forecast: International and offshore activity progresses further, while the U.S. remains flat. As U.S. operators wait for the presidential election results and look forward to a rebound in 2025, the country’s E&P activity is staying flat. Second-half 2024 drilling will be down slightly from the first half. In Canada, we think drilling could be up as much as 7.9%, assuming operators continue building on 2023’s growth. At the same time, Canadian oil production is still posting gains. Outside North America, drilling will again be up moderately this year, extending a recovery that began in 2022. Offshore work, particularly in thriving deepwater locales, will continue to outpace the overall growth. For details, please turn to the individual U.S., Canadian and International forecast articles. 

About the Authors

Kurt Abraham

World Oil

Kurt Abraham kurt.abraham@worldoil.com