Gains registered in all three global E&P categories

KURT S. ABRAHAM, Executive Editor

World Oil’s annual tabulation of drilling, production and reserve statistics shows that the global upstream oil and gas industry is thriving. Indeed, the worldwide E&P industry during 2011 rang up increases in all three major statistical categories—drilling, production and reserves—and appears headed to do the same thing again this year. Drilling was up 7.5% last year over 2010’s figure, at 103,039 wells. This year, we forecast that the pace of drilling increase will slow just a bit, but it will still be good enough for a 2.2% increase to 105,350 wells.

Global production of crude and condensate was up 1.0% last year at 76.133 million bpd. This growth can be traced to increases in the Middle East, particularly Saudi Arabia, as well as in Russia and North America. As regards reserves, the oil figure shot up 3.2% last year, to 1.63 trillion bbl, on the strength of additions reported in the Middle East (Iran and Iraq), South America (several countries) and, lo and behold, the U.S.

Some key activity findings include:

• The U.S. continues to drill more than two-fifths (44%) of all wells globally
• China has now solidified its position as the second-largest driller behind the U.S., at nearly 25,000 wells
• Russia remains the top oil producer in the world, and has returned to output and drilling levels not seen since the first-half 1980s era of the old Soviet Union
• Reserve figures in some countries remain wholly unreliable.

NORTH AMERICA

Oil production was up 3.1% in 2001, at 11.25 million bpd, and reserves improved 1.0%, to 210.52 billion bbl. This year, we expect drilling to climb 1.7% higher.

Canada. The year 2011 was an unsettled, uncertain period for Canadian producers, with gas prices remaining flat; oil sands projects in question; and the U.S. unable to begin building the Keystone Pipeline to transport oil sands output. So far in 2012, there appears to be more of the same.

Yet, the strength of oil prices has sustained the Canadian industry through it all. Oil production was up 3.7% last year, at 2.93 million bpd, and reserves stayed about even. The oil prosperity has been able to nearly compensate for the loss of gas-directed drilling, hence the well count is forecast this year to be down only 1.5%, at 12,328 wells. For more details, please turn to World Oil, August 2012, page 61.

Mexico. Drilling was down about 10% last year, but an uptick to 1,082 wells is forecast this year. Oil production was stabilized in the back half of 2011, hence output averaged 2.55 million bopd, up just under 1.0%.
In addition to exploring for additional offshore resources, state company Pemex is putting its faith in the awarding of onshore field redevelopment contracts, many of which are going to U.S. firms. For more details, see World Oil, August 2012, p. 67.

U.S. The last 12 months have been very good to the U.S. industry on the oil side, with activity now hitting a comfortable, profitable plateau. The U.S. boosted drilling 13% last year. Another gain of about 3% is expected this year. Production averaged 5.69 million bopd, reflecting a remarkable 4% gain in output. Oil reserves also posted an impressive 13% increase to 25.18 million bbl. For more details, see World Oil, August 2012, p. 53.

SOUTH AMERICA

This region is enjoying positive results in all categories, despite problems in some individual countries. Drilling is expected to grow 3%, to 3,974 wells, while oil production last year was up 1.4%.

Brazil. There is nothing but positive news coming out of Brazil. Although drilling was down 13% last year, much of that decline can be traced to longer times required to drill complicated wells offshore. This year, a 29% increase in wells, to 874, is predicted by Brazilian authorities. Oil production last year was up again, gaining 2.6% to 2.2 million bpd. Thanks to several discoveries, oil reserves posted a healthy, 5.6% gain to 15.1 billion bbl. Gas reserves also jumped 8.5%.

More than 90% of Brazil's oil production is offshore in very deep water and consists of mostly heavy grades. Six fields in the Campos basin (Marlim, Marlim Sul, Marlim Leste, Roncador, Jubarte and Barracuda) account for more than half of Brazil's oil production.

Venezuela. The Chavez regime continues to insist that everything is functioning just fine in its upstream sector, even though there is sufficient evidence to the contrary. In his annual report on the activities of state firm PDVSA last April, Petroleum and Mining Minister Rafael Ramírez claimed that the country has an output capacity of 3.5 million bopd. Yet, Venezuela’s oil output appears stuck at a level below 2.5 million bopd. In addition, there are reports that not enough proper maintenance of existing production facilities is occurring. However, Ramírez insists that PDVSA is making strides to increase capacity further, including new oil fields in the Orinoco Belt.

On the drilling side, best estimates are that the number of wells drilled last year was a little over 1,000, down from about 1,050 in 2010. Yet, Ramírez’s report refers to grandiose plans for drilling 8,177 wells in 2014 and 9,259 wells by 2019. And then there is the matter of oil reserves. Without reputable, independent verification, the Chavez regime in January 2011 claimed its oil reserves jumped 85 billion bbls to 296.5 billion, surpassing Saudi Arabia. Again, this year, there was a smaller but significant addition of 1.07 billion bbl added. These moves have been widely questioned.

Colombia. Drilling was up 12% last year, and a smaller increase is predicted this year. Production jumped nearly 17%, to 915,000 bopd, as the regulatory reforms instituted by the current government made an impact. Oil reserves also jumped about 10%, to 2.26 billon bbl.

In all, foreign direct investment in the oil and gas industry jumped from $278 million in 2003 to $4.3 billion in 2011. Some new fields have gone onstream in the Caquetá and Putumayo areas.

WESTERN EUROPE

The region’s drilling decreased modestly to 577 wells last year, and a further decline is forecast for 2012. Oil production dropped 7%, yet oil reserves were up 6%, thanks mostly to gains in Norway.

UK. The coalition government’s decision back in March to give a £3-billion tax break to help operators drill new, deep wells appears to be breathing new life into the UK offshore industry. Also helping the industry were announcements this summer that officials will give tax relief support to shallow-water gas fields, as well as tax help for decommissioning projects.

The British government’s tax moves have come just in time to stabilize the upstream sector, and a slight gain in wells is forecast this year. Whether these items will be enough to arrest the decline in UK oil production is uncertain. Output fell 11.5% to just 1.1 million bpd.

Norway. Preliminary production figures for the first half of 2012 indicate that Norway enjoyed a natural gas output increase, while oil production was down 5% from the first six months of 2011. For 2011 overall, Norwegian output averaged 1.96 million bopd, down 5% from 2010’s level.

Drilling remained level last year, at 180 wells. This year, a 3% gain to 185 wells is predicted. Oil reserves were up nearly 11%, at 6.01 billion bbl. Four new fields began producing during first-half 2012.

Italy. Drilling totaled 31 wells and nearly 214,000 ft of hole, down slightly from 2010’s figures. This year, a 13% decrease to 27 wells is expected. Oil production, meanwhile, gained 4%, to 98,914 bpd.

In July 2012, Total made a final investment decision to develop Tempa Rossa field in the Basilicata region of southern Italy. It is slated to go onstream in early 2016 and plateau at 50,000 bopd.

EASTERN EUROPE/FSU

The overall region experienced a 10% jump in drilling to 8,801 wells. Another 6% gain is forecast this year. Accordingly, oil production was up 1.2%, at 13.15 million bpd.

Russia. Once again, the country led the world in crude and condensate output, averaging 10.178 million bpd (up 1.7%). Rosneft accounts for 22% of Russian oil production, followed by Lukoil (17%), TNK-BP (14%), Surgutneftegas (12%) and Gazprom (6%). The remaining 29% is produced by smaller companies and affiliates of Western firms.

The output levels achieved in 2011 and this year have not been seen since the first half of the 1980s in the old Soviet Union era. Yet, oil production grew more slowly in 2011 than in the previous year. There were 16 new oil fields put into production over the last year.

Nevertheless, drilling was up 10% last year, at 7,364 wells and 61.5 million ft of hole. The forecast calls for another 7% gain in drilling, to 7,880 wells this year. The number of new oil wells brought onstream during 2011 was 6,164, up 5.9% from 2010’s figure. At the end of 2011, the number of oil-producing wells had increased slightly to about 160,400.

Other FSU countries. Drilling in Former Soviet countries outside of Russia was up 7% last year, at 1,130 wells and 6.1 million ft of hole. A 2% gain to 1,152 wells is on tap for this year. Oil production among this group averaged 2.81 million bpd, down less than 1%.

After Russia, Kazakhstan has the second largest oil reserves (30 billion bbl), as well as the second largest oil production (1.6 million bpd), among the former Soviet republics. Kazakhstan aims to become one of the world's top oil exporters over the next decade, based on development of three major oil fields.

According to figures from its government, Azerbaijan saw its oil production decline from 1.01 million bpd in 2010 to 908,773 bpd last year. The Azeri Chirag Guneshli (ACG) field accounts for about 80% percent of Azerbaijan's total oil output and is produced by the BP-operated Azerbaijan International Operating Company. Drilling in the country was up 15% at 124 wells in 2011, and that level is expected to continue this year.

Albania. A revival of oil production is underway, led by Canadian firm Bankers Petroleum. According to Balkanalysis.com, the company’s exploration campaign exponentially increased the Patos-Marinza field’s reserve size. Proven and probable reserves have increased, from 100 million bbl in 2006 to 227 million bbl by the end of 2010. In March 2011, Bankers took over Albpetrol’s remaining interest in the Patos-Marinza field and plans to increase production here by 30% in 2012, to an average of around 17,000 bpd.

AFRICA

The continent’s drilling fell 7% last year, to 1,432 wells, due mostly to temporary declines in Libya and Sudan/South Sudan. In Libya, the overthrow of the Qadaffi regime put a temporary halt to drilling, but the industry is now back on track. In Sudan and South Sudan, activity was affected by a dispute between the two countries about how to apportion oil and gas activity, but an agreement is now in effect.

Nigeria. Drilling has leveled out into a comfortable range between 95 and 105 wells per year. This year, activity will be on the high side of that range. Meanwhile, oil production gained 3% last year, averaging 2.42 million bpd. Several large offshore field development projects continue, such as Usan (180,000 bopd) and Egina (150,000 to 200,000 bopd).

Algeria. Drilling was up 21% last year, totaling 285 wells. A more modest gain is forecast for 2012 at 299 wells. Crude and condensate output was off slightly at 1.74 million bpd, but oil reserves rose 1.4%, to 12.67 billion bbl. Natural gas reserves held constant at 159.1 Tcf. State firm Sonatrach in August reiterated its readiness to increase its investments in developing oil exploration, refining and petrochemical facilities to $80 billion over the next four years.

Chad. The Exxon Mobil-led consortium has had to spend an additional $630 million on production support during the last year. At the end of 2011, project production support investments were contributing about 86,000 bpd to the project’s crude oil output. Without the consortium’s investments, production would have fallen to about 29,000 bopd – just over one-fourth of the current yield of 115,000 bopd, due to production declining faster than initially assumed. The project added 69 new oil wells in 2011, with 36 wells drilled in the second half of the year. A total of 633 production wells were on line at year-end 2011.

MIDDLE EAST

Regional drilling set yet another record last year, totaling 2,599 wells and 20.75 million ft of hole. A further 6% increase to 2,749 wells is forecast this year. Regional production averaged 25.9 million bopd, up an impressive 8.0%.

Saudi Arabia. The kingdom boosted oil production 10% last year, to 9.95 million bopd, and output is above the 10-million-bpd threshold this year. Meanwhile, drilling increased modestly in 2011, and a stout, 15% increase to 470 or more wells is forecast this year. According to state firm Saudi Aramco, oil reserves dipped less than 1%, to 259.7 billion bbl, while gas reserves gained 1.3%, to 282.6 Tcf.

Saudi Aramco said that it made “significant progress” in both of its offshore developments, Manifa, the world’s fifth-largest oil field; and Karan, the kingdom’s first non-associated offshore gas field. Additionally in 2011, the firm began shallow-water exploration in the Red Sea.

UAE-Abu Dhabi. Almost one-third of the top 20 largest Middle Eastern E&P projects are in the UAE, principally in Abu Dhabi. Consquently, Abu Dhabi drilling is forecast to rise 11.6%, to 298 wells. Oil production last year was up 3.6%, to 2.32 million bpd, while oil reserves held almost steady at 94.35 million bbl.

State firm ADCO is developing Qusahwira and Bu Hasa oil fields, adding 250,000 bopd by 2014. ADCO is also redeveloping Bid al-Qemzan field, adding about 20,000 bopd in third-quarter 2012 to existing output of 225,000 bopd.

Iran. Based on official news agency reports and other available data, Iranian drilling is estimated to have gained 20% last year, to 139 wells. This year the count is forecast to jump another 8%, to 150.

Oil production has hit a ceiling at just over 4 million bpd, and is struggling to maintain close to that rate. A July 2012 report by Reuters indicated that tough sanctions imposed by Western nations with regard to Iran’s nuclear program may be affecting oil production. The report said that Iran has shut in a number of oil wells at various fields, but no details were available. However, an anonymous Iranian official was quoted as saying, “We’re now in a situation, where we’re being forced to reduce production, so we will prolong the rehabilitation of our oil fields.”

Iraq. Drilling is estimated to have totaled 76 wells last year, but a small reduction to 65 wells is forecast this year. Lukoil has started drilling 23 production wells and building the production facility at the supergiant West Qurna 2 oil field. Output should be 500,000 bopd by late 2013 or early 2014. Exxon Mobil in May 2012 signed a contract with Iraq Drilling Company to drill 20 oil wells at West Qurna 1 oil field in Basra. In yet another project, China Petroleum Engineering & Construction Corp. has drilled 13 new wells at Halfaya oil field (CNPC, Total and Petronas) and plans to drill 17 more by the end of the year.

Nationwide oil production averaged 2.64 million bpd last year, up 8.4% from the 2010 level. Oil reserves claimed by the government have been boosted 24%.

FAR EAST/SOUTH ASIA

Mostly on the strength of increased Chinese drilling, regional wells drilled increased modestly in 2011, to 26,847. This year, a further gain of 1.0% is forecast. Regional oil production slipped about 17,000 bpd, to 7.03 million bpd.

China. Once again, the country set a new drilling record, tallying 24,560 wells. We expect Chinese drilling to gain slightly this year, to 24,800 wells. Engineers were able to push oil production 1.7% higher, to 3.86 million bpd. However, oil reserves declined 1.5%, to 15.48 billion bbl, while gas reserves improved 2.0%, to 77.5 Tcf.

Roughly 85% of Chinese oil production capacity remains onshore, primarily in mature fields. Although offshore E&P activitiy, spearheaded by CNOOC, has increased substantially in recent years, China's interior provinces have also received significant attention.

India. Wells drilled were down 18% last year, at 456. However, a nearly 15% rebound is forecast for 2012, to 523 wells. Despite qualms about the reliability of older Indian fields, oil production managed to gain 4%, to 779,355 bpd.

As reported by TheEnergyInfo.com, Oil and Natural Gas Corp. Ltd (ONGC) will drill 480 wells in fiscal year 2012-13, the most in the past 17 years. Of the 480 wells, 125 will be offshore, said U.N. Bose, director of technology and field services at ONGC.

ONGC said in mid-2012 that it struck a large discovery off the western coast. It will boost oil-in place reserves at ONGC’s D1 field to 1.0 billion bbl.

Indonesia. Drilling was down about 2% last year, at 930 wells, and a further decline is forecast this year, to under 900 wells. Oil production continued its slide in 2011, falling 3.7%, to 918,800 bpd.

According to the country’s upstream agency, BPMIGAS, total investment in the oil and gas sector is projected to reach US$ 20.925 billion in 2012. This figure is a significant increase when compared to last year’s realized investment of US$ 13.9 billion.

Exploration activity planned for this year includes 16,320 km of 2D seismic survey; 10,026 sq km of 3D-seismic survey; and the drilling of 276 exploration wells.

SOUTH PACIFIC

Regional wells totaled 257 last year, up 10% from 2010’s level. A gain of 14% is expected this year. Output declines across the board pushed regional production down 13.5%, to 546,275 bopd.

Australia. Drilling was up 16% last year, at 205 wells, and a further, 15% increase is forecast this year. Oil production, however, was down a disappointing 15%, averaging 416,000 bpd.

According to analysts at Deloitte, Australia’s oil and gas sector is embarking on a sequence of major new investments, the largest in the history of the industry. Of the 14 gas liquefaction plants under construction or firmly committed around the world, eight are in Australia.

Several oil projects are underway that will go onstream in the next two to three years. These include Montara oil field (PTTEP) in Northern Territory, Balnaves field (Apache Corp.) in Western Australia and Coniston field (INPEX) in Western Australia.

New Zealand. Wells drilled were down slightly last year at 42, but are forecast to return to 2010’s level of 45 this year. Oil production, however, declined 13%, to 46,600 bpd.

The government’s annual tender process to attract oil and gas exploration interest in 2012 got underway in June. According to the Ministry of Economic Development, the government expects by Oct. 15, 2012, to receive work program bids from companies interested in investing in exploration over 23 onshore and offshore areas.