September 2014

Robust drilling leads global activity forward

After reaching a plateau last year, worldwide E&P activity is set to resume additional growth, led by a very strong drilling market.

Kurt Abraham / World Oil

Given the high levels of activity in recent years, many professionals in the global, upstream oil and gas industry may not have noticed that the strong growth trend of the previous three years took a bit of a hiatus during 2013. Worldwide drilling declined about 3,000 wells, or 2.9%, while oil and natural gas reserves eked out very small gains. Global crude and condensate production posted a modest increase of just under 350,000 bpd, which was 0.4% higher.

Yet, it also should be noted that just two countries—China (down 2,089 wells) and the U.S. (down 1,049 wells)—are responsible for the entire 3,000-well decline in drilling. And it should also be pointed out that both nations are on the rebound, headed for higher totals this year. Accordingly, we forecast that drilling, worldwide, will increase 4.9% during 2014, to 106,540 wells.

In some ways, it is miraculous that global crude and condensate output increased at all last year, given regional instability that resulted in production declines in countries that included Libya, Nigeria, Iran, Syria and Yemen. Offsetting these reductions, however, were very strong increases in the U.S. and Canada, along with milder gains in Russia, the rest of the former Soviet Union and China. As regards global oil reserves, robust increases in the U.S., Canada and the Middle East balanced out declines in Africa, the Far East and Western Europe sufficiently to keep the difference on the positive side of the ledger, up 0.3%. Natural gas reserves were up 0.9%, due mostly to gains in North America and Africa.

Some key activity findings include:

  • The U.S. will drill 45% of wells globally, exceeding the 42%-to-44% range of the previous three years.
  • The world’s top four drilling countries continue to be the U.S. (48,230 wells this year), followed, in order, by China (25,200 wells), Canada (11,825 wells) and Russia (7,585 wells). Together, these four nations, this year, will drill 92,840 wells, a whopping 87% of all drilling, worldwide.
  • Russia remains the world’s top oil producer at 10.42 MMbpd, followed by Saudi Arabia at 9.64 MMbpd. The U.S. is catching up fast, averaging 7.44 MMbopd (a gain of 953,900 bopd), to finish third.
  • The top four drillers continue to be the top four nations, as regards numbers of oil wells actively producing. The U.S. (579,420 wells), China (258,495), Russia (165,400) and Canada (85,976, including 14,375 in situ wells) account for nearly 1.1 million wells—1,089,291, to be specific. This is up 3.4% from 2012’s figure.
  • Over the last five years, the U.S. has had phenomenal growth of its oil reserves, gaining 70%, from 19.121 Bbbl at the end of 2008, to an estimated 32.500 Bbbl at the end of 2013.

The following regional assessments give perspective and explanation to the statistical findings.


Consistent with worldwide trends, the region’s drilling was down about 1,500 wells last year, to 57,053, due to declines in the U.S. and Mexico. On the other hand, regional oil output grew 9.5%, to 13.415 MM bpd. Oil reserves grew 1.7%, to 218.1 Bbbl, while gas reserves jumped 4.2% higher, to 413.3 Tcf. This year, drilling will resume its upward trend, growing 6.2% to 60,604 wells.

Canada. Consistently strong oil prices, and recovering natural gas prices, have made the outlook for the Canadian industry as good as it has been in many years. Despite political and environmental distractions, drilling activity is up, and producers are showing improved financials. In the face of a pipeline capacity shortage, producers have shifted oil shipments to rail.

Last year, Canadian production gained 7.6%. Reversing the downward performance of a year earlier, oil reserves were up 1.2%, but gas reserves fell 3.9%. Drilling during 2013 was level with 2012’s figure, but an 8.7% increase is expected this year. For more details on Canada, please see World Oil, August 2014, p. 59.

Mexico. The revolutionary changes to Mexico’s constitution, allowing foreign direct investment in oil and gas (adopted last year), along with subsequent enabling legislation, signed by Mexican President Enrique Peña Nieto on Aug. 11, 2014, bode well for the country’s future hydrocarbon production. If the reforms hold up, the U.S. Energy Information Administration (EIA) estimates that Mexican oil output could stabilize at 2.9 MMbpd through 2020, and then rise to 3.7 MMbpd by 2040.

In the very short run, the benefits may not be as obvious. In the face of the constitutional upheaval, Mexican drilling last year fell 33.5%, to 823 wells. This year, state firm Pemex expects just 522 wells to be drilled, for a 36.6% decline. Oil production appears to have stabilized during 2013, losing just 1.0%. Oil reserves fell about 3%. For more information on Mexico, please see World Oil, August 2014, p. 62.

U.S. Growth in U.S. drilling took a hiatus last year, losing 2.3%, to 45,323 wells. However, drilling has resumed its growth pattern this year. A 6.4% increase, to 48,230 wells, is expected, thanks to strong activity in the Eagle Ford, Bakken, Niobrara and Permian basin shale plays, Fig. 1. Not surprisingly, U.S. production continued its relentless comeback, gaining nearly another 1.0 MMbpd, a 14.7% increase, to average 7.441 MMbpd. Oil and gas reserves are both estimated to have gained 6.5%, each, to 32.5 Bbbl and 327.9 Tcf, respectively. For more details on the U.S., see World Oil, August 2014, p. 53.


Fig. 1. Exemplifying the prolific nature of U.S. shale plays, WPX Energy, in January 2013, drilled an exploratory well in the Niobrara shale of Colorado that has produced, as of mid-2014, more than 2.5 Bcf of gas (photo courtesy of WPX Energy).



Drilling across the region jumped 6.4% higher last year, and an even stronger 8.4% gain is expected this year, due principally to a significant rise in Argentina. After remaining nearly flat in 2012, South American oil production improved 0.6%, gaining about 42,000 bpd, thanks to Colombia, Ecuador and Peru. Oil reserves again posted a very small gain, while gas reserves posted 3.6-Tcf gain, to 271.2 Tcf.

Brazil. The country continues to inventory and develop a large number of oil and gas finds, principally offshore, and pre-salt fields figure heavily in the equation. Production from pre-salt fields increased nearly 40,000 bopd between January and August 2013, and that output should grow significantly over the coming years, as development proceeds. State firm Petrobras plans to develop its major pre-salt assets in three specific phases—extended well tests; pilot projects; and large-scale production through multiple FPSO facilities.


Table 1. World crude/condensate production–2013 versus 2012*



Last October, a consortium comprised of Petrobras (40%, operator), Shell (20%), Total (20%), CNPC (10%) and CNOOC (10%), was awarded a 35-year production sharing contract by Brazilian regulator ANP to develop super-giant Libra field. Last November, ANP also received $70 million in revenue from bids submitted by companies during its 12th oil and gas round. Per the minimum exploratory programs (PEMs) submitted by the winning bidders, ANP expects at least $215 million to be spent on exploring and developing the blocks.

Nationwide, Brazilian oil production was down nearly 2%, at 2.086 MMbpd. In contrast, oil reserves improved nearly 1%, to 14.330 Bbbl, while gas reserves jumped 36.8% higher, to 15.3 Tcf.

Venezuela. Despite logistical and political problems, as well as a lack of reinvestment, Venezuela remains one of the world’s largest oil producers. Last year, oil production averaged 3.015 MMbpd, down 0.6% from 2012’s level. State firm PDVSA revised the country’s oil reserve figure 0.2% higher, to 298.4 Bbbl. Gas reserves have been refigured 0.4% higher, to 197.1 Tcf.

Drilling totaled 937 wells last year, including activities by foreign firms, up 5.3% from 2012’s level. A small decline to 898 wells is forecast for 2014. As a result of exploration drilling conducted during 2013, PDVSA claims to have found 193.4 MMbbl of new, proved and probable oil reserves, as well as 748.4 Bcf of gas reserves.

On Sept. 2, 2014, Venezuelan President Nicolas Maduro removed Rafael Ramirez from his twin posts as Minister of Petroleum and Mining, and president of PDVSA, in a cabinet shake-up. Maduro promoted former PDVSA E&P head Eulogio Del Pino to the company’s top spot and appointed Asdrubal Chavez, the cousin of late President Hugo Chavez, to lead the petroleum and mining ministry. Maduro moved Ramirez to the Foreign Ministry, replacing Elias Jaua.

Colombia. The country has seen a dramatic increase in its oil and gas production in the last six years, since the government’s implementation of a series of regulatory reforms. Indeed, oil production jumped above the 1.0-MMbpd mark last year, averaging 1.008 MMbpd, or 6.8% higher than 2012’s figure. This compares to a level of only about half that in 2007, at 531,000 bopd.

Output at Rubiales heavy oil field exceeded 177,000 bpd in 2012, up from 37,000 bpd in 2008. Other large oil fields include Cano Limon, Castilla, and Cupiagua. The Ministry of Mines and Energy said that it expects Colombian production to reach 1.3 MMbopd by 2020. To sustain that growth, drilling will have to remain at its present level or higher. Wells drilled last year totaled 115, down 12.2% from 2012’s number. This year, we expect a 9.6% increase to 126 wells. Meanwhile, oil reserves rose 2.9%. Gas reserves declined 3.8%.


After dropping for several years, drilling throughout the region finally saw a 3.8% increase last year. For 2014, the overall rate of activity will remain almost level. Given the low rate of new discoveries outside Norway, regional oil reserves fell 3.8%, to 10.560 Bbbl, while gas reserves shrank 3.9%, to 124.7 Tcf. Oil production was off 5.7%, at 2.787 MMbpd.

Norway. At this time last year, Norway’s crude and condensate production had been falling precipitously, while gas output was on the rise markedly. Today, oil production is still falling, but at a much slower rate, while the improvement in gas output has now reversed. Oil output averaged 1.532 MMbpd last year, down 5.1%. Gas production was down 5.0%, at 10.52 Bcfd. Similarly, oil reserves declined 5.6%, to 5.498 Bbbl, while gas reserves shrank 2.0%, to 72.4 Tcf.

Keen to improve the situation, operators boosted drilling an impressive 39.5%, to 233 wells during 2013. That level of activity is being maintained this year, with 230 wells expected by the Norwegian Petroleum Directorate (NPD). There is still an impressive list of field development projects either approved for development or awaiting approval. Given this list, along with additional discoveries made this year, the longer-term outlook for Norwegian oil and gas production should be very strong, if the explosion in E&P costs can be contained and controlled. For more details on Norway, see World Oil, July 2014, page 99.

UK. What would have been unthinkable just 20 years ago finally took place last year—the UK became a net importer of all fossil fuels, and is a net importer of petroleum products for the first time since 1984. After plunging 14.5% during 2013, British oil production slowed its loss last year to about half that rate, at 8.5%, averaging an anemic 841,873 bpd.

On the drilling side of the ledger, there had been hope for continued improvement last year, after the wells drilled total posted a small gain to 192 during 2012. Instead, operators demonstrated their lack of confidence in the coalition government by reducing drilling another 6.8%, to just 179 wells. While the rate of decline is expected to slow to 2.2% this year, resulting in 175 wells, this prediction is hardly cause for celebration.


Table 2. Estimated proven world reserves, 2013 versus 2012 



Aging reservoirs and infrastructure have affected the UK’s oil production over the past few years, with production declines and widespread outages resulting from technical problems. And while a number of new fields are in the process of coming online, British production will continue to decline, because new output will not be sufficient to offset declines elsewhere.

A severely alarmed and chastened central government has now decided to react to the situation by creating yet another new bureaucracy. Officials will establish a new Oil & Gas Authority, to take more direct charge of the UKCS. The authority will be headquartered in Aberdeen, Scotland, as soon as possible.

Something else that could affect British E&P is the Sept. 18, 2014, referendum that was pending as this issue went to press. The referendum will decide the matter of Scotland’s potential independence from the UK. A realignment of Scotland/UK sovereignty would have consequences for control of UKCS resources.


Across the region, drilling continued to escalate, gaining 3.2% to 8,869 wells. A further increase to 9,090 wells is forecast for 2014. As might be expected, oil production rose another 1.5%, due almost exclusively to gains in Russia and other former Soviet countries. Oil reserves were up by a higher proportion, totaling 124.92 billion bbl. Natural gas reserves rose less than 1%.

Russia. For the eighth year in a row, Russia led the world in crude and condensate output. Last year, production averaged 10.417 MMbpd (up 1.3%). As expected, following its acquisition of TNK-BP last year, Rosneft now accounts for 36.8% of Russian oil production, followed by Lukoil (16.6%), Surgutneftegas (11.7%), Gazprom (6.1%), Tatneft (5.0%), Bashneft (3.1%) and various other companies (20.7%). The number of oil wells actively producing in Russia rose 3.1%, to 165,400.

Drilling last year was up 3.0%, at 7,365 wells, with another 3.0% gain expected during 2014. Oil reserves last year are estimated to have grown 1.7%, with gas reserves increasing 0.5%. Production growth in both oil and gas has come mainly from development projects at fields in Eastern Siberia— Krasnoyarsky Krai, Irkutskaya Oblast and Republic of Sakha (Yakutia), Fig. 2. During 2013, the oil production growth rate continued to decline. In an effort to change this situation, the government has taken steps to stimulate investment, to bring online tight oil reserves.


Fig. 2. A Gazprom rig drills for gas at Nizhne-Kvakchikskoye field, in the Kamchatka Territory of eastern Russia (photo courtesy of Gazprom).


Other FSU countries. Wells drilled in former Soviet countries outside of Russia last year were level with 2012’s figure. This year, a 4.9% decline to 1,037 wells is forecast. Oil production among the 14 republics averaged 2.838 MMbpd, up 2.0%. Oil reserves decreased 1.1% to 37.784 Bbbl, while gas reserves were down 0.4%, to 554.3 Tcf.

Among the group, Kazakhstan led in production, at 1.627 MMbopd. Second-place producer Azerbaijan averaged 865,573 bopd, up 0.2%. In Kazakhstan, the Chevron-led consortium, Tengizchevroil, is in the process of raising Tengiz field production by 12 MMt/year (240,000 bopd) and will spend as much as $23.5 billion over several years to do it.


Last year, African drilling increased 8%, due mostly to gains in Algeria, Angola, and Libya. This year, drilling across the continent should rise 3.5%. African oil production, however, declined 5.6%, to 8.564 MMbpd, due to reductions in Libya and Nigeria. Oil reserves were down 1.3%, while gas reserves gained 7.1%.

Nigeria. Drilling rose 13.0%, to 156 wells, but the forecast calls for the well total this year to go back down to roughly the 2012 figure. As operators struggle to get several large, offshore field development projects onstream, Nigerian oil production continues to slowly decline. Output last year was down 3.5%, to 2.190 MMbpd. The reserves situation is more optimistic, with oil reserves slipping ever so slightly to 36.4 Bbbl. Gas reserves were also down less than 1%, to 182.15 Tcf.

As was the case last year, several large offshore field developments are due to go onstream, but operators have slowed down the timetable, not knowing whether the often-delayed Petroleum Industry Bill (PIB) will be passed in the Nigerian legislature. With federal elections due in February 2015, it seems unlikely that any action on the PIB will happen until after that time. Accordingly, several developments will be delayed.

Algeria. Drilling is estimated to have risen about 26% last year. However, activity this year should remain at about the 2013 level. Crude and condensate output was off slightly, at 1.509 MMbpd. Oil reserves remained nearly even at 12.8 Bbbl. Gas reserves held steady at 159.1 Tcf.

As of the beginning of September, state firm Sonatrach said that it had struck 18 oil and gas discoveries during 2014. Thirteen finds were made during the first six months, including seven oil and six gas discoveries.

Angola. Output from Africa’s second-largest oil producer was up 0.2%, at 1.784 MMbpd. However, oil reserves fell 5.8%, and gas reserves tumbled 11.5%. Drilling was up 29.8% during 2013, totaling 170 wells. A major increase to 234 wells is expected this year, as operators work to restore reserves to previous levels. Exploration activity in pre-salt formations is also ramping up this year, following the auction of pre-salt blocks in 2011. State firm Sonangol has set an oil production goal of 2.0 MMbpd for 2015, as new deepwater fields go onstream.

Among the smaller countries, Benin is eyeing a return to oil production after a stoppage at the end of the 1990s. South Atlantic Petroleum is redeveloping Sèmè field and hopes to begin output before the end of 2014. Meanwhile, thanks to efforts by smaller producers, Chad has been able to achieve a small rebound in its oil production, from a low of 93,000 bpd in late 2013, to about 102,000 bpd in mid-2014. In southeastern Africa, Sasol Limited has announced a joint pre-feasibility study for a large-scale gas-to-liquids (GTL) plant, which will be based on gas from the Rovuma basin, offshore northern Mozambique. The study is being conducted in conjunction with state firm ENH and Italy’s Eni.


Yet another drilling record appears to have been set in the Middle East, where wells totaled 3,247 last year. For 2014, a 6.7% gain is forecast, which would be a record, as well. Regional output averaged 24.7 MMbpd, down 1.1%. Reserves of both oil and gas were up marginally.

Saudi Arabia. Production across the Kingdom averaged 9.643 MMbopd, down 0.9%. However, oil reserves held firm at 260.2 Bbbl, while gas reserves rose 1.3%, to 288.4 Tcf. The year 2013 saw state firm Saudi Aramco make significant progress on two offshore developments—Manifa, the world’s fifth-largest oil field, and Karan, the Kingdom’s first non-associated, offshore gas field.

The company also added three oil and two gas discoveries to its portfolio, bringing the number of discovered fields to 121. This included exploration and drilling operations in the deep waters of the Red Sea, where the firm made a new oil discovery at Al-Haryd.

UAE-Abu Dhabi. Output at the largest emirate averaged 2.532 MMbopd, up 0.7% from 2012’s figure. Although recent exploration has not yielded any significant oil discoveries, the emirate is compensating by emphasizing EOR techniques, designed to extend the lifespan of existing oil fields. By improving the recovery rates at existing fields, Abu Dhabi claims to have nearly doubled its proved reserves over the past decade. Several output expansions at existing fields, both onshore and offshore, are ongoing.

Iran. Oil production across Iran has declined substantially over the past few years, and growth of natural gas output has slowed. Oil production averaged 3.335 MMbpd last year, down 3.3%. Nevertheless, Iran raised its oil reserve figure 1.7%, to 157.15 Bbbl, and gas reserves were revised 0.5%, to 1,196.0 Tcf. International sanctions have affected Iran’s oil and gas activity substantially, causing a number of upstream project cancellations or delays.


Table 3a. Forecast of 2014 world drilling—comparisons with 2013 and 20121



Table 3b. Forecast of 2014 world drilling—comparisons with 2013 and 20121




Due to a 2,000-well reduction in Chinese drilling, regional wells drilled fell 7.7% last year. This year, a 2.3% recovery to 27,407 wells is forecast. Regional oil production was off slightly, at 6.835 MMbpd. Oil reserves shrank 1.5%, but gas reserves gained 1.6%.

China. For the first time in a number of years, China’s three major companies failed to set a new, combined, annual drilling record. Instead, they drilled about 2,000 fewer wells for a total of 24,510. This year, we expect a modest recovery, back up to 25,200 wells. Despite reduced drilling, Chinese production squeezed out a 1.6% gain, to 3.706 MMbpd. However, oil reserves dropped 1.9%, while gas reserves increased 1.8%.

A roughly 80-20 ratio exists in the distribution of Chines oil production between onshore and offshore fields. The three state firms (CNPC, Sinopec and CNOOC) have realized incremental production increases through a mix of new offshore production, EOR at older onshore fields, and small discoveries in existing basins. The companies have invested great sums of time and money to implement EOR that includes water injection, polymer flooding, and steam flooding, to offset oil production declines in mature, onshore fields. New E&P activity is focusing on the offshore areas of Bohai Bay (Fig. 3) and the South China Sea, as well as onshore fields in the western and central provinces.

India. Wells drilled rose 4.2% last year, to 541. A small pick-up to 566 wells is expected for 2014. India’s oil production slipped 0.6%, to 848,775 bpd. Oil reserves actually increased slightly, to 7.07 Bbbl, and gas reserves reversed a previous decline, gaining 7.3%, to 50.5 Tcf.

Operators have been forced to explore deepwater and marginal fields, while trying to improve recovery rates at existing onshore fields. In the Mumbai High, Gujarat, and Assam-Arakan basins, mature fields continue to experience production declines, although several redevelopment projects, EOR efforts, and marginal developments are underway in these basins.


Across this region, drilling was up sharply, gaining 25.0%, to 285 wells, with increases registered everywhere except East Timor. A further gain of 24.2% is forecast this year. However, regional production of crude and condensate fell 12.1%. Similarly, oil reserves slipped 0.7%, to 4.968 Bbbl. Gas reserves shrank 3.7%, to 141.6 Tcf.

Australia. Drilling last year was 29.7% higher, and a further increase of 26.3% is expected this year. Crude and condensate production continued its freefall, dropping 13.9% to a mere 381,232 bpd. Remarkably, oil reserves actually grew 0.1%, to about 4.0 billion bbl. Gas reserves were down about 4%.

Australia is set to be the world’s largest LNG exporter within five years. Construction of a long list of offshore gas and LNG projects is absorbing hundreds of billions of dollars. However, high costs, together with uncertain, long-term global gas demand and Australia’s own requirements, are prompting operators to re-assess further LNG expansion.

Meanwhile, oil production is declining, as explorers struggle to find reserves to replace maturing older fields. Shale oil explorers in Australia’s interior hope to offset some of the decline, while other firms are concentrating exploration efforts in the deeper waters of the Timor Sea. wo-box_blue.gif

About the Authors
Kurt Abraham
World Oil
Kurt Abraham
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