After a difficult 2020, the recovery in oil and gas demand, supported by vaccination efforts and OPEC+ supply cuts, is proving good for drilling activity. Rystad Energy expects about 54,000 wells to be drilled worldwide in 2021, up 12% from 2020 levels.
In 2022, drilling will increase further, by another 19% year-on-year, to about 64,500 wells, although activity will still be lower than the 73,000 wells drilled in 2019, Rystad Energy said in a report Tuesday.
Onshore drilling activity is expected to rise 12 percent from 46,000 wells drilled in 2020 to about 51,700 wells in 2021, before rising another 19 percent in 2022 to about 61,700 wells.
Despite the increase in activity, it still appears that drilling needs some more time to recover to pre-pandemic levels, as the onshore well count was nearly 71,000 in 2019.
In the offshore segment, Rystad expects drilling activity to increase year-on-year by around 10% in both 2021 and 2022.
This will bring the number of offshore wells drilled to nearly 2,500 this year, up from less than 2,300 in 2020, and Rystad forecasts that the corresponding number for 2022 will exceed 2,700.
Such a healthy recovery is in fact poised to push offshore drilling activity beyond pre-pandemic levels over the next two years, as the number of offshore wells drilled globally in 2019 was just shy of 2,500. This means that offshore drilling recovery will occur as early as 2021, with 2022 being a year of further growth.
Daniel Holmedal, energy research analyst at Rystad Energy, said, “Unlike previous years, where the North American shale sector led production growth, we expect the Middle East onshore and offshore shelf and the South American deepwater market to be the main drivers of growth going forward.”
“To regain production levels, operators will need to implement new drilling plans along with maintenance and upgrade programs for existing wells, which opens up significant opportunities for well service providers in the coming years.”
According to Rystad, the onshore segment remains more sensitive, especially within the North American shale sector, where continued capital discipline among operators is pushing the bulk of activity to 2022 and beyond. Shale-focused operators have already guided relatively flat drilling and completion budgets for 2021.
Spending on well services in the region is expected to increase from $50 billion in 2020 to $54 billion in 2021, with the stimulation segment seeing higher growth compared to other well services segments.
This is due to a high number of drilled but uncompleted wells supporting stimulation spending in early 2021. If the oil price remains above $60 for the remainder of the year, shale operators would be well positioned to ramp up activity in the second half of 2021 and into 2022.
In terms of offshore drilling activity, the deepwater markets in Europe and Africa are expected to remain relatively stagnant compared to other major regions in 2021.
In Europe, this comes after a strong year of activity in 2020, driven by high project sanctioning activity from 2017 through 2019. Most of the deepwater growth is coming from North and South America, with Brazil, Guyana and Mexico being the most prominent drivers of the upturn.
In terms of well intervention, West Africa and the Middle East could be a strong market in the coming years, with a total of around 10,000 active oilfield wells, with an average well age of 16 and 21 years, respectively.
In comparison, most other regions have an average well age of between 10 and 15 years.