Analyst: US rig count to drop by 3% or more in 2013

Posted on 22 May 2012

By Joanne Liou, editorial coordinator

Marshall Adkins, managing director at Raymond James & Associates, forecasts the US rig count to decrease by at least 3% as the US supply grows at a record pace.

The idea of increasing global oil supply to match global oil demand once seemed out of reach. However, the tables have turned, and the industry’s ability to get oil out of the ground from shales means the industry may need to start holding back. In fact, in 2013 the US rig count will fall by 3%, Marshall Adkins, managing director at Raymond James & Associates, said at the 2012 IADC Drilling Onshore Conference in Houston on 17 May. “We’re going to have to see Saudi cut production, and sometime next year, the rig count in the US needs to roll over and slow down because we’re bringing in too much oil,” he said.

Modeling a massive shift away from natural gas rigs, Mr Adkins referred to the types of wells that were being drilled in January 2010; the spread between rigs drilling for dry gas, wet gas and oil was about one-third across the board. By the end of 2012, however, he forecasts that 75% of drilling in the US will be oil-related. “The oil rig count keeps going up,” he explained. “That will slow on a full-year average meaningfully next year, and overall, rig count will be down about 3%.”

Technological developments are shaping the outlook for the gas market as it drives the growth in supply. The average first-year well productivity in the Barnett Shale in 2006 was 400,000 cfe/day. On average, about five years later, the eight largest shale plays, including the Granite Wash, Haynesville and Eagle Ford, all produced more than five times the amount of gas per well on the first year than in 2006, Mr Adkins said.

“The problem is as we drill all those wells in liquids-rich areas because of the liquids, we’re getting a load of gas associated with those,” he explained. “Go back a few years ago; we had very little supply growth. As we look forward to 2013 and 2014, there is going to be substantial growth, 2 to 3 Bcf/day of annual growth from these oil and liquids-rich gas plays.”

Advances in technology have boosted productivity as well, Mr Adkins stated. “We’re getting a lot better at getting this oil and gas out of the ground as we learn more about these formations. Don’t expect supply to come crashing down even if the rig count slows.”

Industrial demand – from LNG, gas to liquids, steel plants, petrochemical plants – will drive the need for natural gas and cause a spike in demand. “In 2016, I expect a major spike in demand because it takes about four to five years to plan, permit and build all this stuff,” he said. The demand will drive a production spike up to 7 Bcf/day, he forecast.

At the same time, automobile efficiency and the decreasing amount of driving in the US, among other factors, are affecting the demand for oil. “We’re driving fewer miles,” Mr Adkins stated. “In the last six years, there has been no growth in the miles driven. US demand is actually worse than we think.” His models point to so little demand that Saudi Arabia will have to cut 1.4 million/day over the next 18 months, starting probably in Q4.

 

Related article:

Analyst: Numbers show that US is drilling its way to zero net oil imports

Leave a Reply

*

FEATURED MICROSITES


Recent Drilling News

  • 18 August 2014

    Repsol runs BlueDock connectors in Trinidad and Tobago

    Repsol has recently run BlueDock connectors with elastomeric seals in Trinidad and Tobago. The operation took place in the Arima 2 well on a jackup platform...

  • 15 August 2014

    Joe Hurt to retire from IADC

    After more than 14 years with IADC and a career spanning 42 years, Joe Hurt, Vice President of IADC’s Onshore Division, will retire at the end of August. Mr Hurt began his career in 1974 with Noble Corp, working on land drilling rigs...

  • 13 August 2014

    OneSubsea, Helix and Schlumberger to form subsea well intervention alliance

    OneSubsea, Helix Energy Solutions Group and Schlumberger have entered into a letter of intent to form an alliance to develop technologies and deliver...

  • 12 August 2014

    Noble Energy, Woodside Petroleum sign PSC for exploration offshore Gabon

    Noble Energy has signed a production-sharing contract (PSC) with Gabon government, covering Block F15 in the Gabon Coastal Basin. Under the terms...

  • 12 August 2014

    Opus Offshore selects DTI motion compensation for second set of Chinese drillships

    Drilling Technological Innovations (DTI) has been awarded a contract to provide motion compensation packages for the Tiger III and Tiger IV drillships...

  • Read more news