The number of active oil and gas rigs in the United States may have fallen in 2019, but oil and gas producers in the United States are still breaking records, according to the EIA.
Efficiency gains per well have allowed U.S. producers to kick out more fossil fuels, even rig and well counts fell. For 2019, the United States produced 12.2 million bpd of oil, and 111.5 billion cubic feet per day of gas.
That year, the average active rig count sat at 943 per month, with an average 1,400 new wells drilled every month, according to Baker Hughes and IHS Markit data respectively. This is near the 45-year low—all the while producing record-breaking amounts of oil and natural gas.
The reason for this phenomena? Horizontal drilling, which allows producers to get into more of the formation. Even since the early 2000s, the average lateral length of a horizontal well has jumped from 10,000 feet to 18,000 feet last year, the EIA said in new research published Thursday.
This lateral length increase has offset—and then some—the fewer number of wells drilled.
These horizontal wells are now the norm instead of the exception, increasing from 2% of all wells in the United States in 1990 to 75% of all wells drilled in 2019.
For 2019, the trend toward increasing production and decreasing active rig counts and wells is clear. For 2020, the situation is less so, with the number of active rigs in the United States falling for 14 straight weeks, with production falling along with it. While 2019 was a year for technological advancements in rig efficiencies, 2020 has been a year of waning demand and oil price pain for U.S. producers as lockdowns work against the industry.
By Julianne Geiger for Oilprice.com
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Unless the US shale industry has invented a new technology for shale oil production that hardly needs rigs, it is impossible for efficiency gains to compensate for a major loss of rigs.
A massive loss of rigs from 613 early this year before the COVID-19 pandemic to 165 now could never be compensated by efficiency gains. Rig count is a good way to predict future US oil production. Shale oil production reached 7.28 million barrels a day (mbd) in November 2019 or 60% of total US oil production of 12.23 mbd when the rig count was 613. Approximately 600 rigs are needed to maintain 7 mbd of shale oil. The rig count is now 165 so it is unavoidable that production will fall.
Based on rig count analysis, US oil production could fall to under 7 mbd or more than 5 mbd less than November 2019 levels this year and the next three years.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London
Today, it sounds more like a last ditch attempt to rally around the flag.
Basically, instead of propping up the U.S. oil industry, we should unite to redirect and retrain the industry to something cleaner and more sustainable. And, while oil is currently seeing lower demand, the world still likes to fight over it, especially in the Middle East.
For a variety of reasons, we need to say a prayer of thanks for all that oil has done for us. But let&amp;amp;#039;s learn from downsides of burning fossil fuel so as to realize a better net benefit going forward.