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It's not too Early to Review Drilling Efficiency

The U.S. oil industry's lobbying group said it wanted greater access to energy reserves for the benefit of the American people. For the industry itself, rigs are more efficient in existing plays and that difference could determine the longevity of U.S. oil production gains.

"America’s oil industry expanded drilling in 2013 thanks in large part to access on private and state lands," Hazem Arafa, director of the American Petroleum Institute's statistics department, said in a statement. "Additional access to our own vast energy resources and streamlined federal permitting would allow for more opportunities to produce U.S. energy while creating more American jobs and generating more revenue for our government."

Related article: Peak Oil becomes an Issue Again after the IEA Revised its Predictions

API said the number of oil wells drilled in the United States in 2013 increased from the previous year as the U.S. oil glut continues. That activity helped the United States last year produce an average of 7.5 million barrels per day, a 15 percent increase from the previous year.

The U.S. Energy Information Administration said in its monthly market report for January oil production growth should come primarily from the Bakken, Eagle Ford and Permian shale basins through 2015. Combined, those three plays made up about 30 percent of the annual average production rate last year. Though North Dakota production is generating major interest from the press, it’s the Permian basin in West Texas and New Mexico that's bullish for energy companies through 2015.

Oil services company Baker Hughes said its well count for the fourth quarter of 2013 increased the most, however, in the Eagle Ford play in Texas. The company said its U.S. onshore well count for the fourth quarter of 2013 was 9,056, down from the third quarter but 5 percent higher year-on-year.

"On average, the U.S. onshore rig fleet produced 5.34 new wells during the fourth quarter, representing a 1 percent improvement in drilling efficiencies compared to the third quarter," the company said.

Related article: 10 Things to Consider about the Marcellus Shale

The EIA says it's improved drilling efficiency and well activity, more than anything else, that's a key driver of the growth in U.S. onshore oil production. That could cast a shadow of doubt over claims by the API that more is an improvement over better. For a company like Halliburton, the high-cost of drilling means efficiency is the best strategy for operators.

New drilling technologies used in shale formations in the United States have given energy companies access to oil deposits that were previously out of reach. That, in turn, has led to historic increases in U.S. oil production. The EIA's forecast for 2015, however, was lower than it expected in previous reports, adding to speculation the U.S. oil gains may be short-lived. With energy hawks and policymakers discussing how and where to send U.S. crude, it may be time to put efficiency at the forefront of the debate.

By. Daniel J. Graeber of Oilprice.com


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