NGI The Weekly Gas Market Report
The shift to more complex, unconventional drilling — launched by the success in the Barnett Shale — has doubled since 2000 and led to technological changes across the oil services sector, Raymond James & Associates Inc. energy analysts said last week.
Improved efficiencies at the rig level essentially were erased “by the increasingly complex nature of the typical wells being drilled in the U.S.,” analysts J. Marshall Adkins, Collin Gerry and John Fitzgerald wrote in their Stat of the Week. “As a result, the number of wells drilled on average each year on a per-rig basis has and is likely to continue to remain flat, unless, of course, the market shifts back to conventional, vertical wells.”
The more complex horizontal drilling had until recently taken over conventional drilling in the United States, they wrote. Lately, though, conventional drilling targeting oil has enjoyed a resurgence. On the oil side, “we have witnessed somewhat of a resurgence in the percentage of drilling activity dedicated to the oil market — from a low of around 11% in mid 2005 back to around 20% in recent weeks. This is probably part of the reason why overall drilling efficiency…has demonstrated some improvement since 2004.”
However, the market “continues to derive an increasing amount of natural gas and activity from the more complex shale plays,” so the demand for more land drilling rigs and associated services is “likely to rise further, putting upward pressure on service costs until or unless the market either delivers meaningful capacity additions or takes another technological leap forward,” wrote the trio. Adkins in May attended the Offshore Technology Conference in Houston and said then that the improved application and evolution of oilfield technology was making a “real difference” for producers (see NGI, May 19).
For natural gas drillers, conventional drilling “is becoming the minority…Directional and horizontal drilling programs have grown to account for roughly half of the entire drilling market, nearly doubling its share since the beginning of the decade. This is being driven by the discovery and development of unconventional resource plays, such as the Barnett Shale.
“The Barnett Shale is the poster child for the new North American resource play,” said the analysts. “Here, the tremendous productivity of new wells has driven extremely compelling drilling economics. As a result, the rig count in the Barnett shale has increased since 2001 from less than 20 rigs to almost 180 rigs. With similar discoveries being made by the week, it seems that (Fayetteville, Woodford, Haynesville, Marcellus, etc.) we see the shift to more complex drilling programs continuing.”
Several new technologies “have, without question, driven an increase in the technical capacity of today’s drilling rigs.” New drillbit design, mud motors, automated controls, automated mobilization, top drives…the list goes on, said the analysts.
“In a typical 10,000-foot Cotton Valley gas well in East Texas, a ‘newbuild’ rig can drill a well in half the time that it would have taken in 2001,” they noted. “Even a mechanical rig, utilizing some of the new technology, has seen a 25% increase in efficiency.”
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