Energy Loud & Energy Proud – Global Drilling to Increase 14.9% in 2023 to Meet Growing Demand
Oil and gas operators worldwide report plans to increase the number of wells drilled in 2023 by 14.9% in response to growing demand and improved oil prices. Regional variances are observed with US land operators projecting to drill 17.3% more wells in 2023 versus 2022 led by the Permian basin with a projected increase of 21.4%. Offshore operators report a planned increase of 14.7% and international land operators at 13.3% more wells to be drilled in 2023 versus 2022 reflecting a globally coordinated upcycle in drilling not seen in many years.
Overall market fundamentals support a multi-year global investment growth cycle for the industry following an unprecedented industry decline in 2020 and 2021 due to the coronavirus demand destruction and the Saudi Arabia/Russia oil price war. 2022 brought about additional challenges with demand growth coupled with the war in Ukraine leading to global energy scarcity and a renewed focus on energy security taking precedence over climate concerns. Global use of coal and other fossil fuels increased in 2022 and drilling activity in US land is poised to increase by 40% in 2022 versus what was initially projected to be only a 20% increase in US land drilling.
Operator sentiment worldwide is 84.5 (up from 71.5 in 2021) and exhibits historically high indices following the historic low of 19.0 set in July, 2020.87% of North American land operators and 68% of international land operators report plans to increase drilling expenditures in 2023. The sharp increase in operator sentiment has resulted in the US land rig count improving from a low of nearly 176 drilling rigs operating at the trough of the 2020 pandemic led market correction to the current level of approximately 752 drilling rigs.
Capital discipline coupled with an elevated oil price environment supported by poor policy, over-regulation, and lack of energy literacy is resulting in record levels of cash flow and profits for operators. The US and global economy are facing record levels of inflation along with supply chain constraints and rising interest rates. With equipment, labor, and supply chains tightening, the rigors of the oilfield are taking a toll on personnel with little time off and maintenance being performed in the field. This difficult situation will persist until the supply-side policy is fixed and/or interest rates are increased to the point of driving the global economy into a hard reset/recession.
Oil and gas demand will continue to increase over the next ten years and additional investment in the industry will be required to meet the global demand.
Kimberlite will continue to track the future expenditure plans among the operators worldwide and report updates. Feel free to reach out to discuss.
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