While demand for onshore rigs declined as the result of less natural gas drilling, demand for offshore rigs continues to flourish, driven by Gulf of Mexico demand, industry analysts said Monday.
The Gulf of Mexico rig count has increased slightly in the last three months, with 33 floating rigs and 29 jackups for the fourth quarter, up from 27 floating rigs and 27 jackups for the third quarter, according to a Tudor Pickering analyst’s note.
Likewise, demand for offshore rigs grew from 73 in January 2012 to 80 by the end of November, as improved technology, such as water flooding, has provided new opportunities to extract oil from maturing wells. The relatively strong price of oil, which closed on Friday on the New York Mercantile Exchange at $90.80 for West Texas Intermediate Crude, compared with natural gas, which closed on Friday at $3.46 per million cubic feet, has been an additional driver.
Oil and gas services companies are working hard to meet the offshore demand: Ensco, for example, has three ultra-deepwater rigs that will be available in 2013.
Demand has dipped in onshore drilling, as the big operators have shifted away from chasing natural gas exploration, resulting in a 61 percent decline for onshore rigs in 2012, down from 2,082 in January to 1,841 at the end of November 2011. The downturn comes after 13 quarters of increased drilling activity, Tudor Pickering said in its report.
The Permian and the Eagle Ford basins have been the hardest hit by the decline, according to Tudor Pickering, while East Texas and North Louisiana have held up the best.
Companies are also trending towards the newer and more efficient alternating-current technology for drilling rigs. Alternating-current engines allow for greater mobility and control over the drilling process, and are considered to be safer and more environmentally friendly. The older mechanical rigs have made up 72 percent of the rig decline, according to Tudor Pickering, who noted that “as activity trended lower during the quarter, we noticed operators clearly holding onto and/or high-grading their fleets.”
Chesapeake continues to have the highest U.S. natural gas rig count, with 37 rigs, while Exxon and Devon have 31 and 30, respectively. Likewise, Chesapeake also has by far the biggest number of onshore oil rigs, 73, while Anadarko has 47 and Devon has 42.