Total global drilling for oil and gas (as measured by the rig count released by Baker Hughes) is said to have risen by 0.17 percent MoM (6 rigs) to 3,437 rigs. However, the activity is 0.6 percent below previous year levels. This increase was primarily led by increased activity outside North America, where the number of rigs engaged in drilling for oil and gas are rising at a fast paced rate.

While activity in North America declined, other areas including South America and Africa pulled up the world total. This is helping international oil companies to compensate for the decline in U.S. production.

Figure 1: Total world number of rigs in October 2013

Source: Baker Hughes
Source: Baker Hughes

International activity of oil and gas drilling

Total number of rigs engaged in oil and gas drilling outside of North America rose by 31 units in October 2013 to 1,315. The current number of rigs is 4 percent above previous year levels according to the Baker Hughes data revealed recently. The number of rigs increased in both land and offshore areas as drilling activity intensified in both areas.

However, the number of rigs engaged in gas production declined substantially. The number of rigs engaged in gas declined by 9 units MoM. This is primarily because of the low returns of natural gas in recent years. The price offered for natural gas is much lower than the price earned on crude oil production and hence, gas is becoming less attractive for investors.

Figure 2: Oil and gas rigs outside North America

Source: Baker Hughes
Source: Baker Hughes

South America accounts for 12 percent of the total global drilling and added 16 rigs in October (1.9 percent increase YoY). Drilling in Mexico rose by nine rigs and added to this total.

Number of rigs in Asia

Number of rigs in Asia comprise 7.1 percent of total world rigs and increased by two units in October to 245. This was primarily driven by aggressive activity in India where the number of active rigs touched a record number of 120 (up 5.3 percent YoY). Indonesia and Australia remained unchanged at 35 and 16 rigs respectively while China’s activity in the offshore area added one rig to the Asian total.

Middle Eastern activity also increased with four new rigs engaged in this area during October 2013. Total OPEC rig count has risen by 5 units MoM while it has risen by 37 units YoY to a total of 436 new rigs. “Middle East drilling rose by four units in October to 383 rigs. Drilling fell 4.5% from 2012 highs of 401 rigs, weighed down by turmoil in Syria and Egypt. Oman continues to increase its count, which rose by seven rigs to a high of 64 in October, from 34 in August. Iraq, which surpassed Saudi Arabia in June as most active (by number of rigs), fell by one unit to 92 rigs, up 37.3% YoY. Saudi Arabia was unchanged from September at 80 rigs (down 9.1% YoY),” said Mehdi Menouar, an industry analyst.

Figure 3: OPEC versus non-OPEC activity in October 2013

Source: Baker Hughes
Source: Baker Hughes

North Sea slows European activity

The North Sea is the chief component of European oil and gas output and contributes 27 percent to the total European output. However, the decline in Europe of 3 units of rigs in October was triggered by reduced activity in Norway. Rigs engaged in the North Sea dropped 12 percent YoY (5 units MoM) to 37 rigs, the lowest levels since July of 2012.

Less rigs in North America

In North America, the number of rigs has dropped, dragging the global total down. North America contributes 62 percent to total worldwide drilling, of which 82 percent is from the United States. The rig count in North America dropped by 25 rigs in October 2013 to 2,122, 3.5 percent below previous year levels. Canadian drilling has declined by nine units and 3.6 percent YoY while the United States activity dropped 16 units during the month.

However, the scenario in the United States is slightly different. The rig count decline is not an indicator of declining production as well productivity has gone up. This is because of new techniques engaged by E&P firms in this area such as pad drilling which allows these companies to drill more wells with fewer rigs and also to increase the productivity of the well.

Figure 4: North American rig count

Source: Baker Hughes
Source: Baker Hughes