After a challenging 2020, oil and gas demand recovery — supported by vaccination efforts and OPEC+ supply cuts — is proving good for drilling activity, says Oslo, Norway, headquartered consultancy Rystad Energy.
In the offshore segment, Rystad expects drilling activity to increase year-on-year by about 10% in both 2021 and 2022. This will bring the number of offshore wells drilled to nearly 2,500 this year, from less than 2,300 in 2020, and Rystad forecasts that the corresponding number for 2022 will surpass 2,700.
Such a healthy recovery is in fact poised to propel offshore drilling activity beyond pre-pandemic levels during the next two years, as the number of offshore wells drilled globally in 2019 was just shy of 2,500. This means the recovery of offshore drilling will already happen in 2021, with 2022 being a year of further growth.
“In contrast to previous years, when the North American shale sector led production growth, we expect the onshore and offshore shelf in the Middle East and the deepwater market in South America to be the main drivers of growth going forward.
To recover production levels, operators will have to launch new drilling plans in tandem with maintenance and enhancement programs for existing wells, opening significant opportunities for well service suppliers in the years ahead,” says Daniel Holmedal, energy research analyst at Rystad Energy.
The onshore segment remains more sensitive, particularly within the North American shale sector, where continued capital discipline among operators is pushing most activity out to 2022 and beyond. Shale-focused operators have already guided relatively flat drilling and completion budgets for 2021. Well services spending in the region is expected to grow from $50 billion in 2020 to $54 billion in 2021, with the stimulation segment seeing higher growth compared to other well services segments.
This is driven by a high number of drilled but uncompleted wells, supporting stimulation spending at the start of 2021. Should the oil price remain above $60 for the rest of the year, shale operators would be well-positioned to increase activity in the second half of 2021 and into 2022.
For offshore drilling activity, the deepwater markets in Europe and Africa are expected to remain relatively stagnant compared to other top regions in 2021. In Europe, this comes after a strong year of activity in 2020, driven by high project sanctioning activity from 2017 through 2019. Most of the deepwater growth comes from North and South America, where Brazil, Guyana and Mexico are the most prominent drivers of the upswing.