US Horizontal Rigs Drift past 1,000 Mark on "Shale Sail"

By Starr Spencer, Platts oil blog - The Barrel, May 13, 2011
Apologies to Bob Seger, but it seems just about everyone in the oil and gas industry these days is following the sentiment in this song, or at least doing a reasonable facimile.

There are all sorts of statistical goodies buried in the Baker Hughes weekly rig count. Here is one of them:

Apart from the fact that the US oil rig count is soaring and has now surpassed the number of rigs drilling for natural gas, which happened last month , US rigs drilling horizontal wells also passed the 1,000 mark in April [data showed on April 1st -- D.R.] for the first time.

And it continues its upward march. This past week ended May 13, 1,041 rigs were drilling horizontal wells, out of a total 1,830 total rigs. [Horizontal rigs now make up about 57 percent of the total rig count, up from a low of less than 4 percent in Sept 1998. Also, for the total drilling rigs in historical perspective, please see remarks below -- D.R.] That is the highest number since Baker Hughes began keeping track of such data in 1991, and probably [sic] is an all-time record.

The surge in horizontal drilling can only be traced to the shale explosion, which is truly one of the energy industry's Biggest Things. Everyone seems to be exploring for or at least reading about shale oil and gas these days, and in the process the purses of oil operators and also national economies are reaping the benefit.

Once companies hit on the idea, sometime in the early 2000s, that they could get a lot more natural gas by not only drilling down vertically, but then taking the well sideways or horizontally once they reached total depth, it was one of those "Eureka!" moments.

They then coupled that with fracture-stimulating or forcing fluid into rock at high pressure, and drilling increasingly longer laterals to access more of a reservoir from a single wellbore. The greater cost of a horizontal well was offset by more output. Once oil prices began to climb, they applied these notions to oil wells, with similar results.

Rig numbers tell the story. Horizontal drilling before the early 2000s wasn't unknown, but at that point it was more in the experimental stage. When Baker Hughes began keeping track of horizontal versus vertical wells starting the first week of January 1991, 100 rigs were drilling horizontally out of a total 1,108 rigs that week. Another 81 rigs were drilling directionally while the vast majority--927 rigs--worked on vertical wells.

In the succeeding years, horizontal drilling largely stayed below--sometimes well below--100 rigs. That is, until 2004, when the Barnett Shale [in Texas] began to glitter things up and everyone wanted to ride the shale trail. Then kicked off an upward trend of horizontal drilling that, except for the economic pullback of late 2008 to late 2009, continues to this day. [Also, horizontal rigs comprised less than one-third of oil-directed rigs in September 2008, and with a tripling of horizontal oil rigs since then, that share has increased to about 46 percent---please see my post "Domestic Oil Production Reversed Decades-Long Decline in 2009 and 2010," here. -- D.R.] 

Now the excitement of shale drilling is becoming an international phenomenon. Canada is several years into several shale gas and oil plays there; places such as Poland [please see my post "Marathon, Nexen to Jointly Explore Shale in Poland," here -- D.R.] and Germany are exploring their potential, and even Mexico has begun drilling its northern regions for shale gas which it regards as an extension of the US' frenzied Eagle Ford Shale in South Texas, a bonanza which contains both oil and gas [please see remarks below -- D.R.].

Still, not all shales require horizontal drilling. Small oil-focused Venoco, which held a nearly two-hour conference call this week and spoke at length about its pioneering Monterey Shale operation onshore southern California, said it expects vertical wells are the most likely way to develop that oil pool. However, with only one rig drilling Venoco's slice of the Monterey for the rest of the year, it appears to be the exception that proves the rule. [Full story]

(Since 1944 the highest weekly U.S. rig count was 4,530 recorded on December 28, 1981, the height of the oil boom. The lowest rig count of 488 was recorded on April 23, 1999. In Canada the highest weekly rig count of 718 was recorded on February 17, 2006. The lowest weekly rotary rig count of 29 was recorded on April 24, 1992---please see my post > remarks, here. Separately, please see my post/table "Estimated Shale Gas Technically Recoverable Resources for Select Basins in 32 Countries -- EIA," including China, Argentina, Mexico, Australia, Canada, Poland, France, etc., here. Also, please see my post "China Plans to Exploit its Shale Gas Resources," here.  Mexico's state-owned oil company Petróleos Mexicanos/Pemex, said in March it had produced its first shale gas from an exploratory well at the Eagle Ford Shale formation in the northeastern state of Coahuila in February. -- D.R.)