News & InsightsPress Releases

More Modest Outlook for Global Land Rig Market 2015-2019 Due to Current Low Oil Price Environment

By February 6, 2015 November 28th, 2019 No Comments

More Modest Outlook for Global Land Rig Market 2015-2019 Due to Current Low Oil Price Environment

Given the current economic conditions, there is a more modest outlook for the global land rig market through to 2019, as detailed in Douglas-Westwood’s new World Land Drilling Rig Market Forecast 2015-2019. The report includes the very latest market outlook based on DW Drilling & Production data and reflects the current low oil price environment. The recent decline in oil price is expected to result in a 19% drop in onshore wells drilled in 2015, with several operators having announced planned reductions in expenditure. This expected fall in drilling activity is likely to have a significant impact on rig demand, with the global operational and active rig populations forecast to decline by 11% and 12% respectively in 2015.

Report author, Katy Smith, commented, “Based on a scenario in which the oil price returns to pre-crisis levels of $70-80 per barrel in 2016, the number of operational rigs is expected to rise by 19% over 2015-2019 as drilling activity recovers. Asia-Pacific is expected to see the largest regional increase in capable fleet size, with 230 units forecast to be added in 2015-2019.

“Increased well depths and drilling complexity have resulted in rising demand for high horsepower (HP) rigs, with the global number of active rigs rated over 1,250 HP having risen by 33% in 2010-2014. This trend is set to continue over the forecast period at a CAGR of 5%. More complex well drilling requirements are also expected to drive an increase in expenditure on components such as top drives over the 2015-2019 period. An increase in the number of rigs being converted to AC power, as well as the use of technologies such as pad drilling, is expected as operators seek to maximise the efficiency of drilling operations.”

Report editor, Steve Robertson, concludes, “There have been significant movement in the oil price and we have updated our views for 2015. Inevitably, there remains downside risk if the oil price weakens further and also upside potential if the oil price recovers in the coming months. Despite the fact that onshore drilling activity is comparatively lower-cost, high Capex offshore projects typically have much longer planning cycles and will usually be so exposed to oil price movements and particularly so once past FID and the major contract awards. We anticipate that a reduction in the US rig count will, given the rapid decline rates of unconventional wells, be a key mechanism by which excess oil supply is eroded and should help bring upward momentum back to the oil price.”

More Modest Outlook for Global Land Rig Market 2015-2019 Due to Current Low Oil Price Environment