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Global oil drilling recovery gains momentum

Oil and gas drilling in the US has recovered much of the momentum it lost after BP's recent accident in the Gulf of Mexico and will increase by almost 30% this year, experts predict.

According to industry technical trade journal World Oil's 2011 Upstream Forecast Report, continued shift in drilling from natural gas resources to oil this year, driven by rising oil prices and stagnant natural gas prices.

"Despite last year's six-month deepwater drilling moratorium in the Gulf of Mexico and slow permitting even in shallow water, many rigs stayed busy by performing workovers and other activities on existing wells," said David Cohen, managing editor of World Oil.

He estimates that 180 wells were drilled in US Gulf waters in 2010 and predicts a 27.8% increase this year to 230 new wells.

Outside of the US, drilling is estimated to have risen 10 % last year to an estimated 51,483 wells, with another 1.7% increase expected this year to 52,369 new wells, according to Nell Lukosavich, World Oil senior editor.

"The biggest increase will be in the Middle East, led by Saudi Arabia," said Lukosavich.

"Shale gas exploration operations will continue to gain momentum throughout Europe, with several aggressive projects scheduled in Poland and Germany."

Additionally, drilling is also expected to increase offshore Norway, the United Kingdom and Southeast Asia. Onshore South America, namely in Venezuela, Brazil and Colombia, is also predicted to see a boost in activity in 2011.

Onshore in the US the report expects that Texas will have the biggest increase in drilling this year with 2,847 more wells drilled than in 2010. The state's Eighth District alone, which holds the conventional Permian Basin oil play, will have an increase of more than 1,400 wells compared to last year, driven by rising oil prices. Texas has 12 oil and gas districts organized under the state Railroad Commission.

World Oil editor Pramod Kulkarni said: "The number of rigs drilling for oil in the US will likely overtake the number drilling for gas this year, after decades of gas-dominated drilling activity."

Kulkarni forecasts the average natural gas price at Louisiana's Henry Hub at $4.30 per thousand cubic feet (Mcf), about 9 cents less than the 2010 average. He also said that an extended period of oil prices above $100 per barrel was unlikely, given recent statements from OPEC indicating a willingness to produce its spare capacity in order to avoid this "unsustainable" price.