A brighter outlook for the tight oil industry?

tight oil industry, oil
The US tight oil industry was hit particularly hard in 2020, a year that was one of the most disruptive for global oil and gas markets. The rig count – generally viewed as an overall barometer of US onshore activity – and horizontal oil-focused drilling in the country, the main driver of the US’s oil production growth in 2017 – 2019, collapsed by approximately 75% through 2Q20.

This article was originally published by , Deputy Editor Oilfield Technology,  See credits.

The downturn in 2020 was unprecedented and so was the plunge in rig activity levels, which was far more severe than any of the previous corrections. As oil prices recovered towards US$40/bbl in 3Q20, the oil rig count bottomed out and many producers cautiously started to redeploy them. The gradual recovery trend has become more visible in recent months, with the horizontal oil-focused rig count surpassing 270 units as of 12 February 2021, 80% higher than the 2020 low of 149 touched in August (Figure 1). Gas-focused drilling in the Appalachia and Haynesville regions also experienced a severe decline of approximately 60% through 2H19 and 1H20. The gas rig count stabilized in 3Q20 and select Haynesville producers have marginally increased their activity in the last few months.

tight oil industry rig count graph
Figure 1. US land horizontal rig count by main hydrocarbon type.

Fracking activity

While the recovery in rig activity could at best be characterized as gradual, fracking activity – a more important indicator of short-term production potential – saw a robust rebound in 2H20 (Figure 2). Fracking activity declined faster than drilling in 2Q20 as many producers were able to ‘freeze’ or delay their pressure pumping contracts at no additional cost. That resulted in an abnormal bulge in the country’s drilled but uncompleted (DUC) well inventory, as many wells that were drilled in 4Q19 and 1Q20 were not completed on schedule in 2Q20. Hence, the cumulative DUC inventory provided the industry with ample flexibility in 2H20 and many producers were able to increase their frac activity while maintaining a conservative rig program. The existing anomaly in the DUC inventory will provide significant support to nationwide fracking deep into 1H21.

Figure 2. Permian started frac operations by week in 2020.

Tight Oil Industry Frac Summary

Rystad Energy has identified 909 started frac operations in North America for January, as of the week ended 12 February. Rystad estimates that there are at least 50 frac operations that it has not yet detected through satellite imagery analysis or the FracFocus registry, for a total of 959 jobs. As for February 2021, Rystad has already identified 201 jobs, 200 of which were identified exclusively by satellite analysis. Activity in the Permian Basin was strong in January, with 438 identified fracs, a large increase from the 249 recorded in December. In other US core oil plays, however, there was stagnation, as the frac count stayed at close to 200. There was a slight decline in South Texas’ Eagle Ford, to 70 in January from 83 in December, which was, however, offset by the addition of 10 fracs in the Niobrara and five fracs in the Bakken regions. Further to the identified frac jobs, Rystad estimates an additional 28 jobs in the Permian, eight in the Eagle Ford, and 14 in other basins for January 2021.

The weekly job count in major oil regions other than the Permian – the Eagle Ford, Bakken, Niobrara, and Anadarko combined – hovered around 40 jobs per week in September and October, but the run rate of activity increased to 60 jobs per week in November, due to the unusual spike in activity in early November in the Niobrara region.

CREDITS: This is an abridged version of an article originally published in Issue 1 2021 of Oilfield Technology magazine. To read the full article regarding the tight oil industry,  follow the link to the issue and turn to page 10: https://bit.ly/3cAmyDU. And to sign up to receive a free regular digital copy of the magazine, follow this link: https://www.oilfieldtechnology.com/magazine/oilfield-technology/register/

OKLAHOMA MINERALS, EDITORS NOTE:  The Tight Oil Industry Defined

Tight oil (also known as shale oilshale-hosted oil or light tight oil, abbreviated LTO) is light crude oil contained in petroleum-bearing formations of low permeability, often shale or tight sandstone. Economic production from tight oil formations requires the same hydraulic fracturing and often uses the same horizontal well technology used in the production of shale gas. While sometimes called “shale oil”, tight oil should not be confused with oil shale, which is shale rich in kerogen, or shale oil, which is oil produced from oil shales.  Therefore, the International Energy Agency recommends using the term “light tight oil” for oil produced from shales or other very low permeability formations, while the World Energy Resources 2013 report by the World Energy Council uses the terms “tight oil” and “shale-hosted oil”.

Tight Oil Industry InfoGraphic

Shown are conceptual illustrations of types of oil and gas wells. A vertical well is producing from a conventional oil and gas deposit (right). Also shown are wells producing from unconventional formations: a vertical coalbed methane well (second from right); a horizontal well producing from a shale formation (center); and a well producing from a tight sand formation (left).

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