Nearly 60,000 new wells were drilled and completed globally in 2017.This is a 14% increase compared to 2016, which represented the turning point following the downturn, and we expect continued growth in well demand towards 2020. An increasing number of wells being drilled and completed is undoubtedly good news for drilling and well service providers as this is a fundamental market driver for the industry.
Figure 1 shows the global well demand, meaning the number of new wells drilled and completed, per year by continent. This includes onshore and offshore wells for both development and exploration purposes. As the chart indicates, North American shale activity is the primary mechanism driving growth globally, only slightly offset by declining drilling activity in Asia. The number of new wells completed in North America increased 40% in 2017 and we expect 11% average annual growth towards 2020.
Figure 1: Number of wells drilled and completed by continent
The positive developments and promising outlook in global well count do, however, mask significant geographical variations and declining exploration drilling.
While development drilling grew strongly in 2017, nearly 15%, exploration drilling was cut by most operators because of budgets, contributing to disappointingly low volumes of discovered resources.Exploration drilling accounted for 3% of the wells in 2017.
The major markets for wells are North America, Asia & Australia and Russia. Together, these constitute 88% of new wells worldwide – roughly 52,500 wells per year. We expect well demand to remain flat in Asia towards 2020 and increase slightly in Russia. North America will continue to drive global growth. The smaller market segments consisting of Europe, Africa, South America and the Middle East account for the remaining 12% of new wells – roughly 7,400 new wells per year.
Figure 2 shows the average annual growth rate for the number of wells being drilled and completed towards 2020. We expect that several of the smaller market segments will continue to experience difficult or turbulent times, like in Africa where demand has yet to reverse on its declining trend. Contrarily, we expect well demand in the Middle East and South America to improve towards 2020.
Figure 2: Average annual growth rate for well demand from 2017 to 2020 by continent.
Drilling and well service providers exposed to the Middle East, Europe, Asia & Australia and Africa should not rely on increased drilling and completion activity in the medium-term. However, providers exposed in the American and Russian markets can expect increasing activity in the coming years as shale activity remains strong, new fields are developed and producing fields require increased infill drilling to counteract declining field rates.