EIA: Oil producers must increase drilling to maintain production

The U.S. Energy Information Administration announced on Tuesday that oil and gas producers would need to increase drilling in order to maintain or increase production due to the rapid decline of existing wells.

WHY IT MATTER The U.S. has the largest oil production in the world, reaching a record of 13.8 million barrels a day in August. The weak oil price and increasing costs have forced energy companies to reduce billions of dollars in spending and slow drilling, slowing the growth of production.

OPEC+ - the largest grouping in the world of oil producing nations and their allies - has also been rolling back its production cuts to clawback market share.

CONTEXT The producers are drilling more horizontal holes, which allows them to recover oil and gas more quickly compared to vertical ones. In December 2024 horizontal wells produced 94% of the oil and 92% natural gas onshore. Horizontal wells are initially more productive than vertical wells, but then experience a rapid decline. The improvements in technology and efficiency have allowed producers to squeeze more oil from fewer wells. Those gains have slowed down. The best-performing acreage is shrinking, forcing producers to more expensive areas.

The oil production of wells that were brought online before 2023 fell by 4.3 millions bpd, to 6.7million bpd at the end of December 2024. These declines were offset in part by the addition of more than 15,000 horizontal wells, out of which 11,700 were added to service in 2024. The new wells were able to produce 4.4 million barrels per day of crude oil. This was enough to offset the declines in existing wells.

The natural gas production of wells that were put online before 2023 fell from 115.4 billion cubic feet per day down to 88.4 bcf/d. In December 2024, new wells will offset these declines and produce an average of 28 Bcf/d natural gas. Reporting by Arathy S. Somasekhar, Houston. Editing by Nathan Crooks & Mark Porter

(source: Reuters)