DEPARTMENTS • OIL & GAS MARKETS
Is the oil and gas industry
really underinvesting?
Wood Mackenzie says no
Plans for onshore drilling in Zimbabwe, Nigeria and Ghana are moving ahead
and will likely boost the Sub-Saharan rig count in the coming year.

Westwood: M&A deals and new drilling plans likely
to keep global onshore rig demand on upward trend
Onshore drilling activity remained
strong in Q2 2023, with global rig
demand on an upward trend, according
to Westwood Global Energy Group’s Q2
report issued in July.

Several big M&A deals were announced
in this quarter, including the merger of
Patterson-UTI and NexTier, forming a
$5.4 billion oilfield services company.

The UK’s INEOS Energy also entered the
US market with its purchase of 172,000
acres of Chesapeake Energy’s Eagle Ford
shale assets. In Canada, ConocoPhillips
purchased TotalEnergies’ 50% stake in
the Surmont oil sands. In Latin America,
Seacrest Petróleo acquired Petrobras
Norte Capixaba’s onshore assets, estab-
lishing itself as the third-largest onshore
oil and gas producer in Brazil.

Several drilling campaigns also
recently secured funding, signifying
renewed interest in onshore projects. For
example, ConocoPhillips announced it
had approved funding for the develop-
ment of the Nuna project in the Kuparuk
River Unit in Alaska. The drilling cam-
paign is expected to begin after pipeline
installation is completed next year, with
first oil in early 2025. Another example
is Invictus Energy, which raised $12.7
million in capital to begin the next phase
of drilling the Mukuyu-2 appraisal well
12 in the Cabora Bassa basin of Zimbabwe.

Exalo’s 202, a 1,200-hp rig, has been con-
tracted to drill the well.

Also in Africa, TotalEnergies is now
planning to kick off its delayed drilling
campaign at the OML 58 onshore block
in Nigeria. Drilling is expected to begin
in 2024 and last for two to three years.

In Ghana, the Ghanaian National
Petroleum Corp (GNPC) plans to start
its onshore exploration program in the
Voltaian Basin in 2024. GNPC has been
building capacity for exploration since
2017. It will tender for a rig in late 2023
or 2024.

In Latin America, Gran Tierra Energy
and Ecopetrol agreed to a 20-year exten-
sion for the Suroriente Block. A novel
term was added in the contract that
allows for long-term investment in work
programs and infrastructure to boost oil
recovery efficiency in existing fields, as
well as the incorporation of appraisal
drilling. Gran Tierra has committed to a
$123 million capital investment program
for the block.

Activity also remained strong in the
Gulf Cooperation Council region, with
multiple contracts awarded in Oman,
UAE and Kuwait for work scopes encom-
passing well intervention, water/gas
injection, and rig equipment servicing.

Despite concerns about underinvest-
ment in upstream, peak oil and gas demand
can be met in the 2030s without a substan-
tial increase to current annual investment
levels of $500 billion, according to a recent
report from Wood Mackenzie.

Current upstream spending is a little
more than half of the 2014 peak of $914
billion (in 2023 terms), according to the
report . This shortfall has led to the indus-
try’s belief that it is underinvesting .

“This was never Wood Mackenzie’s
opinion” said Fraser McKay, Head of
Upstream Analysis for Wood Mackenzie.

“Our long-held view has been that spend-
ing and supply would rise to meet recover-
ing demand and that the upstream indus-
try would not and could not reprise the
ignominious years of ‘peak inefficiency’
during the early 2010s.”
From 2024, Wood Mackenzie predicts oil
demand growth will slow, reaching a peak
of 108 million bopd in the early 2030s.

The firm cited three main reasons for
why it believes that spend levels not much
higher than the current run-rate can deliv-
er the supply needed to meet demand
through to its peak and beyond : the devel-
opment of giant low-cost oil resources,
relentless capital discipline and a trans-
formational improvement in investment
efficiency. “Conventional greenfield unit develop-
ment costs have been slashed by 60% in
2023 terms” Mr McKay said . “And US tight
oil wells generate nearly three times more
production today for the same unit of capi-
tal than in 2014. New technology, capital
efficiency and modularization have been
leveraged to powerful effect.”
Most of the industry’s oil and gas invest-
ment for the rest of this decade will target
advantaged resources: those with the low-
est cost, lowest emissions and least risk.

Beyond that, new supply will become more
expensive to develop.

“Counterintuitively, the half-a-trillion
run rate will need to be maintained beyond
peak demand,” Mr McKay said.

Wood Mackenzie calculates nearly $400
billion per year would be required in the
2020s and nearly $250 billion a year in the
2030s (in 2023 terms) .

SEPTEMBER/OCTOBER 2023 • DRILLING CONTRACTOR