Shales may push onshore rig boom in South Africa by 2016

By Linda Hsieh, managing editor

Shale exploration and development will drive demand for high-horsepower onshore drilling rigs in South Africa from zero this year to nearly 60 by 2016, Calum Shaw of Douglas-Westwood said in a presentation at the 2012 IADC Drilling Africa Conference in Lisbon, Portugal, last week. This will make South Africa one of the epicenters of land drilling activity on the continent over the next five years, along with more mature markets such as Egypt and Algeria. In those regions, too, the increased application of deviated and horizontal drilling, as well as enhanced oil recovery technologies, are likely to boost demand for high-horsepower rigs, Mr Shaw said.

“This represents opportunities for rig contractors but also for manufacturers and oil service companies,” he continued. Overall, Douglas-Westwood currently counts approximately 7,200 land drilling rigs operating worldwide, including approximately 180 in Africa. “Going through to 2016, we think the global fleet will grow by about 40%, reaching 9,000, whereas the fleet in Africa we think will grow by about 70% and get close to 300,” he said.

In South Africa, the shale boom over the coming years will likely require rigs with 2,000 hp or higher in order to drill the sorts of depths needed. “The question mark is where these rigs are going to come from. … Moving drilling rigs around is not the easiest considering infrastructure challenges in Africa,” Mr Shaw observed. Another potential obstacle to the development of this market is the logistics of bringing in the significant amounts of water that would be required for hydraulic fracturing.

“Nonetheless we feel that there will be demand for close to 60 onshore land drilling rigs operating in South Africa come 2016,” he said.

In Egypt, Douglas-Westwood is forecasting a demand for 92 land drilling rigs by 2016, up from 53 in 2012. In Algeria, the company believes rig demand will increase from 53 to 55 over the same period.

Sudan is a more difficult country to forecast, Mr Shaw said, noting that the current political situation, including border disputes between Sudan and South Sudan, could have a negative effect on drilling activity, reducing its rig demand from 21 in 2012 to 16 by 2016.

Political unrest also continues to affect Libya, making it another region where rig demand is difficult to forecast, but Douglas-Westwood expects that by 2016 there should be a demand for 15 drilling rigs in the country, according to Mr Shaw.

In the short term, issues such as local content are likely to slow drilling activity in Nigeria, where approximately 12 onshore rigs are currently operating, he continued. In the long term, however, this is unlikely to curtail growth for one of Africa’s largest oil producers, and it’s expected that up to 16 land rigs will be operating in Nigeria in five years.

The African onshore drilling market is currently filled by a diverse mix of rigs from local, international and national oil company contractors. The top five contractors on the continent in terms of rig count are Egyptian Drilling Company, CNPC, two Sonatrach subsidiaries (ENTP and ENAFOR) and KCA DEUTAG, according to Douglas-Westwood.

“Over the next five years, we think there will be an increase in the local drilling rig contractors and national oil company drilling rig contractors,” Mr Shaw said. “We also see a strong Chinese presence at the moment, and we expect that presence to grow over the next five years as well.”