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Thursday, May 22, 2025

Rig count as a measure of energy activity

by

20 days ago
20250429

Rig count is a stan­dard mea­sure of ac­tiv­i­ty in the oil and gas in­dus­try. It refers to the num­ber of ac­tive drilling rigs in op­er­a­tion at any giv­en time. It is a key in­di­ca­tor for the health of the in­dus­try and al­so a good in­di­ca­tor for fu­ture pro­duc­tion, in­vestor con­fi­dence and the de­mand for en­er­gy sup­port ser­vices, es­pe­cial­ly for drilling-re­lat­ed ser­vices and pro­vi­sion of equip­ment.

Rig count can be im­pact­ed by a num­ber of ex­ter­nal fac­tors like in­ter­na­tion­al en­er­gy com­mod­i­ty prices, drilling costs, mar­ket ex­pec­ta­tions, cap­i­tal al­lo­ca­tion strate­gies and even tech­nol­o­gy changes and im­prove­ments.

In­ter­na­tion­al­ly, most of the drilling ac­tiv­i­ty for both on­shore and off­shore, comes from the North Amer­i­can re­gion (US & Cana­da).

In 2024, there were 787 ac­tive drilling rigs in North Amer­i­ca ver­sus 948 in the rest of the world. How­ev­er, the North Amer­i­can drilling rigs are pre­dom­i­nant­ly on­shore.

When we look at off­shore rig count, the Asia Pa­cif­ic re­gion has the most ac­tive rigs; in 2024 it in­creased to a 10-year high of 100 ac­tive rigs while the av­er­age num­ber of ac­tive rigs is around 85, high­er than any oth­er re­gion. The ma­jor­i­ty of off­shore drilling in this re­gion comes from Chi­na and In­dia.

The Latin Amer­i­can re­gion (which in­cludes T&T, Guyana and Suri­name) had 37 ac­tive rigs in 2024, com­pared to 62 in 2015.

It can be seen in the chart that drilling ac­tiv­i­ty typ­i­cal­ly drops sig­nif­i­cant­ly when there were ma­jor price shocks, for ex­am­ple, post-2015 and 2020. Each time, there was some lev­el of re­cov­ery, but the to­tal num­ber of ac­tive off­shore drilling wells in 2024 is 82 rigs few­er than the high in 2015. The 2015 price drop marked a ma­jor shift in the oil and gas in­dus­try, and most ma­jor com­pa­nies al­lo­cat­ed sig­nif­i­cant­ly less cap­i­tal to ex­plo­ration and de­vel­op­ment af­ter 2015, even in pe­ri­ods of high­er prices (such as 2022).

Read­ers in T&T may re­mem­ber that there were six drill­ships parked up in the Gulf of Paria af­ter 2015. They were tak­en out of ser­vice be­cause of the lack of de­mand.

The cur­rent fall in oil prices will like­ly im­pact fu­ture rig count, es­pe­cial­ly if it is sus­tained over many months.

There have al­so been in­creas­ing costs of pro­duc­tion for off­shore drilling ac­tiv­i­ty in­clud­ing sup­ply chain is­sues lead­ing to de­lays and cost in­creas­es. The cur­rent trade war be­tween the US and Chi­na will like­ly fur­ther dis­rupt sup­ply chains.

In the past few years some ma­jor en­er­gy com­pa­nies shift­ed their in­vest­ment port­fo­lio to in­clude more re­new­ables and low-car­bon ini­tia­tives, though this has shift­ed back to­wards fos­sil fu­els for many com­pa­nies more re­cent­ly. Nev­er­the­less, the in­dus­try con­tin­ues to be char­ac­terised by dis­ci­plined cap­i­tal al­lo­ca­tion and we may nev­er see be­ing re­peat­ed the heights of glob­al ac­tiv­i­ty record­ed in 2015.


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