A slow, gradual recovery for global land rig demand is expected following the COVID-19 induced downturn in 2020, according to an analysis from Westwood Global Energy Group, the specialist energy market research and consultancy firm
The analysis has further revealed that the demand is estimated to return to pre-pandemic (2019) levels by 2025.
As drilling activity plummeted across the globe over the course of 2020, operational rigs are estimated to have fallen around 25%, contracting from around 4,570 to around 3,530. Utilisation levels followed suit falling to an estimated approximately 40%, similar to the downturn levels of 2016.
While a recovery is anticipated year-on-year over the forecast period, it is expected to be gradual and characterised by operator caution as they navigate several important considerations – pace of global demand recovery, the energy transition and geopolitics.
There will also be significant regional variances to contend with. Countries with E&P landscapes dominated by NOCs are expected to lead recovery.
Ben Wilby, senior analyst at Westwood, said, “The global market is expected to remain significantly oversupplied throughout the forecast period. China is anticipated to lead rig demand, while strong growth is expected in the GCC. However, both Latin and North America experienced significant demand contractions in 2020, and are not expected to recover to 2019 levels, particularly in North America, over the forecast period.”
However, the analysis also highlights areas of potential upside to Westwood’s Base Case forecast. Momentum in the development of unconventional reserves in China, Argentina and Colombia could result in stronger than forecasted rig demand. Similarly, additional demand could come from the sanctioning of projects that have seen long delays in the past, including large-scale developments in Australia. Sustained levels of higher commodity pricing and demand recovery could also encourage US onshore operators to increase the rig count and drilling of new wells.
