Market Snapshot: Canada’s drilling-rig fleet reflects a decade of economic and technical changes

Release date: 2016-11-30

The size of the Canadian drilling-rig fleet and its composition by depth rating reflect economic and technical trends in oil and gas development. The rig fleet is all of the drilling rigs able to drill wells whether those rigs are working on a wellsite, being transported to or from a wellsite, or are in a service yard and waiting to be rented. Depth rating refers to the maximum vertical depth at which a rig is recommended to drill.

Source and Description

Source: JuneWarren-Nickles, EIA

Description: This stacked area chart illustrates the average weekly size of the rig fleet in Canada from 2000 to 2016. The rig fleet steadily increased from about 600 in 2000 to over 850 in 2007. The number of rigs slightly decreased to 800 by early 2014. Since 2015, the fleet has fallen to below 700 rigs.

From 2000 to 2007, all segments of the Canadian rig fleet grew as the prices of oil and natural gas rose. The number of shallow-rated rigs grew because higher gas prices made shallow-gas drilling in southeast Alberta and southwest Saskatchewan increasingly economic. Meanwhile, the number of medium-, deep- and ultra-deep rated rigs grew because of increased vertical drilling to develop stacked, tight-gas sandstones in Alberta’s Deep Basin.

Oil prices rose from about US$30 per barrel to almost US$100 per barrel in 2007 and remained relatively high until 2015, when they fell to below US$50 per barrel. Barrel-of-oil-equivalent (BOE) natural gas prices rose from about US$25 per barrel in 2000 to about US$50 per barrel in 2005, but have fallen since 2008 to about US$15 per barrel in 2016.

From 2000 to 2007, all segments of the Canadian rig fleet grew as the prices of oil and natural gas rose. The number of shallow-rated rigs grew because higher gas prices made shallow-gas drilling in southeast Alberta and southwest Saskatchewan increasingly economic. Meanwhile, the number of medium-, deep- and ultra-deep rated rigs grew because of increased vertical drilling to develop stacked, tight-gas sandstones in Alberta’s Deep Basin.

From 2008 to 2014, the price of natural gas fell significantly while the price of oil remained relatively high. Although the size of the rig fleet decreased only slightly over this period, the number of shallow- and medium-rated rigs fell significantly because new shallow-gas drilling and vertical tight-gas drilling had become uneconomic. Meanwhile, the number of deep and ultra-deep rated rigs kept growing because of widespread adoption of horizontal drilling and multi-stage hydraulic fracturing to develop deep formations that produce tight oil, shale gas, and tight gas. These gas projects remained economic despite lower gas prices because of drilling efficiencies and increased targeting of liquids-rich gas (prices for the co-produced liquids, including propane, butane, and condensate, were more correlated to then-high oil prices).

Since 2014, the Canadian rig fleet has shrunk considerably due to falling commodity prices, this time including a steep drop in oil prices. Most of the decrease in fleet size has been from removal of shallow- and medium-rated rigs, as well as removal of some deep-rated rigs.

 

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