07/16 Closing Prices / revised 07/17/2024 08:15 GMT |          07/16 OPEC Basket  $84.44   -$0.87 cents 07/16 Mexico Basket (MME) $74.97   -$1.06 cents  | 06/31 Venezuela Basket (Merey)  $69 23   -$1.22 cents| 07/16 NYMEX WTI  August CLQ24  $80.76 -$1.15 cents  | 07/16 ICE Brent Sept  BRNU24 $83.73 -$1.12 cents  | 07/16 NYMEX Gasoline Aug RBQ24 $2.48 -0.6 %  |  07/16 NYMEX  Heating Oil  Aug  RBQ 24   $2.47  -1.8% | 07/16 Natural Gas August NGQ 24    $2.19 +1.4%  | 07/12 Active U.S. Rig Count (Oil & Gas)    584  -1  | 07/17 USD/MXN Mexican Peso   17.6789 (data live)  | 07/17 EUR/USD   1.0910 (data live)  | 07/17 US/Bs. (Bolivar)   $36.5060000 (data BCV)

Oil’s Other Strategic Reserve Is Running Low, Too – WSJ (video)

The inventory of drilled but uncompleted wells declined rapidly during the pandemic but has stabilized in recent months

A preference for fracking oil wells over drilling has led to a decline in the number of drilled but uncompleted wells since August 2020. (AP)

Jinjoo Lee, WSJ

EnergiesNet.com 11 10 2022

Drill, baby, drill?

After seeing oil demand plunge in 2020, U.S. producers’ mantra switched to “frack, baby, frack” as they paused drilling new rigs in favor of completing—or fracking—wells that had already been drilled. Drilling is just the first step in shale formations. Fracking, a process that involves the injection of water, sand and chemicals into the drilled well, actually gets the oil out of the ground. 

Producers’ preference for completion over drilling has led to a steep decline in the number of drilled but uncompleted wells, or DUCs, since August 2020. That inventory is at five-year lows, according to Rystad Energy data. While the U.S. Energy Information Administration counts all available DUCs, Rystad and S&P Global Commodity Insights prefer to track wells that are no more than two years old, because they are likely to be completed at a later date. Any older, and the chances of completion get much slimmer.

A depletion of DUC inventory is problematic because a steady supply is needed to “maintain and grow production levels, avoid operational delays” and offset production declines from existing wells, according to a white paper published by energy-focused investment firm Bison Interests earlier this year. That last point is especially important for U.S. shale: Much like soda spurting out of a shaken can, their output peaks quickly.

Typically, the industry would see a steady build of DUC inventory if the ratio of fracking fleet to rigs is around 2.6 or 2.7 to 1, according to Justin Mayorga, shale-research analyst at Rystad Energy. That is partly because it takes less time to complete wells than to drill them: about 17 to 20 days to drill and 6 to 10 days to complete, he said. In some cases, frack crews are able to complete multiple wells at the same time using a technique called simul-frac. Today, that ratio has recovered to roughly 2.6 from a low of 1.7 in January 2021, according to Rystad Energy data. 

Fortunately, the number of so-called live DUCs has stabilized in recent months as more wells are being drilled than completed. Matt Andre, energy analyst at S&P Global Commodity Insights, said that DUC inventory is likely to increase in the coming months. The reason, though, isn’t encouraging for those rooting for lower energy prices: The number of frack crews is growing at a slower pace than rigs, implying more tightness in equipment and labor for fracking than drilling.

Supply-chain issues are making it tough to get more equipment and tools, including fracking sand, while oil-field service workers who were laid off in droves in 2020 are reluctant to return. Compared with four years ago, the last prepandemic year when Brent crude prices went above $80 a barrel, there are 28% fewer frack crews and 30% fewer oil-focused rigs in the U.S., according to data from Primary Vision Network and Baker Hughes, respectively.

The industry is getting its DUCs in a row, but the work is far from complete.

Watch video: After authorizing the largest release ever from the U.S. emergency strategic petroleum reserve, the Biden administration is signaling it will soon try to refill the stockpile. WSJ explains how this strategy can lower gas prices, and why some are skeptical that it will work. Illustration: Ali Larkin

Write to Jinjoo Lee at jinjoo.lee@wsj.com

wsj.com 11 09 2022

Share this news

Support EnergiesNet.com

By Elio Ohep · Launched in 1999 under Petroleumworld.com

Information & News on Latin America’s Energy, Oil, Gas, Renewables, Climate, Technology, Politics and Social issues

Contact : editor@petroleuworld.com

CopyRight©1999-2021, EnergiesNet.com™  / Elio Ohep – All rights reserved

This site is a public free site and it contains copyrighted material the use of which has not always been specifically authorized by the copyright owner.We are making such material available in our efforts to advance understanding of business, environmental, political, human rights, economic, democracy, scientific, and social justice issues, etc. We believe this constitutes a ‘fair use’ of any such copyrighted material as provided for in section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those who have chosen to view the included information for research, information, and educational purposes. For more information go to: http://www.law.cornell.edu/uscode/17/107.shtml. If you wish to use copyrighted material from this site for purposes of your own that go beyond ‘fair use’, you must obtain permission fromPetroleumworld or the copyright owner of the material.

Scroll to Top