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US drillers add most oil rigs
January 14, 2018
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NEW YORK: US energy companies added 10 oil rigs this week, the biggest increase since June, as crude prices rose to their highest levels in three years, prompting drillers to return to the well pad.

The total rig count rose to 752 in the week to Jan. 12, the most since September, General Electric Co’s Baker Hughes energy services firm said in its closely followed report on Friday.

The US rig count, an early indicator of future output, is much higher than a year ago when only 522 rigs were active after energy companies boosted spending plans in 2017 as crude started recovering from a two-year price crash.

The increase in US drilling lasted 14 months before briefly stalling in the second half of last year as some producers trimmed their 2017 spending plans after prices turned softer over the summer.

“Drilling activity may not be up every week, but we continue to expect growth through the first quarter of 2018 and longer if prices hold,” James Williams, president of WTRG Economics in Arkansas, said in a report this week. US crude futures traded around $64 a barrel this week, near its highest since December 2014. That compares with averages of $50.85 in 2017 and $43.47 in 2016. Looking ahead, futures were trading around $62 for the balance of 2018 and $58 for calendar 2019.

In anticipation of higher prices in 2018 than 2017, US financial services firm Cowen & Co said 23 of the roughly 65 E&Ps they track have already provided capital expenditure guidance for 2018 indicating a 12 per cent increase in planned spending over 2017.

Cowen said the E&Ps it tracks said they would spend about $66.1 billion on drilling and completions in the lower 48 US states in 2017, which was about 53 per cent over what they planned to spend in 2016. Analysts at Simmons & Co, energy specialists at US investment bank Piper Jaffray, this week slightly reduced their forecast for the total oil and natural gas rig count to an average of 996 in 2018 and 1,126 in 2019.

Last week, it forecast 997 in 2018 and 1,126 in 2019. There were 939 oil and natural gas rigs active on Jan. 12. On average, there were 876 rigs available for service in 2017, 509 in 2016 and 978 in 2015. Most rigs produce both oil and gas. Overall, US production is expected to rise to an all-time high of 10.3 million barrels per day in 2018 and 10.9 million bpd in 2019, up from 9.3 million bpd in 2017, according to a federal energy projection this week. US output peaked on an annual basis at 9.6 million bpd in 1970, according to federal energy data. Much of the production growth will be concentrated in the Permian Basin, the largest US oilfield stretching across Texas and New Mexico, said John Staub, the EIA director of the office of petroleum, natural gas and biofuels analysis.

Meanwhile, new onshore wind and solar energy projects are set to deliver electricity more cheaply than fossil fuels plants, with other green technologies also rapidly gaining a cost advantage over dirty fuels, a report published Saturday said.

According to a new cost analysis from the International Renewable Energy Agency (IRENA), within two years “all the renewable power generation technologies that are now in commercial use are expected to fall within the fossil fuel-fired cost range, with most at the lower end or undercutting fossil fuels”.

It expects renewables will cost between three and 10 US cents per kilowatt hour (kWh) by 2020, while the current cost spectrum for fossil fuel power generation ranges from five to 17 US cents per kWh.

“This new dynamic signals a significant shift in the energy paradigm,” said IRENA’s Director-General, Adnan Amin, in a statement.

“Turning to renewables for new power generation is not simply an environmentally conscious decision, it is now − overwhelmingly − a smart economic one,” he added.

Continued technological advancements are not the only factor helping drive down prices. The report found that the market was becoming more competitive and a number of experienced project developers had emerged in the sector.

The best onshore wind and solar PV projects are expected to deliver electricity for three US cents or less by next year.

But onshore wind and solar are not the only sectors becoming more competitive rapidly. The study found that new bioenergy and geothermal projects commissioned in 2017 had global weighted average costs of around seven US cents per kWh.

IRENA said auction results suggest that two other technologies --concentrating solar power (CSP) and offshore wind − will provide electricity for between 6-10 US cents per kWh by 2020.

Agencies

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