Oil and gas producers will need to step up drilling to sustain or increase output due to rapid declines in production from existing wells, the U.S. Energy Information Administration said on Tuesday.
WHY IT MATTERS
The U.S. is the world’s largest producer, with oil production touching a record 13.8 million barrels per day in August. However, weak oil prices and rising costs have pushed energy companies to cut billions in spending and moderate drilling, slowing production growth.
Meanwhile, OPEC+, the world’s largest grouping of oil-producing nations and its allies, has been rolling back production cuts to claw back market share.
CONTEXT
Producers are drilling more horizontal wells, which allow them to recover more oil and gas quickly after initial production compared to vertical wells. In December 2024, horizontal wells accounted for 94% of oil and 92% of natural gas produced onshore. However, horizontal wells have a high initial production rate, with a steep decline period that follows relative to vertical wells. Improvements in efficiency and technology mean producers are squeezing more oil out of fewer wells. However those gains are now slowing. Acreage with the best economics is thinning, pushing producers into more expensive areas.
Oil production from wells that came online in 2023 or earlier fell by 4.3 million bpd to 6.7 million bpd in December 2024. Those declines were offset by the more than 15,000 new wells that were brought online in 2024, about 11,700 of which were horizontal ones. The new wells produced 4.4 million bpd of crude oil, enough to overcome declines from existing wells.
Natural gas production from wells that came online in 2023 or earlier fell from 115.4 billion cubic feet per day to 88.4 Bcf/d. New wells offset those declines, producing an average of 28.0 Bcf/d of natural gas in December 2024.
(Reporting by Arathy Somasekhar in Houston: Editing by Nathan Crooks and Mark Porter)