U.S. is world's top crude oil producer despite slashing rig count - Marketplace

U.S. is world's top crude oil producer despite slashing rig count - Marketplace

More oil, fewer rigs: how the U.S. became the world’s top producer

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More oil, fewer rigs: how the U.S. became the world’s top producer

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The U.S. produces more crude oil than any other country on the planet. That fact would’ve sounded absurd just a decade ago, and even more absurd that we’re producing all that oil with far fewer rigs.

As the Energy Information Administration reported Tuesday, the number of active oil rigs in the U.S. has fallen by nearly 70% since 2014, even as our production has continued to break records.

The oil industry used to just set up rigs in places where there might be oil, drill straight down and hope for the best.

But in the last couple of decades, some important technological developments have come along. Among them, horizontal drilling, said Tom Seng at Texas Christian University.

“When you drill horizontally, you’re going through sort of, let’s call it the meat of the oil area there, the pay zone.”

And because those horizontal wells can extend 10,000 feet or more, Seng said, they reach a lot more oil than vertical wells.

Another big change is data. He said digital sensors and imaging techniques help companies find oil deposits a lot faster.

“The drilling engineer is literally steering these drill bits based on real-time information that the operator is receiving,” he said.

As all of these technologies have matured and improved, oil rig efficiency and production has gone up. But financial pressures are at work too.

“The costs to drill new wells are quite high right now,” said Ellen Wald at the Atlantic Council’s Global Energy Center.

Cement, steel and other materials needed for new rigs grew more expensive over the last few years. And investors, she said, are pushing oil companies to deliver higher profits.

“If companies can get more out of the wells they have, then they can, you know, they can make more profit by drilling fewer wells,” said Wald.

That drive for efficiency and profit also helps explain why larger oil companies have been buying up a lot of smaller ones. “It’s some of the smaller companies that have been driving a lot of the innovation,” said Hugh Daigle at the University of Texas at Austin.

So, if you can’t beat ‘em … buy ‘em?

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