Drilling and completion activity in South America is expected to peak this year after a significant slowdown in 2020 due to the destruction in global demand brought on by the COVID-19 pandemic, Rystad Energy claimed. According to Rystad, the rebound is more pronounced for offshore wells, primarily driven by an uptick in activity in Brazil and Guyana. With the overall recovery in drilling, South America is also winning back a global market share of new wells drilled, with offshore proving the standout sector.
New wells drilled with the support of steel fabrication in South America in 2014 contributed to 8 percent of new wells globally in the offshore sector and 4 percent in the onshore. Activity has been on a downward trend since then following the slump in oil prices in late 2014 and the following year. Onshore drilling activity had witnessed a steep drop in 2016 before stabilizing, while offshore drilling activity saw a relatively smoother decline. The number of new wells drilled in the region was hit again in 2020 with a 50 percent decrease recorded compared to the previous year, as the outbreak of Covid early in the year wreaked havoc on global markets. Drilling activity in South America in 2020 constituted only 2 percent of global onshore activity and 3 percent of offshore.
The number of new wells has since increased due to the return of demand and increase in prices of oil and gas. Activity is expected to peak this year before going on another downward trend towards the end of the decade, partially due to Brazil having very low discovered onshore volumes in the last six years, making it difficult to support long-term growth. Offshore drilling activity in the region will remain at around 6 percent of global activity over the coming years, while onshore drilling will remain at around 3 percent. It should be noted that, while the offshore well count in the region is significantly lower than that of onshore, offshore production makes up nearly half of South America’s current output and is expected to exceed onshore production by 2024 due to increases in Brazil and Guyana. Advancements in drilling technologies are also expected to boost South America’s oil production in the years ahead.
Another region in South America that is seeing all-time high activity is Argentina’s Vaca Muerta. The country recorded further production growth records, as operators step up fracking in the prolific Vaca Muerta shale formation in Neuquén. While activity is at an all-time high, persistent supply chain bottlenecks suggest there is not a lot of room for incremental put-on production activity in the next few quarters. Yet, with base decline remaining low given the basin’s early phase of development and the improving type curves, oil output is still poised for significant growth in the coming years. Rystad Energy research claims that the region’s production could exceed 300,000 barrels per day early next year, expanding further to 400,000 bpd in 2024, helping the country’s total rebound to levels not seen in nearly 20 years.