Saudi gas rigs drop sharply

International drilling activity continued to decline last month, the second straight month of decreasing rig counts, according to Baker Hughes International Rig Count.

A net eight rigs shut down in June, meaning there are now 959 rigs drilling internationally. 959 operating rigs is the lowest international activity level since last December, and is in line with the activity seen at this point last year.

The decrease was primarily driven by the Middle East, where nine rigs shut down. Like in most months, the shift in Middle Eastern rig count was dictated by Saudi Arabia, as the country saw eight rigs come offline last month. Saudi drilling activity shifted heavily in favor of oil drilling, returning the kingdom to a more traditional focus on oil. Twelve gas-targeting rigs shut down last month, while four oil-targeting rigs began drilling.

For decades Saudi Arabia is rightfully known as an oil producing country, and it currently only produces about 10 Bcf/d of gas, compared to American output of over 70 Bcf/d. However, the kingdom is in the process of developing several gas fields, and gas drilling is definitely on the rise.

In fact, over the past five months the country’s gas and oil rig counts have been roughly equal. Gas and oil drilling have also been comparable in Saudi Arabia in the early 2000s and in late 2010.

International Rig Count Falls - Middle East Slows

Source: EnerCom Analytics

Other shifts in Middle Eastern activity were much more minor. Two rigs began drilling in Egypt, while one shut down in Oman, Pakistan and Qatar. In total there are now 392 rigs operating in the Middle East.

Venezuela rig count slide eases

The largest regional increase was seen in Latin America, where six rigs began drilling.

This is a welcome development for the region, as last month saw the lowest rig count in at least 36 years. Most countries in the region saw some sort of rig count shift, only four showed flat rig counts. The overall increase was driven in large part by Argentina, where five rigs began operations. Three also came online in Mexico and one began drilling in Chile. One rig shut down in Ecuador and Trinidad and Tobago.

Venezuelan rig counts continued to slide, with two rigs coming offline last month. This is a much smaller decline than the eight that stopped drilling in April and May, but there are now only 26 rigs active in the country. With the exception of rapid declines in rig counts due to strikes, this is the lowest rig count seen in Venezuela in almost exactly 30 years, the last time there were only 26 rigs in the country was July 1988.

International Rig Count Falls - Middle East Slows

Source: EnerCom Analytics

Activity shifts in other regions were more minor.

Three rigs came offline in Asia-Pacific, driven by a general decline in activity. Two also shut down in Europe, mostly driven by the Netherlands, where all three rigs stopped drilling. The Netherlands have seen a rig count of zero in only one other period in the past 36 years, March and April last year.

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