Supply & Demand Dynamics
Demand for Land / Onshore Drilling Rigs is directly influenced by the demand growth for fossil fuels and global onshore exploration and production activities. Well intervention and work-over activities have less impact on the demand for drilling rigs, due to other well intervention methods and technologies available. However, more wells do not necessarily mean more rigs. Newer rigs are more efficient and with pad drilling, fewer rigs are required to deliver the same or higher number of wells.
Oil price volatility hugely affects the demand for onshore drilling rigs, as fewer wells are drilled during the industry downturn. Historically, apart from Russia and the CIS, North America has held the largest share of demand, followed by the Middle East and Latin America. In the Middle East, Oman, Saudi Arabia and Kuwait are the biggest areas for land rigs. The onshore rig segment in the Middle East has exhibited one of the highest growth rates in the world over the last 20 years.
The demand patterns between the regions globally are slightly different, whereby most of the growth in North America is for hi-spec rigs (1,500/2,000 / 3,000 hp) used in horizontal drilling. Historically the Middle East and Russia have used lower specs rigs, with more demand for 2,000 hp rigs (and above) starting to build up from 2014 onwards.
Outside of Russia and the CIS, North America has been historically the largest market for land / onshore rigs of any type, followed by the Middle East. Regionally, around 75 % of the units are drilling rigs, with the rest being work-over units. The rig fleet in the GCC region has been growing significantly over the last several years, reaching close to 370, with major purchases in UAE, KSA, and Oman.
Latest global active land rig count (Source: Baker Hughes, various estimates for Russia and CIS)
Onshore rigs have different power supply mechanisms, i.e. SCR or AC. SCR is old technology, whereas AC-powered (with variable speed) rigs allows adjusting the load and torque as required. This not only provides drilling efficiency and control but consumes less fuel and reduces wear and tear. The majority of new onshore rigs globally are equipped with the AC power system. However, in the Middle East, the majority of onshore rigs are equipped with the SCR system. In the USA, around 70% of the land rigs are AC powered. It is expected that AC powered and rigs will dominate the increase in rig supply capacity around the world.
The Middle East market for onshore drilling rigs consists of national/domestic rig contractors, as well as international players, with the domestic companies prevailing and controlling more than 70% of the rig fleet (including work-over rigs). Below is an approximate distribution of rig contractors and owners in the GCC region. Around 40% of the rig count in the region is high spec 2,000hp to 3,000hp rigs, with circa 25% of the units being 1,500hp to 2,000hp rigs and c. 15% 1,000hp to 1,500hp rigs.
This information is as of Q4 2020 and based on various companies reports and presentations and our estimates. Counts of MB Petroleum, IDC and NDSC may require further verification on a number of rigs.
When it comes to the US market of land / onshore active drilling rigs, as of Q1 2021, the average market share and rig count by contractor/operator is as below. It is evident that there are 5 major players who dominate the US land rig business and control nearly 70% of the market.
This information is as of Q1 2021 and based on companies reports/presentations. The exact number of rigs and percentage will vary depending on the actual rig count of the week and when companies publish their reports. Only active drilling rigs are included in the estimation.