The number of active oil and gas rigs across the US has fallen for the first time in three weeks, according to a report from energy services provider Baker Hughes.
The oil and gas rig count, an early indicator of future oil and gas output, decreased by three to 586 last week (ending 2 August).
Baker Hughes also reported that the total rig count fell by 11% compared with the same time last year.
The number of oil rigs remained at 482, but the rig count for natural gas fell to 98, according to Baker Hughes.
In the Denver-Julesburg-Niobrara basin drillers cut one rig, bringing the total to nine, the lowest number since June 2021.
The number of active rigs in the Marcellus Shale also fell by one to 24; the lowest in that region for almost four years.
Drillers also cut one rig in the Permian Shale in West Texas and eastern New Mexico, taking the total down to 303, the lowest since 2022. Texas cut two rigs, bringing the total down to 224, also the state’s lowest since January 2022.
The only state to increase its rigs was California where drillers added one rig, bringing the total up to eight, the highest since January 2022.
Across the US, the total count of oil and gas rigs decreased by 20% in 2023, following increases in 2022 (33%) and 2021 (67%).
Energy companies have begun cutting their rigs, according to Reuters, due to a decline in oil and gas prices, increasing labour and equipment costs and shifting focus on paying down debts and boosting shareholder returns instead of raising output.
According to Offshore Technology’s parent company, GlobalData, onshore oil production in the US is projected to increase by just 3.65% between 2023 and 2024. The small increase in oil production and decrease in the oil and gas rig count highlight a fall in demand for oil and gas.
While a decrease in price and increasing labour and equipment costs are significant factors, the rollout of cheaper and more renewable energy technologies is also likely to have affected the market.
According to GlobalData, renewable energy capacity in the US is set to increase from 9,101GW in 2023 to 9,769GW in 2024.
The implications of cuts to oil and gas rigs follow the trend of the energy transition.
The more oil and natural gas rigs that are cut, the less carbon emissions that are omitted into the atmosphere.
According to the US Energy Information Administration's Short Term Energy Outlook, the US is forecast to generate 21 billion fewer kilowatt-hours of natural gas in the second half of 2024 than in 2023.
A decrease in the oil and gas rig count, highlighted in the Baker Hughes report, and an increase in renewable technologies deployed in the US likely results in a continued amount of oil and gas rigs being cut across the country.
