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The United States produces more crude oil than any other country on earth. This fact would have sounded ridiculous just a decade ago, and it’s even more ridiculous that we’re producing so much oil with far fewer rigs.
As the Energy Information Administration reported Tuesday, the number of oil rigs in operation in the United States has fallen by nearly 70% since 2014, even as U.S. production continues to set records.
The oil industry used to put rigs where there was likely oil, drill straight, and hope it worked.
However, during the past few decades, several important technological developments have taken place. That includes horizontal drilling, said Tom Senn of Texas Christian University.
“When you drill horizontally, you’re going through the core of the oil field there, the toll zone.”
And because these horizontal wells can extend more than 10,000 feet, they can reach much more oil than vertical wells, Sen said.
Another big change is data. He said digital sensors and imaging technology will allow companies to discover oil reserves faster.
“Drilling engineers are literally steering the drill bit based on real-time information that the operator receives,” he said.
As all of these technologies matured and improved, oil rig efficiency and production increased. But financial pressures are also at play.
“The cost of drilling a new well is very high right now,” said Ellen Wald of the Atlantic Council’s Global Energy Center.
Cement, steel and other materials needed for new rigs have become more expensive in recent years. And investors are demanding oil companies deliver higher profits, she said.
“If companies can make more money from the wells they own, they can drill fewer wells and make more money,” Wald said.
This drive for efficiency and profit also helps explain why big oil companies are buying up small oil companies in large numbers. “A lot of innovation is driven by a small group of small businesses,” says Hugh Daigle of the University of Texas at Austin.
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