World upstream oil and gas activity is expected to remain at a high level in the coming years, with annual well drilling increasing from 103,000 wells in 2013 to more than 115,000 wells in 2018. Although a sharp decline in oil prices in late 2014 and early 2015 may restrain the upstream industry in the near term, global economic growth will support energy demand. Some of the best upstream opportunities will be for natural gas. Recently, the world oil and gas industry underwent dramatic changes. The success of tight oil activity in the U.S. altered the global balance of petroleum supply and demand, contributing to declining oil prices. With the short-term outlook for the price of crude oil turning suddenly downward, the profitability of drilling high-cost oil wells will diminish. Even so, by 2018 world drilling activity is expected to continue on an upward trajectory. Many lower cost or highly productive projects will remain profitable. Furthermore, a key world trend will be a focus on natural gas. China and several countries in the Middle East are expected to accelerate drilling to supply their growing domestic gas markets, while the U.S., Canada and Australia will look to natural gas as an export commodity. To sustain growth in the number of wells drilled annually, the average number of active drilling rigs worldwide is forecast to rise modestly by 2018. The world's increasingly technologically advanced rig fleet has been especially important to efficiency improvements. This is expected to continue, allowing the number of active rigs to grow more slowly than the number of wells drilled. Much of the progress in exploiting unconventional oil and gas reserves in the U.S. has resulted from advances in technology, including horizontal drilling and hydraulic fracturing. This technology creates potential for the U.S. success to spread to other countries. However, while tight gas, coalbed methane and oil sands resources have become important to the world's energy supply, the prospects for large-scale shale drilling outside North America remain modest in the short term. Countries such as Argentina, Australia and China are expected to hold the best opportunities during the next few years.
Drilling activity will remain concentrated in North America. More rapid growth will be evident in a small number of other countries, primarily concentrated in Asia and the Middle East, where favorable resource opportunities and investment capital availability will stimulate activity. Drilling in Europe will be moderate. Russia's upstream industry is hampered by economic sanctions, and the mature and declining nature of the North Sea limits new field development. A combination of above- and below-ground factors will hold back overall growth in Central and South America, despite opportunities in Argentina and Colombia. Upstream activity in Brazil will be restrained by its national oil company's level of indebtedness and the expense of developing its deepwater offshore, pre-salt fields.