Oil and gas industry fires up drilling

NEW YORK (CNNMoney.com) -- Drilling for oil and gas is back in full swing after last year's lull, according to a report released Tuesday.

There were an estimated 11,300 oil wells, natural gas wells and so-called dry holes drilled in the third quarter, the American Petroleum Institute said. That's up 45% from the third quarter of last year, when drilling activity slumped.

In a break with historical trends, the number of oil wells completed this year has outpaced the number of natural gas wells that have been finished.

Oil well completions in the third quarter surged 60% versus the third quarter of 2009. Natural gas completions rose 28% in July, August and September.

For the first nine months of this year, oil well completions were up 21% , while natural gas completions fell 3% compared to the same period in 2009.

Natural gas had been the "primary target" for U.S. drillers over the last decade, according to API. But a drop in natural gas prices this year resulted in fewer gas wells being drilled, the report said.

Prices for natural gas futures have tumbled about 50% so far this year.

However, the industry does appear to be shifting its focus towards natural gas, which is seen as more plentiful and cleaner than other petroleum products.

Exploratory natural gas wells jumped 68% in the third quarter, while overall exploratory drilling was up 31% versus last year, according to Hazem Arafa, director of API's statistics department.

The increase in exploratory wells "demonstrates the industry's continued commitment to finding new energy sources to meet growing U.S. and world demand," Arafa said in a statement.

The rebound in drilling activity comes as prices for oil and gas have gradually recovered after plunging from record highs in 2008 as the weak economy curbed the world's demand for energy.

The industry is also reeling from the worst oil spill in U.S. history, which resulted in a months-long ban on deepwater drilling in the Gulf of Mexico this summer.

The report also showed that the industry drilled a total of over 69 million feet of well in the third quarter, an increase of 43% versus last year.

Oil well footage surged 81% to nearly 33 million feet, while natural gas well footage rose 17% to about 29 million feet.