Definition - What does Annular Space mean?
Annular space is the space surrounding the bottom hole assembly or reamer, the drill string and drill pipe, or drill collars, in which drilling fluid can flow. The annular space is where drilling fluid mixes with spoil and becomes a slurry which is then transported out of the bore. This method is noted in horizontal directional drilling.
Trenchlesspedia explains Annular Space
The capacity of the annular space isn't as critical to drilling as is the flow of the drilling fluid. The consistency of the slurry formed by the mixing of drilling fluid with spoil is influenced more by the quantity of drilling fluid and the respective amount of spoil rather than by the size of the annular space. When insufficient annular space exists because of a dense slurry mixture, undesirable effects such as hydrolock, can occur.