The current downturn in the oilfield services business and the approach of the major swing producers is expected to have a marked effect on the global oilfield services (OFS) market through to 2019, according to the third quarterly edition of Douglas-Westwood’s World Oilfield Services Market Forecast 2015-2019. Total OFS expenditure over the forecast is expected grow at a CAGR of 7%, compared to 12% seen over 2010-2014.
Onshore expenditure is expected to decline year-on-year by 42% in 2015, largely as a result of significantly lower drilling activity in US unconventional plays, where rig counts have fallen some 54%. Similar onshore drilling decline has been seen in many producing nations, with the important exception of Saudi Arabia, which has been producing at record levels in 2015. DW now expects the actions of the Kingdom to result in significant difficulties for US producers, which have thus-far been insulated by hedging positions. As a result, onshore US OFS spend is expected to see a slow recovery through the forecast – reaching $92bn in 2019, compared to $133bn in 2014.
DW’s offshore OFS forecast, driven by DW’s in-house Offshore Oil & Gas Database, updated daily, is generally less affected by oil price decline – particularly in the short-term. However, expenditure has been hit by service price deflation with OFS spend expected to fall by 11% in 2015. In the long term, DW expects there to be a lagged effect from the commodity price downturn as a result of delays to final investment decisions (FID) on new projects. Consequently, offshore OFS expenditure will see activity driven decline post-2016 before an uptick in 2019 – though this will not be significant enough to bring spend back to 2015 levels.
Operator focus on Opex and well intervention is expected to be a key theme in many oil producing nations over the coming 12-18 months, with strong growth expected in surface well testing, production testing and coiled tubing, as producers look to maximise flow rates from existing assets. Those wells which are drilled through the forecast are expected to be longer, more complex and have longer laterals, resulting in similarly strong growth rates expected for drilling-related services – namely directional drilling, drill bits and drilling fluids.
Overall, depressed oil prices, day rates and US onshore drilling activity cast a significant shadow over the global OFS sector. While some services may benefit from sustained activity in the Middle East, the industry as a whole is suffering and faces a gradual recovery rather than a sudden bounce-back in activity.