Global Oilfield Services – Nadir for Onshore Expenditure; Offshore Still Struggling
This year will see the bottoming out of the industry downturn for the onshore oilfield services (OFS) market. DW expect 2016’s total onshore expenditure figure of $126 billion (bn) to represent an industry nadir, with expenditure increasing 10% year-on-year between 2016-2020, reaching $186bn in 2020.
All regions, with the exception of Australasia, are expected to see positive onshore expenditure trends as oil prices rise and onshore drilling rebounds. The strongest growth will be seen in North America, at 19% year-on-year 2016-2020 for OFS, as rising oil prices bring lower-quality shale acreage back into economic viability. However, overall spend onshore North America will be depressed when compared to the highs observed in 2014.
This trend is observed onshore in all regions, aside from the Middle East, which is projected to be the strongest growth market. Expenditure is expected to amount to 117% of 2014 levels by 2020 as the region’s OPEC members increase upstream activity in order to defend market share.
The projection for offshore OFS expenditure is markedly less positive. A significant drop in project sanctioning, coupled with low rig dayrates will see expenditure over the forecast period average $48bn annually, down 16% from the highs of $65bn reached in 2014.
The largest offshore OFS year-on-year decline in expenditure is seen in Africa, which is forecast to undergo a 3% year-on-year decline between 2016 and 2020. Part of the decrease can be attributed to a lack of project sanctioning in high-cost deepwater plays, such as the Kwanza Basin offshore Angola, which have been particularly hard hit in the low oil price environment.
Downwards trends in the offshore OFS markets reflect current market conditions, with decreases in offshore drilling and offshore rig utilisation particularly damaging. Growth in offshore drilling seen since 2010 has been sharply halted – offshore well spuds saw a 5% reduction last year and a further 11% is anticipated for 2016. The offshore drilling sector is also heavily oversupplied with units brought to market during the boom years of 2011 to 2014, despite widespread scrapping of older rigs. The resultant low levels of utilisation have and will continue to drive down rig dayrates, which will negatively impact offshore OFS expenditure.
The World Oilfield Services Market Forecast 2016-2022 provides unique insight into the global oilfield services (OFS) market. The product delivers historic, current and future drilling, completion & workover expenditure, forecasting 20 common oilfield service lines including rig & crew, cementing, well testing and logging.