Latin American Drilling & Well Services expenditure forecast to grow at a 7% CAGR: Argentina, Brazil and Mexico to drive growth
The global drilling & well services (DWS) market is expected to grow at a 5% CAGR over 2018-2022, totalling $1.4tn. Onshore markets will dominate expenditure with rig & crew and stimulation services being the largest markets. North America, underpinned by unmatched drilling activity in US shale plays, will remain the world’s largest DWS market, accounting for 51% of expenditure over the forecast. However, it is Latin America which will see the strongest growth in DWS spend, with a 7% CAGR – from $17bn in 2018 to $22bn in 2022 – led by Argentina’s onshore and Brazil and Mexico’s offshore sectors.
Latin America Drilling and Well Services Expenditure Change 2018-2022
- Global expenditure to reach $320bn in 2022, up 24% from 2018
- Onshore to remain dominant, with rig & crew and stimulation services to be the largest markets.
- North America expected to account for 51% of global forecast expenditure.
- Latin America will see significant growth over the forecast, driven by offshore activity in Brazil Guyana, and Mexico as well as the emergence of onshore Argentina’s Vaca Muerta formation as world class unconventional play.
- African DWS expenditure to decline at a 5% CAGR over forecast, despite notable growth in Libya and Uganda.
Latin America’s DWS Market
Latin American DWS expenditure is relatively well-split across onshore and offshore. Over the forecast, expenditure will be dominated by Argentina and Brazil, accounting for 27% and 33% of the total respectively.
Offshore, Brazilian activity in high-cost deepwater plays will drive DWS expenditure to increase 31% to $7bn by 2022. Historically, Mexico was one the region’s largest DWS markets, but spend was hit dramatically by the oil-price downturn, due to the compounding effect of rapid natural decline and reduced cash flow. Returning activity in the Southern Gulf of Mexico will spur a recovery in offshore DWS expenditure – increasing to $1.4bn in 2022. Bolstering the region’s offshore sector further, will be Guyana. The small nation is set for first oil in 2020 from the Liza field, and as a result Westwood expects to see DWS spend more than double over the forecast to $554m in 2022.
Onshore, Argentina looks set for a period of very strong growth, with DWS expenditure to reach $6.2bn in 2022. This growth, estimated at a 14% CAGR, will be driven by foreign (and domestic) investment into the prolific Vaca Muerta shale formation – noted as a world class unconventional play. Westwood expects Argentina’s onshore E&A and development drilling activity to increase 38% over 2018-2022. The largest service lines in Argentina are expected to be casing & tubing, rig & crew, MWD & LWD and stimulation – totalling $4.1bn, $4.6bn, $1.9bn and $1.6bn of forecast spend respectively.