The oilfield service (OFS) industry can, at times, be intimidating in its complexity and depth. Furthermore, mega-mergers (e.g. GE – Baker, Technip – FMC, Wood Group – Amec Foster Wheeler) have created a supply chain that no-longer has homogenous competition that can be easily-grouped and segmented.
All the leading players in OFS now have a materially different business mix and service line provision.
The launch of Douglas-Westwood’s major update to the Sectors online service provides a good opportunity to reflect on the outlook for the OFS business. We have added expenditure data for 103 service lines to SECTORS, covering Capex and Opex – totalling over $8 Trillion of spend across 2005-2023.
The overall story is one of mixed fortunes for the OFS sector. A North American led recovery in onshore drilling activity is expected to boost the onshore drilling and well services (D&WS) sector over the coming years, while offshore spending is likely to be sluggish in rebounding. SECTORS data shows strong growth for D&WS expenditure through to 2023, with a cumulative total of $1.6 trillion to be spent – 76% of which is allocated to the onshore sector.
Oilfield equipment, on the other hand, is expected to see stagnation in terms of dollar demand through to early next decade before signs of a recovery emerge. This is primarily due to the marked oversupply across the vast scope of equipment covered by the new SECTORS data – comprising 59 equipment components. Most critically, the newbuild offshore rig market (comprising jackups, semisubmersibles, and drillships) is expected to continue to decline from a peak of $24 billion in 2013 to just $4.2 billion by 2023. This is a result of the substantial number of rigs currently idle, with offshore drilling volumes expected to be insufficient to warrant a new build cycle without wholesale rig scrapping. Similar stories are seen across the oilfield equipment sector, with operators and service companies alike expected to concentrate on bringing idle units back to the market before placing new orders.
In terms of growth rates, offshore maintenance, modifications and operations (MMO) looks to be the most promising sector, with a substantial and sustained recovery in expenditure likely to be seen through to 2023. This is a result of the return of previously delayed non-essential workscopes, such as platform modifications, in addition to continued growth in the installed production platform population. This, coupled with the supply chain shifts which have and will continue to shape the MMO sector, presents a prosperous market outlook for Opex focused players within the OFS supply chain.