OFS Sector Expected to Take a Hit

Laxman Pai
Thursday, September 12, 2019

Lower oil prices will push the global oilfield services (OFS) sector into a recession in 2020 after three successive years of growth, according to Rystad Energy.

In a new sector outlook update, Audun Martinsen, head of oilfield services research at Rystad Energy, forecasts a 4% decline in global oilfield service revenue if oil prices stay flat next year.

“Lower oil prices call for negative growth in the service market in 2020,” says Martinsen. “For suppliers, this means that a three-year growth story will come to an end regardless of which market segment you look at.”

The service market will likely achieve a 2% growth in 2019, to $647 billion. In 2020 this number will fall to $621 billion with an oil price of $60 per barrel (Brent).

Looking at the various market segments, the shale industry will likely drag down oilfield service purchases as it contracts by 6% next year.

Offshore will fall 1% as oil companies cut brownfield and exploration activity in an attempt to reduce spending.  Other onshore activity will see revenues slashed by around 5% as OPEC scales back investments to curtail output.

However, due to the existing backlog, some service segments can still realize positive revenue growth. Subsea equipment, SURF (subsea umbilicals, risers, and flowlines) and offshore drilling can still accelerate in 2020, but growth will fall from the double-digits to the single-digits.

“This new market view stands in stark contrasts to what we previously forecasted when oil price estimates stood around $70 for 2020. At that oil price, the service market was expected to grow by 2%, held up by offshore and shale. However, downside risks have been mounting in the oil market, and we could face additional headwinds in 2020,” Martinsen said.

Looking further ahead, Rystad Energy forecasts a positive outlook for the global oilfield services market.

“In 2021 we will see the long cycle effects manifesting into a greenfield, exploration and brownfield wave, which will come into play and initiate a 5% growth as the oil market sees relief and investments follow,” Martinsen remarked.

Looking towards 2023, offshore market segments, shale, and other onshore segments are likely to realize an average compounded annual growth rate of 2% to 3%.

Subsea purchases, construction and installation, and equipment seem even more robust at 7% due to the massive influx of large offshore and LNG projects and the fact that subsea developments see a new renaissance, according to Rystad Energy.

Categories: Energy Oil Research Services

Related Stories

Southeast Asia’s 2GW Cross-Border Offshore Wind Scheme Targets 2034 Buildout

ABL Secures Rig Moving Assignment with India's ONGC

Pakistan, Türkiye Deepen Oil and Gas Ties with Offshore Indus-C Block Deal

Aesen, DOC JV Targets Subsea Cable Logistics

SBM Offshore Starts Construction of FSO for Trion Oil Field off Mexico

MDL Secures Cable Laying Job in Asia Pacific

Hibiscus Petroleum Starts Drilling at Teal West Field off UK

Brownfield Output Decline Accelerates, says IEA

Norwegian Oil Investment Will Peak in '25

Saipem Wins FEED Contract For Abadi LNG Project FPSO Module In Indonesia

Current News

Malaysia’s Petronas and Oman’s OQEP Strengthen Oil and Gas Ties

Southeast Asia’s 2GW Cross-Border Offshore Wind Scheme Targets 2034 Buildout

Pharos Energy Kicks Off Drilling Campaign Offshore Vietnam

Viridien to Shed More Light on Malaysia’s Offshore Oil and Gas Potential

US Pressure on India Could Propel Russia's Shadow Oil Exports

Energy Drilling’s EDrill-2 Rig Starts Ops for PTTEP in Gulf of Thailand

RINA Wins FEED Contract for Petronas’ Flagship CCS Project in Malaysia

ABL Secures Rig Moving Assignment with India's ONGC

Pakistan, Türkiye Deepen Oil and Gas Ties with Offshore Indus-C Block Deal

Eni-Petronas Gas Joint Venture Up for Launch in 2026

Subscribe for AOG Digital E‑News

AOG Digital E-News is the subsea industry's largest circulation and most authoritative ENews Service, delivered to your Email three times per week

https://accounts.newwavemedia.com