FAVERSHAM, UK – Douglas-Westwood (DW) foresees expenditure in the offshore oilfield service sector averaging $48.6 billion/yr over 2016-2020, 25% down on 2014’s total of $65.3 billion.
Reasons include the sharp drop in offshore drilling, with 8% fewer well spuds last year and a further 9% reduction likely this year.
Even if the oil price recovers rapidly, offshore activity will stay suppressed, DW says, due to the deferral of final investment decisions for several developments such as Anadarko’s flagship Shenandoah project in the Gulf of Mexico and Woodside’s Browse FLNG off northern Australia.
Asia – the largest-spending region – is set for a 9% drop in drilling activity this year following cutbacks by CNOOC, independents and supermajors reining in spending in Indonesia and Malaysia, and Chevron scaling-back operations in the Gulf of Thailand where in recent years the company has drilled thousands of wells.
DW predicts offshore spend in Asia will decline to $15.2 billion in 2017 before rallying slightly to $16.5 billion by the 2020, still 74% off 2014’s peak.
Elsewhere, the only positive news is in the Middle East where annual spending is set to rise 5% from $6.6 billion in 2016 to $7.4 billion in 2020, largely as a result of the full implementation of the South Pars gas development in the Persian Gulf and brownfield developments of the giant offshore Safaniya (Saudi Arabia) and Upper Zakum (United Arab Emirates) fields.
Lower offshore rig day rates will remain an issue for offshore OFS expenditure, the analyst adds, with the sector heavily oversupplied with units added to the market during the boom years of 2011 to 2014. DW estimates offshore rig and crew spending will decline 2% year-on-year during 2016-2020.
It could take well into the 2020s for spending to recover to 2014 levels, DW adds.
Another of the analyst’s reports on oil country tubular goods (OCTG), including drill pipe, production tubing and well casing – the World Oilfield Equipment Market Forecast – suggests 2016 spending will amount to just 42% of the 2014 peak.
Drill pipe and production tubing have seen smaller decreases in spending – offshore, drill pipe is regularly replaced and serviced to negate the risk of a failure that could result in large amounts of non-productive time, while production tubing is often replaced during workover operations to prevent fluid exchange with surrounding rock formations and to maintain pressure in the well.
Sales of these products, however, is set to remain flat offshore for the remainder of the decade as oil prices fail to recover sufficiently to allow drilling to return to pre-downturn levels.
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