DW: Oilfield equipment expenditure to reach $180B in 2019

New oilfield equipment study briefs onshore, offshore spend in 2015

Annual global oilfield equipment (OFE) expenditure is expected to increase $36 billion from 2015 to 2019 according to Douglas-Westwood’s new World Oilfield Equipment Market Forecast. Following a decline of some 19% since 2014’s oil price collapse, DW expects the world OFE market to see recovery to 2017 before reaching $180 billion in 2019.

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Lead author Matt Adams commented, "Onshore expenditure has been particularly hard hit by commodity price decline, with a 31% fall in Capex expected in 2015 compared to only a 3% decline in offshore spend. Equipment oversupply, particularly in the US, is symptomatic of falling drilling activity. Global onshore frac pump expenditure is expected to decline by 82% in 2015, with very few new additions to be added to the existing fleet, as unutilized units are used to replace and maintain active units. Similar stories are seen across onshore equipment lines, from conveyancing tools to onshore rigs."

Offshore, oilfield equipment manufacturers find themselves cushioned by long lead times and contracts signed pre-2015. Fixed and floating production systems account for the largest portion of future offshore spend, due to a large number of new installations to be put in place as deepwater projects come onstream. Similarly, subsea hardware order book backlogs remain, helping to sustain offshore equipment expenditure through to 2017.

Operator-related spend is expected to see less severe near-term effects of the industry downturn, with a decline of only 14% expected in 2015. This is due to the production phase focus of operator expenditure, including production trees, artificial lift and midstream installations. Such spend must remain regardless of falling greenfield activity, aided by replacement and maintenance demands of installed equipment and shifting focus towards increasing flowrates from existing assets.

By contrast, service company and contractor expenditure (including much of rig spend) is expected to bear the brunt of Capex decline, with DW expecting a 32% fall in 2015 expenditure. Such spend is largely impacted by a lack of anticipated offshore rig orders – after peaks between 2011 and 2013 – and underutilization/oversupply in many fleet-related equipment lines such as pumping units, helicopters and onshore rigs.

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