Middle East and Asia, the onshore dominated regions, is set to see a recovery in expenditure as oil prices rise, due to the sensitivity of onshore driving activity to changes in oil price, according to a recent forecast.

The Douglas-Westwood’s (DW) new World Oilfield Services Market Forecast, pointed out that a particularly strong recovery in North America is expected, with oilfield service (OFS) expenditure growing some $39 billion between this year and next, an increase of 63 per cent year-on-year.

After this year, DW expects onshore drilling rates to begin to rally in line with recovering oil prices, prompting a recovery in onshore OFS expenditure. However, it is not anticipating a return of last year’s levels until 2017.

Global OFS markets are facing difficult headwinds as a function of commodity prices, with the market entering a new cycle characterised by oversupply in the near-term, however, the market will rebound with new highs reached by 2018, said the report.

The total expenditure is forecast to decline 30 per cent this year, compared to last year, to $216 billion - a direct consequence of oil prices falling around 60 per cent since June, it said.

The current low oil price environment has caused a significant reduction in anticipated wells drilled, particularly in the onshore US market – where the majority of worldwide OFS spend takes place.

A large number of US completions of already drilled wells are expected to slip beyond 2015 as operators look to maximise revenue from initial production rates.

Furthermore, evidence from industry consultation indicated that pressure had been placed on OFS companies to cut prices in order to help operators weather the low oil price storm. Fundamentally, this will result in significantly lower OFS expenditure through the coming few years.
 
DW’s offshore OFS forecast, driven by DW’s in-house Offshore Database, updated daily, is generally less affected by oil price decline, particularly in the short-term. This is a result of many offshore drilling projects being sanctioned years in advance, particularly in deepwater plays such as Angola and Brazil.

The largest component of offshore expenditure is rig and crew, driven by rig rates and labour costs. The day rates in the forecast period – sourced through DW’s Offshore Rig Forecast – to be impacted by oversupply and lower utilisation, said the report.
 
In the long-term, the shale boom in the US is likely to continue post oil price recovery, driving onshore North American OFS expenditure to over $130 billion in 2019 for the first time in history, it said.

The spending in stimulation, completions equipment and perforation – all of which are closely tied to unconventionals – are expected to see the strongest growth through to 2019.

Similar trends are also expected in countries where fledgling unconventional sectors are expected to see strong growth through the forecast period, such as Argentina, Australia and China, it added. - TradeArabia News Service