Rystad Energy: oilfield service purchases set to lose US$340 billion until 2028
Published by Nicholas Woodroof,
The COVID-19 pandemic’s effect and the accelerating energy transition last month impelled Rystad Energy to revise its peak oil demand forecast. Rystad now sees it coming in 2028, two years earlier than previously expected, at 102 million bpd, down from earlier projections of 106 million bpd.
OFS purchases are expected to drop to US$473 billion this year from US$625 billion in 2019 and remain flat in 2021 before starting a slow recovery. Based on Rystad's updated peak oil demand forecast Rystad now sees OFS purchases returning to pre-pandemic levels only after 2024 in nominal terms, reaching US$642 billion in 2025. In real terms, excluding the impact of price inflation, annual purchases are not expected to revisit pre-pandemic levels this decade.
The US$340 billion of lost purchases value is spread across the coming eight years and is calculated as the cumulative difference between the current and the previous outlook for peak oil demand, which corresponds to a 6% drop.
Rystad now expects investments to increase by 13% in 2022 (versus 17% previously) and 16% in 2023 (18% previously). Most of this downward revision is driven by shale investments, which previously were expected to grow by 45% in 2022 and now are pegged at about 30% growth. Shale operators have been hit hard of late, and they also harbour ambitions to generate better cash flow by reducing their investment ratio. Growth in the offshore segment is revised down from 12% in 2022 to only 9%.
“With a lower need and willingness among E&P companies to invest in oil and gas, capital expenditure across offshore, shale and conventional onshore resources will probably struggle to get back to 2019 levels,“ says Audun Martinsen, Head of Energy Service Research at Rystad Energy.
In nominal terms, offshore investment levels are projected to return to 2019 levels in 2023, with conventional onshore following suit in 2025 and shale in 2028. In real terms, however, investments in upstream oil and gas may never make it back to 2019 levels, Martinsen adds.
Service purchases are trading the same way. Even when including operational budgets in the oilfield service market, there is little reason to expect a return to 2019 levels anytime soon. In real terms, this is not likely to happen at all this decade, whereas in nominal terms it could be achieved by 2025.
The service market is now estimated to grow at a compound annual rate of 7.9% from 2020 to 2025, compared to 10.4% in previous forecasts. The biggest revision to service purchases comes from the EPCI segments, where lower sanctioning activity has had a negative impact, but segments related to wells have also suffered due to the slowdown in the shale sector.
Read the article online at: https://www.oilfieldtechnology.com/special-reports/04122020/rystad-energy-oilfield-service-purchases-set-to-lose-us340-billion-until-2028/
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