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As operators and the supply chain adapt to challenging market conditions, we explore the five trends that look set to dominate the offshore service sector this year and beyond.
1) Continued consolidation
A rise in collaboration and joint venture projects across the supply chain has become increasingly common in order to improve efficiency and offer integrated solutions to operators' more streamlined developments.
In a cautious market, operators increasingly look towards suppliers that offer integrated services, while greater stability in world oil prices may also open the door to further M&A activity during the year.
2) More FIDs on the horizon
With operators focused on cost reduction, the increased capex demand will be driven by projects with economics that are robust enough to reach a final investment decision (FID), despite the downturn.
Our Global Project Tracker allows you to monitor the status of all major pre-FID projects worldwide, enabling you to identify upcoming opportunities in the pre-FID phase, so that you can focus your efforts on the most viable prospects.
3) Low drilling demand
The global rigs market has suffered from early contract terminations and falling average day rates as operators allow high-end rigs to roll off contract. Although the rate of decline in rig count has now passed its peak, current forecasts indicate exploration drilling will remain on a downwards trajectory.
4) Financial uncertainty within the vessel market
Project delays and a lack of investor confidence is expected to prolong the subdued outlook in the vessel market. Underutilisation of the current global fleet and a lack of new build orders will continue throughout 2017 but, with essential inspection, repair and maintenance work now postponed as long as feasible, a gradual increase in demand is anticipated. Along with competitive fleet attrition and renewed deepwater demand, this could alleviate some pressure on the market.
5) Uptick in decommissioning
We estimate a significant acceleration in the number of platforms reaching removal age, particularly within the North Sea through to 2020. The result is that both operators and governments will face greater pressure to prioritise decommissioning activity. Although this will generally have a positive effect across the supply chain, over the near-term we expect operators to capitalise on reduced opex/boe rates which will enable declining fields to maintain profitability.
While it may be tempting to conclude that 'one more year of caution' is necessary for the oilfield services sector, the industry has changed drastically since the oil price collapse — a new reality that looks set to continue.