The offshore oil and gas industry is currently in a resurrection mode and is expected to keep growing, however, the annual growth rate in the global offshore oilfield services market will likely be halved after 2022, according to the energy intelligence group Rystad Energy.
In a commentary on Thursday, Rystad said that the service market would likely slow from 7% annual growth per year in 2019-2022 “to only 3% from 2022 to 2025.”
Audun Martinsen, Head of Oilfield Service Research, said: “Just how things ultimately play out in the offshore market will depend to a large extent on whether OPEC, with help from Russia, will decide to take serious measures to stabilize the market over the next years. If the group decides to rein in production to protect commodity prices, momentum in the offshore market could continue. If not, the offshore renaissance party seems destined to come to an end in 2022.”
He said that the higher oil prices were the main reason behind recent upstream spending spree and “in keeping with the cyclical nature of this industry – the added production from those investments will soon help to put downward pressure on oil prices, which in turn will undermine field sanctioning activity post-2020.”
“The offshore industry is currently experiencing a renaissance, with oil and gas companies ramping up their greenfield sanction activities. From 2022, however, the tide seems likely to turn, as many of the projects approved in 2018 and 2019 – representing about 5 million barrels of oil equivalent (boe) per day – will start production, “Rystad said.
In addition, four consecutive years of growth in the offshore industry will likely spur inflation in many service sectors, possibly reaching 10-15% from 2018 levels, the Norway-based firm said.
“The effect will be a noticeable slowdown of greenfield service purchases of platforms, subsea infrastructure, drilling rigs and vessels, causing the overall offshore service market growth rate to be cut in half,” Martinsen said.
He added: “We estimate that investment commitments associated with offshore project sanctioning are likely to drop to between $70 billion and $80 billion per year – only half the amount forecast in 2020. Fewer projects sanctioned, as well as fewer completed from the ‘offshore renaissance period’ of 2018 through 2021, will likely cause the offshore service market to reach an inflection point in 2022.”
The market segments most severely affected by a slowdown will be those with heavy exposure to greenfield activity, such as subsea equipment, offshore drilling, and SURF (subsea umbilicals, risers and flowlines). The only segment that is likely to see an increase is engineering, Rystad concluded.
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