The annual growth rate in the global offshore oilfield services market will possibly be halved after 2022, according to Rystad Energy. The energy research and consultancy forecasts that the service market will slow from 7% annual growth per year in 2019-2022 to only 3% from 2022 to 2025.
Commenting on the numbers, Audun Martinsen, Head of Oilfield Service Research, said that the way that things will eventually play out in the offshore marker depends largely on whether OPEC, with help from Russia, will decide to take serious measures to stabilize the market over the next years. If this happens, momentum in the offshore market could continue. If not, the offshore renaissance party seems destined to come to an end in 2022.
He also added that:
Higher oil prices were a primary cause of the 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.
Currently, the offshore industry is facing a renaissance, with oil and gas companies increasing their greenfield sanction activities. However, from 2022 the tide seems likely to turn, because many of the projects approved in 2018 and 2019 will begin production.
What is more, for four years in a row, growth in the offshore industry will lead to inflation in many service sectors, potentially reaching 10-15% from 2018 levels. The effect of this will be a significant 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.
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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
Mr. Martinsen stated.
Finally, the market segments most affected by a slowdown will be those with a heavy exposure to greenfield activity. These include subsea equipment, offshore drilling, and SURF (subsea umbilicals, risers and flowlines). The only segment that is likely to see an increase is engineering.
