Oil companies poised to spend again
OSLO: After four years of cutbacks, oil companies are poised to open their purses again and develop new offshore fields, although the benefits won’t be spread equally across the companies which provide them everything from seismic surveys to pumps and turbines.
The long-awaited spending rebound will re-energise oil service providers that have survived the deepest crisis in a generation thanks to cost cuts, mergers and sometimes painful debt restructuring.
Notwithstanding recent oil price volatility, spending on offshore oilfield services will rise by six per cent this year to US$208 billion (RM851 billion) before surging by another 14 per cent next year, according to Norwegian consultant Rystad Energy AS.
Oil in London is heading for its longest run of daily gains on record, buoyed by Organisation of the Petroleum Exporting Countries supply cuts and hopes of easing trade tensions between the United States and China.
Oil producers will probably commit to 110 new undersea projects this year, up from 96 last year and 43 in 2016.
The market for subsea equipment might expand by between 13 and 14 per cent each year through 2023, said Rystad oilfield service research head Audun Martinsen.
Oilfield surveyors and providers of support and maintenance services should rebound at a slower pace as an overcapacity of vessels continued to glut the market and the rigs sector should improve at last, said Martinsen.
London-based oilfield services provider TechnipFMC Plc forecast that revenue at its subsea division will climb but margins may fall this year.
While oil and gas companies press ahead with new developments, they may initially focus on already-discovered fields, while keeping a cautious stance on riskier exploration projects.
“With oil prices trading below US$60 per barrel, there continues to be some uncertainty on exploration and production spending this year, particularly offshore,” said Kristian Johansen, CEO of Norwegian oilfield surveyor TGS Nopec Geophysical Co ASA, recently
There should be a “slight rise in demand from drilling”, meaning that just 30 per cent of deepwater rigs might remain idle this year, down from 35 per cent last year, said Wood Mackenzie analyst Mhairidh Evans.
Transocean Ltd, which last month announced an US$830 million drilling contract, might benefit from the rebound as it focused on deepwater, while Shelf Drilling Ltd might also gain from its exposure to the Middle East, said Martinsen.
On the other hand, the market for equipment used on shallow water platforms such as pumps, turbines and heat exchangers provided by the likes of General Electric Co, ABB Ltd and National Oilwell Varco Inc might lag, partly because they tend to be ordered later in project cycles, said Martinsen.