The global oilfield service market’s downward trend will continue into 2020, consultancy Rystad Energy forecasts.
Revenue for the market posted a year-over-year decline of 3% during the third quarter of 2019, marking the first quarter to record negative growth since the second quarter of 2017. Moving into the fourth quarter, service firms are reporting that operators have little budget left, hinting that the fourth quarter will be sluggish.
This could make for a dissatisfying new year, Rystad said, as the 1% trailing 12-month growth rate could be disrupted by even a slight revenue decrease in the fourth quarter, potentially pulling growth below zero.
The ramifications of the reduced investment have already materialized for US service firms, which are suffering through reduced work and pressured pricing. Halliburton recently announced the dismissal of 800 jobs in an attempt to cut costs, perhaps signaling that the company expects US activity to remain constrained.
Rystad expects the total service market to contract 2% in 2019 as a result of the cuts made in US shale. However, better performance is expected in the subsea sector, where the market will grow to $27 billion from $25 billion. As many as 330 christmas trees have been awarded in each of 2018 and 2019, and a similar number is also expected in 2020.
For 2020, Rystad forecasts the continued trend of reduced US shale investment to result in a 7% year-over-year drop in shale and tight oil service purchases. As 40% of the global well service and commodities market consists of shale activities, the sector will deflate the most in 2020, falling to $213 billion from $225 billion.
The offshore and onshore conventional service market in 2020 will benefit from increasing project sanctions, the total value of which is expected to grow to as much as $225 billion in 2020 from $200 billion in 2019, the consultancy said. Gas projects are projected to drive most of the growth, with $50 billion worth of contribution from onshore LNG.
Offshore project sanctioning could total some $100 billion in 2020, keeping offshore service purchases flat for the year before a wave of projects matures into execution mode, driving purchases up 5% and 7% in 2021 and 2022, respectively. The land market will also get a boost, albeit further in the future once expected LNG projects have entered the most intense construction period, Rystad said.