INDUSTRY REVIEWOIL & GAS
business opportunities in the downstream sector, such as ethylene crackers. “Regulatory procedures, local approvals,
the sale of the product and other factors influence the momentum of final investment decisions. Some of those involve offshore developments, such as floating liquefied natural gas (FLNG) projects, but we are also seeing growing activity exploring tiebacks to onshore trains,” he reported. Steve Harley, president, energy sector,
customer solutions and innovation, for logistics group DHL, said the oil and gas industry’s recent attention in the upstream sector has been more on onshore and shallow water projects. “In light of that, looking ahead, we have
got quite a focus on managing ongoing operational logistics and providing support for existing upstream businesses. We have also got involved in a lot of ad hoc work where there have been refinery upgrades, LNG plant extensions, for example – particularly in North America.”
Mixed picture On the onshore side, UK based global energy business research and consulting firm Douglas Westwood (DW) suggested 2016 would see the bottoming out of the industry downturn for the oilfield services (OFS) market, with the year’s total expenditure of USD126 billion increasing 11 percent year-on-year through to 2020, when it will hit USD188 billion. “All regions, with the exception of
Australasia, are expected to see positive onshore expenditure trends as oil prices rise and onshore drilling rebounds. The strongest growth will be seen in North America, at 19 percent year-on-year 2016- 2020 for OFS, as rising oil prices bring lower-quality shale acreage back into economic viability. However, overall spend onshore North America will be depressed when compared with the highs observed in 2014,” reported DW. It said the latter trend would be apparent
onshore in most regions, aside from Eastern Europe and the former Soviet Union (FSU) where activity will be boosted by large investment in gas-targeted drilling in Eastern Siberia in the latter part of the decade to satisfy large export agreements with China and the Middle East. DW analyst Matt Cook said: “It may be
too soon to start talking about a general recovery, but if you look at the US shale oil and gas industry, for example, there has been an increase over the last few months in the number of wells being drilled. That is significant in the light of the fact that the scale
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Blue Water Shipping believes the modest recovery in the onshore sector is due to lower construction and logistics costs.
of those activities dropped off a cliff over the previous couple of years,” he told HLPFI. Prospects for the oil sands industry in
Canada also appear positive in the near term, he continued. “For a lot of those projects, there are quite long lead times between sanctioning and implementation. So projects which were sanctioned a couple of years ago are still being brought to the fold now.” According to heavy lift carriers and
forwarders interviewed by HLPFI, in many cases the main factor behind the recent modest recovery in new onshore project activity is the opportunity to take advantage of presently lower construction and logistics costs before a possible sharp increase in overall oil and gas industry activity in 2018/19 and subsequent price increases for services and equipment. “That is what we are hearing from some
of our clients, particularly in relation to lower cost onshore projects, and it makes sense to us as well,” confirmed Thomas Bek, global manager, oil, gas and industrial projects, for forwarder Blue Water Shipping.
Reviving interest Expanding on that point, Mike Hussey, regional director North America for worldwide heavy lifting and engineered transport group Sarens, reported that “just in the last few months we have seen certain cashflow-positive companies starting to show an interest in pursuing some of the projects that they had previously taken off the table. “The rationale for that is that because
there is not a lot of work around right now, labour prices and the cost of construction are lower than they were two years ago, so people who have the cash are thinking they may want to do that work now rather than wait until, say, 2018/2019 when everyone else might be looking to execute their projects,” he added. DHL’s Harley confirmed that the chance
to take advantage of ready equipment availability and lower construction costs is one of the factors driving a recent slight upturn in onshore and lower cost oil production projects. But he added: “Also, people need to keep a core development programme in place – if you are an international oil company you cannot cut everything back to zero.” However, even the prospect of lower
Just in the last few months we have seen certain cashflow- positive companies starting to show an interest in pursuing some of the projects that they had previously taken off the table. – Mike Hussey, Sarens
construction and logistics costs is currently proving insufficient to encourage the advent of many new projects in the offshore oil sector, particularly where deepwater drilling and resulting higher production costs are involved. “The projection for offshore OFS
expenditure (in the period 2016-20) is markedly less positive. A significant drop in project sanctioning, coupled with low rig day rates will see expenditure over the forecast period average USD49 billion
January/February 2017 47
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