INDUSTRY REVIEWOIL & GAS
annually, down 26 percent from the highs of USD66 billion reached in 2014,” stated DW. Steve Robertson, DW’s research director,
highlighted the scale of the current caution over prospects for the offshore oil sector during a webinar held to discuss one of the company’s regular World Drilling & Production Market Forecasts. “There is a hiatus in final investment
decisions in the offshore sector, with only a small number of projects moving forward,” he stated. “If you compare the deepwater outlook for that market at the beginning of 2015 with that at the beginning of 2016, the anticipated expenditure for the period 2016-20 was down from USD210 billion to USD137 billion. Of the 210 project prospects originally expected to come on stream in that period, the number at the beginning of 2016 had dropped to 122 – in effect, 90 projects planned for the next five years have been cancelled.” Summarising the current overall
prospects for oil and gas industry project work, DW’s Cook suggested: “It is going to be longer term before the offshore sector picks up to where it was before the oil price downturn, well into the 2020s. Whereas on the onshore side, while we are not expecting a surge in activity to the levels of 2014, we certainly expect to see some recovery in the market during 2017.” From a logistics industry perspective,
DHL’s Harley added: “We are seeing some projects coming through and from our discussions with service companies, we feel the market may well have hit the bottom now and things are starting to pick up slightly. However, it is still pretty uncertain how quickly that will happen.” HLPFI
A 70-tonne stripping tower being delivered by Volga-Dnepr from Bakersfield, California, to Erbil, Iraq.
Logistics costs set to remain under pressure
Lower oil prices have resulted in a squeeze on service suppliers to achieve substantial cost savings, writes Phil Hastings.
logistics service supplier margins – are expected to continue through 2017. The impact of lower oil and gas prices on
T
We are seeing some projects coming through and from our discussions with service companies, we feel the market may well have hit the bottom now. – Steve Harley, DHL
48 January/February 2017
project development costs was highlighted by industry analyst Douglas Westwood (DW) in late 2016 following a review of over 250 upstream capital projects (onshore and offshore, including unconventional) sanctioned over the last four years. Steve Robertson, the company’s research
director, explained that faced with much lower free cashflow from producing fields, the focus for many exploration and production (E&P) companies has been on managing costs so that dividends can be maintained through the downturn. However, he continued, while the
sanctioning of many new projects has been deferred during that period, a number of
wo related trends that emerged during the downturn in world oil and gas prices – a sharpened industry focus on reducing project costs and resulting pressure on
trends have helped to drive a “remarkable reduction” in upstream capital costs and bring some uneconomic fields over the threshold of viability.
Squeeze on costs One of those trends, he said, is a squeeze on the supply chain by the E&P companies, with demands to service and equipment companies for 10-15 percent price cuts being common. Other relevant trends include a “massive” oversupply of some asset classes, such as rigs and vessels, which has led to rates for such units “plummeting”, and the re-engineering of existing projects, returning to conceptual or front-end engineering and design (FEED) studies to re-work the development scheme to achieve substantial cost savings. The impact of those trends on logistics suppliers was summarised by Bill Hill, GAC executive group vice president, oil and gas. “The oil and gas industry has become more cost-conscious as project
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