Oil prices are set to rise on average US$10/bbl annually towards 2020, with global liquids supply and demand balancing out in around two years, according to Oslo-headquartered oil and gas consulting and business intelligence firm Rystad Energy.
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Image from ExxonMobil. |
At an oilfield services information session in Aberdeen last week (25 March), senior analyst Audun Martinsen told an audience of 25 delegates the increases were necessary to realize sufficient investment and production to meet the global demand increase of around 1 MMb/d outlined in the International Energy Agency’s World Energy Outlook 2014.
“[Our forecast shows] the market will balance itself in 2017 and 2018, and in 2016 we will close the gap [between supply and demand],” he says. Martinsen adds supply is projected to slow towards the end of the decade, before increasing again.
The main sources of growth between 2014 and 2025 are likely to be offshore developments, shale and tight oil plays, as well as oil sands.
He says data from exploration and production companies that provided guided numbers for this year showed an average 17% investment reduction across all segments from $372 billion in 2014 to $311 billion, with the biggest cut of 34% for those exposed to shale and international activities.
Total spending on oilfield services in 2015 is likely to be 13% lower at around $825 billion, compared with $950 billion last year.
Martinsen says: “The market is already slower, but we expect it to gradually improve in 2016 and be back to its usual pace in 2017, with prices around $80/bbl.”
He adds, comparing regional oilfield service market growth: “North America will be hit hardest in 2015, going down 25% in spending with a 35% reduction in well services; however, if we believe the oil price will increase $10 in 2016, this will initiate more investment in the region… long term, if our prognosis is right, we expect the US market to be back to normal with around 15% growth in 2017 and 2018.”
He says the European market would see a 15% drop in growth in 2015, adding over the next two to three years, large field developments, such as Statoil’s Mariner, will spark new investment.
And for the UK, Martinsen says tax cuts proposed in Chancellor George Osborne’s budget earlier this month could herald a 20% increase in free cash flow for exploration and production companies in five years’ time: resulting in an increase in activity of between 10% and 20%.
He says South American oilfield service growth figures, now expected to decline around 10% in 2015 and 2016, were revised down due to the Petrobras corruption scandal and, from an African perspective, Angola would be “hit hard” as companies delay deepwater project investments in the short term, before ultimately returning to reinvest.
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