Fossil Fuels Still Attractive Despite Financial Crisis
New York - Demand for oil and natural gas continues to grow, despite the current economic downturn, indicating a positive future outlook for oilfield services, according to a new report by business intelligence expert GBI Research.
The new report shows that, for the most part, the global oilfield services industry has grown exponentially over recent years, witnessing a rapid increase in revenue and advancement in technologies. Increased exploration and production activities have seen the discovery of reserves in new regions, necessitating an expansion in oilfield services.
A significant rise in unconventional plays within the North American region has necessitated an increase in the demand for pressure pumping services, which are currently driving the capital expenditure of oilfield services. This will come as a much-needed boost to operators, who may have been affected by the cuts in exploration and production activity following the global financial crisis and Deepwater Horizon incident in the U.S. Gulf of Mexico (USGOM), which resulted in the implementation of regulatory plans worldwide. Since then, operations have been accelerating with a steady rise expected until 2016.
Recent discoveries of promising fields not yet in production will provide a cushioning effect for any reverberations felt from the economic crisis with the future for the oilfield services industry looking optimistic as a result of technology advances and fresh methods of tapping unconventional reserves. Such innovation is generating confidence in the performance of the oilfield services industry, and growth resumption is anticipated for 2012-2013. Long-term projects may therefore face postponement, but are likely to escape cancellation.
However, the market is not without its risks. Oilfield service majors rely upon on subcontractors and equipment providers, which increases the risk of deadlines and budgets being adversely affected. This dependency can force companies to compensate Oilfield service companies may also potentially face increased financial risks associated with long-term, fixed-price contracts with national oil companies (NOCs). These contracts allow oilfield service companies to provide integrated project management services, but invite additional risks associated with labor availability and productivity, cost overruns, supplier and contractor pricing and performance, operating cost inflation, and potential claims for liquidated damages.