The energy sector’s deferral jackpot has grown to $200 billion since oil prices weakened in 2014, with 63 natural gas and oil developments now shelved or canceled, which is going to be a tantalizing set of prospects for oilfield service (OFS) operators able to survive until market stability returns, according to Rystad Energy analysts.

“Every project that has been deferred since the oil price plunge has been added to the future backlog of projects to be awarded,” the analysts said. Well service and drilling contractors make up more than $50 billion of delayed spending, with offshore drillers hit especially hard as their exposure to the “same deepwater regions has had a big impact.”

An estimated 100 rig years have been pushed back, representing more than a year of normal greenfield awards, with deepwater and midwater regions in North America, Europe and Southeast Asia making up about 75% of the delays.

“All in all, the backlog of deferred projects plus the normal activity would yield large volumes of projects to be developed over a short period of time. These delays have caused 3 million boe/d of supply to slip that would spur a large demand for new resources to be developed.”

The OFS industry could reduce capacity too much in the current environment which would make it difficult to take on growth during higher price cycles.

“Those few that will have the capacity are the ones that will win the jackpot,” the analysts said.

Rystad has been tracking delays announced (or inferred) since the second half of 2014 for development projects where sanctions could “reasonably have been expected within two years” of the delay (see Daily GPI, Dec. 5, 2014). Analysts initially had estimated in late 2014 that about $150 billion of global energy projects had being shelved. Last July, Wood Mackenzie Ltd. put the number of shelved final investment decisions at 46 projects worth more than $200 billion (see Daily GPI, July 28, 2015).

One positive from the delays is that projects are being reworked to improve their efficiencies “and are benefiting from lower unit prices with each passing day,” the analyst said. “That is good as more and more projects will be likely candidates to be awarded once the oil markets show signs of improvements.”

The biggest piece of the OFS backlog is within the engineering, construction and installation (EPCI) of facilities, which amounts to an estimated $85 billion. “This represents 80% of an average normal year of greenfield EPCI awards, or a backlog-to-annual award ratio of 0.8,” analysts estimated. Half of the EPCI purchases “stems from the 10 largest projects that have been deferred,” which all would be overseas.