Led by onshore spending in the United States, oilfield equipment (OFE) expenditures should continue to increase in the 2020s, reaching a forecast peak of $133 billion in 2023, according to Westwood Global Energy Group.
The firm’s new OFE market forecast is based on analysis of more than 50 different equipment types across the upstream natural gas and oil industry that cover global spend for new, replacement and servicing.
Last year was an uncertain one for the OFE sector, but investment still continued to recover, reaching $107 billion from a low of $93 billion in 2016, Westwood analysts said.
“Based on current projections, OFE expenditure is expected to continue to increase into the 2020s,” the Westwood team said, with worldwide expenditures of $617 billion between 2019 and 2023, an $18 billion uplift on the 2014-2018 period.
Over the forecast period, onshore spend is expected to account for 55% of the total at $314 billion, dominated by tubular goods, rigs and rig equipment, accounting for a nearly one-third increase overall in global onshore drilling.
“Intensive drilling activity” is expected for onshore regions, driven by gains in the Lower 48 and in onshore China. “North America, with the expected continuation of growth in U.S. unconventionals, will make up nearly half of forecast onshore expenditure,” Westwood analysts said.
“Despite a continuation of pipeline capacity challenges in Canada, North America will remain the biggest player in the oilfield equipment market over the forecast, with expenditure reaching $38 billion by 2023.”
In the high-demand region of the Asia Pacific, China is expected to lead as the country “solidifies efforts to reduce reliance on hydrocarbon imports through targeting unconventional gas resources.”
Asia is seen as the next largest onshore OFE market after the United States with $77 billion in spending over 2019-2023. The region is expected to experience a 15% compound annual growth rate in spending, led by China.
State-owned producer China National Petroleum Corp. early last year “outlined its five-year exploration and development plan to achieve these production targets,” with plans to drill up to 20,000 wells every year through to 2024 and many targeting shale oil, shale gas and tight gas.
Another state-owned producer, PetroChina, expects shale/tight gas production to reach 35 billion cubic meters (bcm) a year by 2025. And China Petroleum and Chemical Corp., aka Sinopec, is forecasting total gas production, boosted by additions from unconventional sources and the ramp-up of production at the Changqing field among others, “should see output reach over 200 bcm/year by 2025.”
The increases from China exploration still would be “well below output from onshore U.S. and Russia -- but come close to the 3.8 million boe/d expected for Qatar in the same year,” analysts noted.
Last month China officially opened its exploration/production environment and supply chain, allowing foreign operators to explore and produce reserves for the first time.
“This move is expected to generate further investment into the country’s supply chain and should help the government reduce reliance on gas imports.”
In the offshore, spend is forecast over the 2019-2023 period to be led by fixed and floating production platforms, with expenditures estimated at $139 billion. Projects are expected to be underpinned by investments in Brazil, Guyana and Saudi Arabia.
“The floating production platform sector will be bolstered by activity in Latin America, where regional expenditure is set to peak at $15 billion in 2022,” the Westwood team said.
First oil from Guyana’s Liza development in the offshore Stabroek Block operated by ExxonMobil was achieved in late-December. Up to five floating production storage and offloading systems, aka FPSOs, are expected to be deployed on the block over the forecast period, “leading Guyana’s oilfield equipment expenditure to reach a forecast peak in 2022.
Western Europe’s spend is forecast to be driven by activity in the North Sea, where Norway and the UK account for 82% of the total. Fixed and FPSOs would underpin expenditures in both countries, where high-cost projects such as Equinor SA’s Johan Castberg (Skrugard) and Johan Sverdrup developments would need OFE over the forecast.
Western European expenditures are forecast to total $29 billion over the 2019-2023 period.