Emmanuel Addeh in Abuja
Deloitte in United States, which provides industry advisory services, has said that the oilfield services sector globally will stay at 25 per below 2019 levels this year.
In its outlook for 2022, the firm stated that this is despite the sector slashing costs and optimising operations to stay afloat even before the pandemic.
Being traditionally dependent on upstream cycles, Deloitte pointed out that the sector is now likely to see a permanent structural shift as rapid energy transition shifts the scales of oil and gas revenues and spending.
“Not surprisingly, spending in Oilfield Services (OFS), which declined during the pandemic, is expected to remain about 25 per cent below 2019 levels until 2025.
“ With margins at the mercy of another price cycle and reduced spending, many OFS companies are crafting a new strategy for the future of energy,” the firm projected.
With a broadening decarbonisation mandate across industries, it reasoned that companies have an opportunity to lead the way for customers by fully reengineering traditional OFS business models and solutions outside the traditional “oilfield” services and to other industries.
“However, digitalisation will only help to a certain extent. The sector needs to get even leaner and greener. Providing integrated solutions for decarbonising upstream projects, implementing subscription-based revenue models, or diversifying into the low-carbon space could be key enablers of the future OFS strategy,” it added.
Rightly so, the firm revealed that about 30 per cent of executives surveyed believe that building capabilities in adjacent areas such as hydrogen and carbon capture technology will help them thrive the most in the future.
“Suppliers already have an advantage in leveraging subsurface and reservoir geology expertise and applying it to new emission abatement techniques like carbon capture,” it argued.
Deloitte advised that companies could even diversify some oil and gas capabilities and replace up to 40 per cent of their revenue by servicing renewable markets, quoting Rystad Energy, a renowned research firm.
In bringing about fundamental transformation, it added that partnerships, alliances, and consolidation appear to be gaining importance.
“Partnerships between OFS and tech companies have already become increasingly common; now the low-carbon or new energy rationale could become a dominant driver.
“In fact, 20 per cent of OFS deals in 2021 involved a target company with operations in renewable energy, as compared with 5 per cent between 2017 and 2020.
“In the coming years, companies have huge scope to create a new charter for themselves by recreating their business profile, diversifying their work approach, establishing expertise in the low-carbon space, and exerting more control of their growth,” it noted.
The report further indicated that although oil prices had risen since the start of 2021, bolstered by recovering demand and capped supply from the Organisation of Petroleum Exporting Countries (OPEC), however, upstream mergers and acquisitions (M&A) activity, which typically follows oil prices, remains well below pre-pandemic levels.
