The global market for oil and gas contractors is expected to rise to a peak of $1 trillion in 2025 and remain at high levels for several years thereafter, according to Rystad Energy.
This development will be helped by strong growth in the midstream part of the industry to liquefy, transport, and re-gasify natural gas, the energy research firm said in a statement on Tuesday.
Overall, oil and gas spending will stay above $920 billion annually on average for the 2022-2028 period, it added.
“Despite the risk that another downturn cycle in oil and gas may occur after 2025, oilfield service suppliers should be able to balance out the downturn by branching out into other parts of the wider energy market – and in so doing, expanding the overall target market for contractors,” Rystad Energy said.
“The key for suppliers is to continue chasing obvious opportunities within geothermal energy, hydrogen, offshore wind, and carbon capture, utilisation and storage.”
According to the energy research firm, all segments in various oil and gas suppliers will grow in nominal terms, led by suppliers targeting equipment and materials and those providing operations and maintenance services.
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“While we expect the next seven years to provide a strong market for energy services, companies still have to improve their economies to make it a feast,” the statement said.
“Luckily, overall utilisation is improving rapidly as suppliers are careful not to overinvest in more capacity as rigs, vessels, plants, and other units in the supply chain are affected by natural wear and tear.”
Rystad Energy also said that the result is better pricing for suppliers – the past 12 months have driven up prices for offshore rigs, land rigs, frac fleets, proppant, OCTG, vessels, and subsea infrastructure to levels not seen in a decade.
“Global oil and gas suppliers look set to echo the biblical story about the Egyptian pharaoh’s dream of seven years of feast and seven years of famine – only in the opposite order,” said Audun Martinsen, partner and head of energy service research, Rystad Energy. All signs point towards 2022 being the start of another super cycle for the energy services sector.”
Last year was a turning point with the post-pandemic recovery and record high gas prices and strong oil prices, allowing oil and gas companies to lift their oil and gas investments by 20 percent, the energy firm said.
“Energy security concerns prompted petroleum producers to raise production and contract goods and services from suppliers, and the oilfield service industry was quickly sold out of fracking fleets, rigs, and casing and tubing steel,” it said.
“The prices that suppliers could charge surged by double-digit percentages, allowing Earnings before Interest, Taxes, Depreciation and Amortisation (EBITDA), a key metric for measuring profitability among companies margins to climb.”
Rystad Energy added that after the rebound in 2022, we are entering a very promising 2023, with the potential for 13 percent growth both for oil and gas investments and 10 percent for low-carbon investments.
