In the latestJanuary 2018 report from EY, Reviewof the UK oilfield services industry, the overarching tone is one of ‘cautious optimism.’  EY’s analysis reviews recent industry data ofthe UK’s registered oilfield services (OFS) companies across five subsectors:reservoirs, wells, facilities, marine & subsea and services &support.  In this post, we look at thekey takeaways from the 43-page report, highlighting the trends in the North Seaand potential implications for employment and future growth.

Outlookfor the UK continental shelf

While Brentprices have surpassed $60 per bbl, a price not seen since 2015, confidence inthe global economy remains moderate. Production in the mature UK Continental Shelf continues to increasedriven by efficiency and new fields.  In2017, we saw first oil at BP’s Schiehallion area, Enquest’s Kraken development,and Total’s Edradour and Glenlivet development. A few other developments are also underway. 

As foroperating costs, we have seen a fall from $26 per boe in 2013 to $14.70 per boein 2017.  This trend is expected towelcome greater investment in the UK.  Itis already happening as nearly 100 applications were received in the 30thoffshore licensing round.  Furthermore,in efforts to make the UKCS more competitive, the Oil & Gas TechnologyCentre (OGTC) opened in February 2017 with £180 million in support of several investmentsin technology and digital projects. Lastly, decommissioning spend is expected toincrease.  This is an opportunity for the UK’s supplychain to establish itself as best in class in dealing with mature fields in acost-effective manner. 

Trendsamong North Sea oilfield services companies

For OFScompanies, the focus remains on cost discipline.  The pressure to innovate and to buildmomentum for digital technology development and big data analytics willcontinue to play a vital role in cost reduction, efficiency, andcompetitiveness.  Consolidation among OFScompanies is expected to continue with the number of transactions to rise.  Large-scale acquisitions and mergers willallow companies to protect market share and add capabilities.  Diversification will be the key to counteractthe lack of significant growth in the UK OFS market in the next few years.  Many companies will look to increase exportactivity and diversify into adjacent sectors.      

Keytrends in the North Sea OFS supply chain

2016 was adifficult year with 15% reduction in turnover across all categories.  Some companies grew from acquisitions,overseas activity, and/or diversification but that accounted for less than 2%of the companies in the survey.  Thereport highlights some key findings and trends across the five sub-sectors:

Reservoirs: The supply chain continues to be impacted by pricing pressure andinsufficient demand.  In 2017, the Oil& Gas Authority (OGA) released 12,000 miles of broadband seismic findingsand over 14,000 miles of reprocessed legacy data.  This could lead to increased explorationactivity and revitalise the segment.

Wells: Drilling activity has been declining in the UKCS andcapital expenditure is forecast to reduce by more than 50%.  However, at least eight new potentialprojects being considered for approval in 2018 accounting for up to £5bn. 

Facilities: Given the maturity of the UKCS basin,companies can no longer delay or cancel non-essential maintenance as in recenthistory.  As such, they will have toallocate capital to maintenance spend for the ageing infrastructure to remainoperational. 

Marine & Subsea: While there are new projects forecastedfor 2018 and beyond, expenditure is much smaller in comparison to recentdevelopments coming online.  Given theforecast decline in subsea capital investment, export markets will increase inimportance.

Support & Services: The past few years have seen a sharpdecline in contract roles, but recovery is expected in 2018. Cost efficiency has led to reduced headcounts and remuneration levels,but technology and demographics look to disrupt the whole industry. Digitaladvances are creating a step change in how and where work gets done.  Millennials are soon to comprise much of theworkforce and bring with them positive changing attitudes toward digitaltechnology, collaboration, and accountability. The competition for new skills and capabilities among the workforce isfierce.  

Conclusion

Andy Brogan, EYGlobal Oil & Gas Leader notes, “The OFS market is likely to remainchallenging for the foreseeable future and only those who can build and defendcompetitive advantages are going to deliver the returns their stakeholders’expect.”

While we areback from the brink of 2017, pressures continue among North Sea oilfieldservices companies and the whole industry. Across the supply chain sectors, the traditional avenues for growth andemployment are on the decline.  Companieswill have to look to novel innovation, sustainability, consolidation, capital,and diversification to remain competitive and grow in the years to come.

To discuss oilfieldservices trends and the potential impact on your recruitment requirements, getin touch with Louise Wood:

+44 (0)1224 261926    louise.wood@prodrill-ers.com