Abu Dhabi: The year 2017 is expected to be another tough year for oilfield services companies as oil prices continue to remain low hitting their profit margins, industry experts told Gulf News.
From more than $100 (Dh367) per barrel in 2014, oil prices fell to less than $30 per barrel last year before recovering to around $50 per barrel due to a production cut agreement between Opec and non-Opec members in December.
Prices are expected to be in the range of $50 to $55 per barrel in 2017 and 2018, according to analysts.
Audun Martinsen |
“For 2017, most of the service companies will experience a flat growth or a reduction in their revenues except for the companies with a majority of their activity in North America as market picks up there,” said Audun M Martinsen, Vice President of Oilfield Service Research in Oslo-based Rystad Energy.
‘We expect more bankruptcies, especially in the offshore asset-heavy segments due to a challenging environment this and next year,” he added.
According to him, 800,000 people have left the industry globally in the last two years and billions of dollars have been wiped out from the market.
“The industry has been hurt and bleeding with heavy losses in revenue and manpower.”
He however expects a slightly better performance this year when compared to previous years as oil markets perform better due to Opec production cut agreement.
Oil prices have moved past $50 per barrel since the agreement in December last year.
Ebrahim Al-Alawi |
Ebrahim Al-Alawi, deputy CEO of Al Mansoori Specialised Engineering said although activity has picked up in 2017 compared to 2016, oil companies across the region are still exerting tremendous pressure on the services companies to reduce their prices further.
“Additionally, national oil companies in Oman, Saudi Arabia and Kuwait have encouraged the creation of indigenous oilfield services companies in those markets, increasing the competition for contracts,” he said.
The company based in Abu Dhabi said they have not allowed this development to deter them from expanding their presence in Oman, Saudi Arabia and Kuwait.
“We are optimistic about the future. We are also pursuing opportunities in North Africa, East Africa, India and the CIS (Commonwealth of Independent States) countries.”
Echoing similar views, Ashik Subhani, managing director of Dubai based Great Waters Maritime said the market has become extremely competitive and a lot of oilfield services companies are taking the jobs at reduced profit margins.
“Less profit margins results in reduction on all spending by the company. Another trend is the formation of joint ventures or consortium by medium and small scale companies for bidding major projects. This is quite effective as these joint ventures can execute the work at a competitive price.”
He also said companies are diversifying in their area of business to tackle tough market conditions.
Topaz Energy and Marine, an offshore support vessel (OSV) provider predicts a difficult year for the industry.
“The outlook for the OSV market remains challenging. Although a rebound in oil prices will eventually boost demand, current significant overcapacity is resulting in rate pressures,” Rene Kofod-Olsen, CEO of the company said last month.
The Dubai based company reported a 25.1 per cent drop in revenues for the first quarter of this year when compared to the first quarter of 2016.
