Global DWS expenditure over 2018-2022 to amount to $1.3tn, despite oil market jitters.
Global DWS expenditure is expected to rise at a 5% CAGR over the next five years, reaching $284bn in 2022. The recent sharp correction in oil prices has focused much attention on December's OPEC meeting, at a time when the ink is yet to dry on the 2019 budgets for many E&P and OFS companies. However, most of these companies were not planning on $70 oil for 2018 and indeed were unlikely to be doing so for 2019 either.
The Q4 2018 edition of Westwood's ‘World Drilling & Well Services Expenditure Market Forecast’ presents the latest outlook for this critical leading-indicator sector for the wider OFS industry.
- Total expenditure over 2018-2022 to amount to $1.3tn, representing a 5% increase compared to 2013-2017.
- North America will continue to dominate the market, representing 50% of global expenditure through to 2022.
- Outside of North America, the Latin American market will continue to see strong growth, with onshore and offshore expenditure forecast to rise at a 6% and 7% CAGR over the next five years, respectively.
- Rig & crew and stimulation services will represent the largest proportion of the market over the forecast, with a 26% and 24% share respectively.
- Onshore sector to see a strong recovery over the next five years (6% CAGR); growth in the offshore sector not expected until the early 2020s.
The global recovery in drilling and completion remains cautious overall, with E&P companies maintaining tight capital discipline and watching for robust, long-term oil price recovery before opening the purse strings again. Focus in the near term will be the onshore market, where project lead-times to first oil are short and overall risk is more-manageable.
North American activity is expected to drive a 27% increase in expenditure over the next five years. The Latin American market is also forecast to see strong growth, with total expenditure in the region expected to reach over $20bn in 2022. Argentina will be a key contributor to onshore drilling activity, notably through the development of the Vaca Muerta shale play, while a recovery in deepwater drilling activity in Brazil will contribute to an increase in offshore expenditure in the early 2020s.
Since the previous edition of the report, Westwood has revised down its outlook for shallow water wells drilled in 2018-2020, with global offshore drilling activity not expected to see a significant recovery until 2021. Subsequently, growth in the offshore DWS market is expected to be more muted compared to the onshore sector, with expenditure forecast to rise at a 1.7% CAGR over 2018-2022. Growth within the offshore market will be limited to the latter years of the forecast and driven by activity in regions such as the North Sea and South East Asia.