OSLO, September 20 /PRNewswire/ --
-- ODS-Petrodata sees a 'window of opportunity' for oil and gas operators in 2009 and 2010
New orders for 16 surveyed key contractors to the oil and gas industry declined 52% in the first half of 2009 relative to the same period in 2008. Whereas some contractors have landed major orders over the last few months, securing work in the near term, an increasing share have seen their backlogs deteriorate rapidly. The situation could become critical for some if they do not see new orders starting to come through towards late 2009 / early 2010.
According to the latest MSS Industry Trends outlook, covering field development and pipeline construction, overall activity levels (excluding the effects of cost inflation) are expected to see a 7% drop in 2009 compared to 2008. Although the global economy is starting to recover and oil prices have risen from the lows of February 2009, the sharp reduction in new orders is expected to lead to further reductions in activity levels in 2010.
The cost of a new field development project (not including drilling) is now expected to decline by an average of 18% year-on-year in 2009, a downward revision from -12/-13% forecast in April this year. This is led by falling raw material costs, as well as a decline in contractor margins, as oil and gas companies are taking advantage of their strengthening position to push for lower prices.
MSS Cost Index annual changes:
- Onshore Project: + 9 % (2008), - 18 % (2009e), + 10 % (2010e)
- Offshore Project: + 7 % (2008), - 18 % (2009e), + 5 % (2010e)
The fall in prices in 2009 is expected to be partially reversed in 2010. "The recent gain in raw material prices, such as steel, is expected to cause cost inflation to return in 2010, although contractor margins generally will remain under pressure. Notable exceptions are in the offshore construction vessel market segments where oversupply will cause day rates to decline further in 2010," according to Senior Market Analyst Dag Kristiansen.
Falling costs are a strong contributor to the drop in spending levels in 2009. When the decline in costs is taken into account, spending is expected to fall by nearly 25% compared to 2008. ODS-Petrodata does not expect a return to the 2008 activity and spending levels until 2012-2013.
With increasingly distressed contractors and falling costs for new projects, ODS-Petrodata is currently seeing a 'window of opportunity' for oil and gas operators. However, fundamentals, including a more stable oil price and increasing challenges in meeting global oil demand, all point towards an increase in spending and activity within oil and gas developments in the medium term. Contract awards are expected to pick up in the coming year, and a recovery in global economic growth and commodity prices could cause this window to start closing in the course of the coming year.
ODS-Petrodata's MSS Cost Index for field development projects as well as the Industry Trends outlook is updated regularly. These studies are based on continuous analysis of the trends of 24 market segments within the oil and gas service industry.
ODS-Petrodata is committed to delivering high-quality market intelligence, data, publications and analysis tools to the upstream oil and gas industry. We emphasise the virtues of quality, timely delivery and perceptive analysis in support of your efforts to understand complex markets.
For further information on the MSS Cost Index or ODS-Petrodata products visit our web pages www.ods-petrodata.com and www.msspoint.com. You may also contact Jens Petter Hamang, MSS Manager (jhamang@ods-petrodata.com / +47-2212-9067).
Jens Petter Hamang, MSS Manager of ODS-Petrodata, +47-2212-9067, jhamang@ods-petrodata.com
