THE growing demand for energy with an increase in the number of investments of offshore and unconventional exploration and production (E&P) activities are expected to drive the global oilfield services market. It is estimated to reach $291.8 billion by 2019, with a compounded annual growth rate (CAGR) of 11.9 per cent from 2014 to 2019, says a report.

North America is expected to lead the global oilfield services market with a share of nearly 52 per cent, in terms of revenue, by the end of 2014, says a new report by MarketsandMarkets.

The report includes major oilfield services market including pressure pumping, oil country tubular goods (OCTG), wireline services, drilling and completion fluids, well intervention, completion equipment, and others.

Key players in the market are Halliburton, Baker Hughes, Schlumberger, and Weatherford, Superior Energy Services, Nabors Industries Ltd.

The oilfield services are required throughout the lifecycle of an oil and gas well. The ever-increasing E&P activities across the globe and new areas of unconventional resources are the major drivers in the growth of the oilfield services market. In recent times, there have been many developments in terms of offshore and unconventional E&P. The increasing world energy demands have pushed the E&P companies to push their limits towards unconventional hydrocarbon resources. The relentless depletion of onshore and shallow-water fields have compelled oil companies to focus on deep-water and unconventional onshore areas where various oilfield services are in demand. These E&P activities for unconventional resources, demand oilfield services in order to produce and make the operations economically viable. This presents a good opportunity for players to capitalise on and the oilfield services market is likely to grow moderately in the upcoming years.

The major drivers for the oilfield services market are the increase in the E&P rate, recoverable reserves, and the energy strategy shift through gas and energy security by domestic supply. The research and development (R&D) initiatives by oilfield service companies and the rise in oil prices have assisted the oilfield services market to grow to this level.

North America accounted for about 52 per cent of the market share of the global oilfield services market in 2013. Halliburton, Schlumberger, Baker Hughes, and Weatherford are the major players in this segment. A few Chinese and Asian players are expected to grow within the market in the near future.

The oilfield services market is segmented into six geographies namely North America, South & Central America, Europe, Africa, Asia-Pacific, and the Middle East. This is further segmented into respective countries.

The latest exploration and highly advanced technology required in African and Asia-Pacific regions are expected to experience the highest revenue growth during the next five years.

The major oilfield services market includes pressure pumping, OCTG, wireline services, drilling & completion fluids, well intervention, completion equipment, and others. Pressure pumping services accounted for about 37 per cent share of the total market in 2013. Pressure pumping is the propagation of fractures through layers of rock using pressurised fracturing fluid, before pumping the cement into the well bore to complete it. This technique is primarily used in the extraction of resources from low permeability reservoirs such as shale gas, tight gas, and unconventional liquids, which are difficult to recover through regular drilling procedures. Pressure pumping services are provided by oilfield service companies (such as Halliburton) to oil and gas companies (such as Shell).

The OCTG and wireline services have the second and third biggest market share as of 2013, with 26 per cent and 11 per cent, respectively. In terms of geographic regions, North America, Asia-Pacific, and Europe were the biggest markets with 52 per cent, 21 per cent, and 9 per cent shares, respectively, in 2013. The oilfield services market is mainly concentrated in North America, where many leading companies like Schlumberger (US), Halliburton (US), Baker Hughes (US) and various other medium and small players, operate.

Reducing capital costs is the key

ASIA PACIFIC-GROWING FASTEST
According to a report by MicroMarket Monitor, the Asia-Pacific oilfield services market is expected to reach $68,762 million by 2019.

High-energy demand from growing economies and new explorations and discoveries in Asia-Pacific market especially in China and India are driving the growth of oilfield services market.

Latin America and Asia-Pacific are the fastest growing markets over the next five years with regards to these activities, and hence growth prospects for the oilfield services market are high in these regions.

Asia-Pacific, the second largest market, has a share of 20 per cent in the global oilfield services market. The total revenue generated by the Asia-Pacific oilfield services market is $31,598.0 million in 2013, which is expected to grow at a CAGR of 14 per cent from 2014 to 2019 to reach $68,762.0 million by 2019. The OCTG segment has the highest share, followed by pressure pumping and wireline services. High-energy demand from growing economies and new explorations and discoveries in Asia-Pacific market especially in China and India are driving the growth of oilfield services market.

NORTH AMERICA-LARGEST SHARE
North America has the largest market share of 50.8 per cent in the global oilfield services market by 2013. The total revenue generated by the North American oilfield services market was $76,857.3 million in 2013, which is expected to grow at a CAGR of 9.8 per cent from 2014 to 2019 to reach $136,858.6 million by 2019. Pressure pumping services has the highest share followed by OCTG and wireline services. Rising drilling and completion activities, discoveries of new oil and gas field, and increasing oil and gas demand globally, are driving the growth of oilfield services market in this region.

SOUTH AMERICA-GOING STRONG
South America has the third largest market having a share of 9 per cent in the global oilfield services market. The total revenue generated by the South America oilfield services market is $14,039.6 million in 2013, which is expected to grow at a CAGR of 17.0 per cent from 2014 to 2019 to reach $36,033.8 million by 2019. OCTG has the highest share followed by pressure pumping and wireline services. Technological advancement and investigation activities for shale gas and CBM, increased spending from oil and gas companies accelerates offshore exploration activities, and synchronisation with rising investment in the energy and power division are the major drivers of oilfield services in this region with Brazil and Venezuela being the key markets.

OCTG share is believed to enhance in the global oilfield services market and rising energy demand and revitalisation of aging of brown oil fields to be the major drivers.

Continuously rising energy demand and revitalisation of aging of brown oil fields are the major drivers for the oilfield services market. Additionally, the lucrative and high investment areas of subsea regions such as the Gulf of Mexico, the North Sea, and new discoveries in West Africa are expected to lead the exponential growth of the oilfield services market. OCTG has the highest share followed by pressure pumping and well intervention services.

EUROPE RULES TOO
The European market had a share of 8 per cent in the global oilfield services market. The total revenue generated by the European oilfield services market was $13,381.6 million in 2013, which is expected to grow at a CAGR of 11.1 per cent from 2014 to 2019, to reach $25,120.1 million by 2019. Pressure pumping services has the highest share followed by OCTG and well intervention services. Three countries, Norway, the UK, and Russia majorly dominate the European oil and gas industry. These three countries account for around 80 per cent market value share in 2014.

AFRICA OILFIELD SERVICES
Africa has a low share of 4.8 per cent in the global oilfield services market in 2013. The total revenue generated by the African oilfield services market is $7,642.3 million in 2013, which is expected to grow at a CAGR of 14.2 per cent from 2014 to 2019 to reach $16,909.2 million by 2019. OCTG has the highest share followed by pressure pumping and well intervention services. Angola and Egypt are the key oilfield services markets in this region.

MIDDLE EAST-GETTING THERE
The Middle East had a trivial share of 4.2 per cent in the global oilfield services market. The total revenue generated by the Middle East oilfield services market was $7,493.3 million in 2013, which is expected to grow at a CAGR of 13.5 per cent from 2014 to 2019 to reach $15,885.1 million by 2019. OCTG has the highest share followed by pressure pumping and wireline services. Saudi Arabia, Qatar and Abu Dhabi are the key oilfield services markets in this region. The oilfield services market in Middle East is also split by geography including countries such as Saudi Arabia, Oman, Qatar, Kuwait, UAE and others. Middle East is one of the growing markets in oilfield services, which will grow more in coming years.

OILFIELD EQUIPMENT RENTAL MARKET
Meanwhile, oilfield equipment rental market is also poised to grow at a 14.5 per cent CAGR by 2018 forecasts a new research report at Sandlerresearch.org.

The decreased investment in in-house production units by major integrated oil and gas vendors is one such trend. The market players are decreasing their in-house investment as they can rent out the oilfield equipment with desired customisation, which reduces the capital costs for any project.

According to the report, the increased oil and gas drilling activities across the globe is one of the main drivers in the market. The drilling activities have increased the demand for rental oilfield equipment, which is expected to propel the growth of the market during the forecast period.

This report covers the present scenario and the growth prospects of the global oilfield equipment rental market for the period 2014-2018. The global oilfield equipment rental market can be segmented into three product divisions: drilling equipment, pressure and control valve, and other equipment.

The report recognises the following companies as the key players in global oilfield equipment rental market: Chesapeake Oilfield Services, Halliburton, Precision Drilling Corp, Schlumberger, Superior Energy Services, Weatherford International, Aos Orwell, Basic Energy Services, EnsignEnergy Services, Fmc Technologies Inc., Greene’s Energy Group, Independent Oil Tools AS, Key Energy Services , Knight Oil Tool, Oil States International, Parker Drilling, RPC, SavannaEnergy Services, Tasman Oil Tools, Western Energy Services Corp.

The key market challenge is the variation in demand by the end-user and the key market trend is the decreasing investment in in-house production units. Further, the report states that the variation in demand from end-users is one of the major challenges faced by the market. The demand varies from one oilfield to another; this variation can be in terms of size and shape of equipment.

OIL & GAS EQUIPMENT & SERVICES OUTLOOK
Giving its outlook for the industry, Standard & Poor’s Industry Investment Reviews says: Our fundamental outlook for the oil and gas equipment and services sub-industry for the next 12 months is neutral. We see mid-single digit growth in upstream capital spending in 2014.

While we still view the longer-term growth rate in upstream capital spending as a secular positive, we harbor some concerns about near-term weakness outside of deepwater work. Our concerns stem in part from weakening global demand, even in emerging markets such as China; rising non-Opec supply; and greater influence of the onshore U.S. market, where we see oil services demand as more volatile and beset by pressures from over-supply. On the other hand, the expected influx of new deepwater rigs through 2014 should spur demand for related services, and deepwater work typically carries higher margins.

A number of oilfield capital equipment companies struggled in 2013 to manage supply chain issues, fueled in part by strong demand for offshore-related work. We think cost reduction efforts and improvements in supply chain efficiency will help margins in 2014. We also believe relatively steady WTI crude oil prices, projected to average in the $90/barrel-$100/barrel area through 2014, will help bolster customer confidence.

All told, we see the best international improvements in the North Sea, Russia and the Middle East; Brazil and Mexico present as wild cards, in our view. A fundamental bear case for oilfield services (not our view) would likely be predicated on two fronts: first, macro drivers, to the extent that concern over sovereign debt levels creates credit problems for upstream customers, placing project approvals at risk; and second, political drivers, to the extent that unrest in places such as Tunisia, Egypt and Libya worsens in 2014, or boils over in Iraq, possibly as a function of acrimony in nearby regions, such as Syria. While we expect greater regulatory oversight in the US Gulf, which, depending on the extent of any new rules, could increase the costs involved in deepwater exploration and development there and potentially dampen supply growth, we think cost increases will be manageable.