A new report published today by the PwC accountancy firm suggests that as oil prices appear to be stabilising and supply and demand move towards equilibrium, there’s growing confidence in the sector that the worse is perhaps over.
PwC’s latest report, ‘A Sea Change: Emerging from a downturn’, considers the outlook for the global oilfield service sector and how the sector can move from crisis to success in a new world.
Adrian del Maestro, oil & gas director of research at PwC, said: “As oilfield service companies emerge from the turmoil, they will be operating in a landscape that has changed fundamentally in the past two years.
“In this new world we see an oil and gas sector focused relentlessly on cost reduction, with business models having to be resilient at lower oil prices.
“If we are poised for a recovery it is likely to be uneven. Exploration activity is reduced, the US tight oil sector (shale) has proved resilient, and the lifting of sanctions has allowed Iran to return to the world stage.”
The report also highlights six key points that oilfield service and supply-chain companies will need to concentrate on over the coming months, from the double down on innovation and reducing the complexity of operations, to exploring partnerships and big data analytics.
PwC experts also say that, while we are unlikely to see prices of $100-barrel in the near to medium term at least. Rather, a more robust price in the $60-$70-barrel range is more likely in the next few years.
A senior partner at PwC’s Aberdeen Oil & Gas Centre of Excellence, added:
“The oil services sector has been particularly badly hit over the last couple of years by depressed prices and lower activity levels, further exacerbated by some key skills leaving the oil & gas sector for other industries.
“However, the global nature of many services businesses should position them well for any upturn, driven by activity in frontier basins, provided they make best use of their skillsets. And already many are starting to reap the benefits of rebasing how they deliver their services and working closely with the operator community to meet their needs.
Alan McCrae, energy tax leader at PwC, added: “There is no doubt that exchequer revenues have been significantly impacted by this prolonged downturn. However, the focus now needs to be on efficient and profitable growth to adapt to the new commodity price reality.
“From a North Sea perspective, with the right measures and actions in place, a successful oil and gas supply chain is the key to unlocking future success in a maturing basin.”
See also: IEA forecasts crude oil glut (and depressed prices) for 2017 unless OPEC cuts production this month