In 2009 demand for offshore operations and maintenance services totalled US$ 53.2 billion, having grown at a compound rate of 13.7% over the past five years. This was driven by a combination of high oil prices, buoyant offshore development activity and rampant price inflation for equipment and services. Over the next five years we expect a more modest compound growth of 7.8% as the market feels the effects of the global downturn of 2008 - 2009. However, beyond 2010 we expect rapid recovery as macro-economics re-assert control over oil prices prompting oil companies to return to ‘business as usual’.
Growth in production
Our latest research highlights the fact that O&M markets are considerably less vulnerable to economic downturn than their capital-led counterparts. Whilst global offshore drilling actvity dropped by a estimated 14% between 2008-2009, total offshore production (the principal driver for all operational activity) grew by 3.5% which in turn led to market growth in the O&M market of 2.8% between 2008-2009 despite widespread price deflation for equipment and services.
Over the 2005-2009 period demand for production related services accounted for 44% of global O&M demand. These services are directly associated with production levels from offshore production facilities and are intensified as an oil or gas reservoir matures and requires additional effort to sustain production. The inevitable maturation of offshore fields will drive compound growth of 9.0% in the production services sector as operators struggle to come to terms with decreasing down-hole pressure and increasing water cuts.
Inspection, repair and maintenance
The market for the inspection, repair and maintenance of subsea infrastructure has grown significantly over the past decade as the industry becomes increasingly dependent on subsea solutions for the development of deepwater and stranded reserves. As a result, we expect to see the stock of subsea completed wells more than double between 2005 and 2012. Similarly, the installed base of subsea pipelines is also expected to grow substantially over the next five years. This equipment will require significant levels of inspection, repair and maintenance work which will drive compound growth of 10.2% in the Subsea IRM market over the next five years – ensuring it outgrows all other market sectors by 2014.
Finally, we predict that the historical dominance of mature western basins will face significant challenges. Between 2005-2009 47% of global demand was accounted for by Western Europe and North America. Although we expect market growth in all regions (despite the UK and RoW regions facing terminal production decline) we expect their share of global demand over the forecast period to drop to 41%. This shift will be driven by a combination of increasing offshore production in regions such as the Middle East and the movement towards deepwater in less mature regions such as Africa and Latin America.
Author: text adapted from Douglas-Westwood’s Offshore Operations & Maintenance Market Report 2010 – 2014.