American Oil and Gas Reporter - February 2019 - 34

even in the most mature Bakken and
Eagle Ford basins, about 70 percent of
economically recoverable resources in
(the) base case oil price scenario have
yet to be developed."

known backlogs, latest contract awards
and regional exposures.
Rystad further projects that the global
industry will commit to 110 new subsea
projects this year, up from 96 in 2018
and 43 in 2016. Consequently, the market
for subsea equipment and services may
expand by 13-14 percent on an annualized
basis through 2023.
"Rystad expects the uptick in offshore
spending to be driven by exploration and
greenfield projects rather than enhancements and extensions of existing producing
fields. In addition, operating expenditure
budgets will likely swell thanks to cost
inflation, more fields coming on stream,
and a buildup of work that needs to be
completed," the report reads.
Of course, the projections are highly
sensitive to oil prices. After oil prices
fell sharply in the fourth quarter and
the general oil market outlook turned
more bearish for 2019, "the shale service
market started to hit the brakes," Martinsen remarks. But with crude oil rallying to start the new year, prices recovered a lot of lost ground in January.
In fact, Brent and WTI ended the month
approaching $62 and $55, respectively-up roughly $12/bbl from their December lows.
That is significant to Rystad Energy's
outlook because it puts crude prices within
a few percentage points of reaching an
"inflection point" at which Rystad sees
the short-cycle shale business again starting
to grow as fast (or even faster) than the

Rising Offshore Activity
But even with bullish forecasts of ongoing growth and higher future spending
in U.S. shale plays, a separate report
from Rystad Energy suggests that offshore
capital expenditures could outgrow spending on onshore shale activities in 2019.
"Service companies exposed to the
offshore subsea market and the maintenance, modifications and operations
(MMO) sector are set to benefit from
this trend reversal," observes Audun Martinsen, Rystad Energy's head of oil field
services research.
Based on an assumption that spending
on land rigs, hydraulic fracturing and
other services for shale plays is likely to
remain fairly flat this year, with about
the same number of total shale wells
completed as last year (20,000), the
report finds that the global offshore
service market is poised to grow by a robust 4-6 percent in 2019 to $208 billion,
and then surge by up to another 14
percent in 2020.
"It seems that the names that will be
able to deliver the best revenue growth
are the service companies exposed to the
offshore subsea market and MMO," says
Martinsen, who explains that Rystad Energy estimates revenue growth based on
FIGURE 1

Survey Respondents' Optimism
About their Organizations' Prospects in 2019
North America

65% 65%

Latin America

78%

66%
40%

2017

2018

Europe

84%

68% 70%
40%

2019

Source: DNV GL

34 THE AMERICAN OIL & GAS REPORTER

Middle East &
North Africa

78%
49%

Asia Pacific

85%
45%

59%

74%

longer-cycle offshore market. According
to Rystad Energy, a Brent price of $64/bbl
would see both shale and offshore grow
at around 5 percent.
Ready To Spend
Summarizing the results of its international survey of 791 senior oil and gas
executives in the upstream, midstream
and downstream sectors, Norwegian service company DNV GL AS characterizes
the industry's mood as "resilient, confident
and ready to spend" in 2019.
The survey was conducted in October
and November, coinciding with the largest
quarterly decline in oil prices in four
years. Despite those bearish market conditions, DNV GL says the senior oil and
gas professionals it surveyed expressed
the highest level of confidence and optimism about the industry's growth in four
years (Figure 1).
"Confidence has surged from 32 percent in 2017 to 76 percent in 2019," details Liv Hovem, chief executive officer
of DNV GL's oil and gas unit. "Growth
will be important and there is a strong
belief in new investment. The global oil
and gas industry is entering 2019 with
renewed optimism and a greater sense
of resilience."
Increased investment is expected to
fuel the industry's growth this year, with
two thirds of the executives surveyed
expecting a rise in large, capital-intensive
projects, according to Hovem. Moreover,
70 percent foresee increased or maintained capital expenditure levels, and
65 percent predict greater or stable operational spending.
Looking beyond 2019, 57 percent of
respondents believe that oil and gas
companies will be able to achieve high
profitability over the next decade, up
from 45 percent in DNV GL's 2018 survey findings. Levels of optimism differ
by region, but the company says the
overall trajectory is the same, whether
respondents are located in North America
or North Africa.
"These high levels of confidence for
both 2019 and the coming decade suggest
that the industry believes in its ability to
adapt to both higher volatility in the
short term, and shifts in supply and demand patterns in the longer term," the
report states.
r
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