Oilfield service market could fall to 50% of 2019 level in 2020-21, foreign-contractor share in Russia could grow - Novak
MOSCOW. Sept 8 (Interfax) - Russia's oilfield services market in 2020-2021 could decline to almost half of the level of 2019, Russian Energy Minister Alexander Novak said in the Energy Policy publication.
"As a result, we see risks of a significant reduction in the margins of oilfield service organizations. A decrease in the volume of orders will inevitably intensify competition on the market, which, in turn, could lead to irreversible economic consequences for a number of companies," the energy minister said.
"According to the estimates of Russia's Energy Ministry, if action is not taken, meaning not taking systemic measures to support the industry, the market share of foreign oilfield service companies could rise to more than 50% by 2022. This threatens the Russian oilfield service industry with the loss of key skills and responsibilities in high-tech areas, including such strategically important ones as geophysical and seismic studies of wells, as well as specialized software. Meanwhile, the minimum level of capacity in order to maintain competitiveness of the oilfield services segment is around 80% of the 2019 level," Novak said.
"At the same time, analysts expect a decrease already in 2023-2025 in the global supply of oil owing to insufficient investment in production in 2020 amid the consequences of the coronavirus and the fall in oil prices. This year, $170 billion less will be invested in oil and gas output than last year. Investment is also unlikely to recover fully in 2021. This protracted period of low investment, according to Rystad Energy's forecasts, could lead to a drop of 5 million barrels per day in global output. When demand starts to return to pre-crisis levels, it will be extremely important for Russia, as for other oil-producing countries, to regain market share as soon as possible, and possibly even increase production amid reduced competition among producers. The prospects for a rapid increase in output in the future depend on the level of support for oilfield services today," the energy minister concluded.