Westwood’s Drilling & Well Services Spotlight
Each month, Westwood’s onshore team provides a summary outlook for specific service line categories in the wells, services and equipment sector.
Updated – 1st May, 2021
THIS MONTH WESTWOOD PROVIDES AN OUTLOOK FOR DIRECTIONAL DRILLING SERVICES, WHERE EXPENDITURE IS EXPECTED TO TOTAL $34bnBN OVER 2021-2025 WITH GROWTH IN CHINESE DEVIATED and horizontal drilling to drive spend.
China: An expected increase in the number of deviated and horizontal wells drilled, as the government pushes CNPC and Sinopec for more domestic production, will see China lead spend globally. Onshore drilling activity is forecast to increase 5% over 2021-2025, with the development of more complex unconventional plays driving the number of deviated and horizontal wells drilled to increase by 22% over 2021-2025, compared to 1% for vertical wells.
Argentina: Drilling activity is forecast to stage a modest recovery following a collapse in 2020. Argentine energy company YPF has ambitious plans to boost unconventional oil and gas production in the Vaca Muerta shale play by 56% and 70% respectively in 2021. Doing so will require notable deviated and horizontal drilling, supporting demand for directional drilling activity over 2021-2025.
Canada: Recent years have seen a contraction in the Canadian drilling market, with activity forecast at below historic levels 2021-2025. Despite this, the majority of wells drilled are expected to be deviated or horizontal, continuing a trend that began in 2010, as operators looked to access hydrocarbons in tighter formations. This is expected to keep directional drilling services expenditure at a high level through the forecast.
- Directional drilling services are one of 21 service lines covered in Westwood’s World Drilling & Well Services report, the latest edition of which has just been released. For more information, or to purchase the report, please click here.
- The directional drilling market is driven by an increasing prevalence of deviated wells, particularly high-angle and horizontal wells. For more complex petroleum systems or unconventional plays, directional drilling can be used to target pay zone sweet spots and increase productivity. China’s production growth is heavily reliant on non-vertical drilling techniques at its key oil-producing Songliao, Bohai Bay, Ordos, Jungar and Tarim basins and gas at projects in the Ordos, Sichuan and Tarim basins.
- Global directional drilling expenditure is expected to total $34bn over the forecast. China will lead expenditure, driven by a government push to increase production capacity, especially at unconventional plays. The US and Russia are expected to account for 50% of total forecast expenditure. Year-on-year growth is expected over the forecast, as the number of wells drilled recovers from the nadir of 2020. Further upside comes as operators continuing to develop more complex and challenging reserves, requiring directional drilling as conventional plays mature.
Jack Baxter
Analyst, Onshore
[email protected]
Updated – 1st April, 2021
DRILL BITS SERVICES EXPECTED TO TOTAL $12BN OVER 2021-2025 WITH ACTIVITY IN CHINA, Russia and UNITED STATES forecast to drive spend
China: Spend to total $3bn over 2021-2025, driven by a high number of wells drilled, coupled with an expected increase in average well depths over the forecast, as operators develop unconventional gas projects. China’s unconventional projects can involve drilling at notable depths (Keshen-21 well completed at >8km) and as a result, high demand for durable drill bits is expected.
Russia: With average well depths notably higher than the global average and some of the highest levels of drilling activity globally, the Russian drill bit market is expected to rank third in the world, accounting for 13% of forecast spend. The country is expected to maintain production through continued high drilling activity over the forecast, with drill bits spend set to reach $326m by 2025.
Oman: The largest driller in the Middle East, Oman sees demand for high-cost, diamond-tooth drill bits for its sour oil & gas projects. These more durable drill bits extend the interval between bits changes, lowering the days required to drill a well at fields where wells depths can reach 5km. As a result, Oman’s drill bits market is among the highest globally, with forecast spend of $410m.
- Drill bits services are one of 21 service lines covered in Westwood’s World Drilling & Well Services report, the latest edition of which has just been released. For more information, or to purchase the report, please click here.
- Drill bits spend includes the material costs of oilfield drill bits. Choice of drill bit depends on project-specific characteristics, such as polycrystalline diamond compact (PDC) bits that are known for higher durability but higher costs. Roller cone bits have a short run life but are relatively cheap and able to be manufactured in larger sizes.
- Global drill bits expenditure is expected to total $12bn over the forecast. The USA will lead expenditure, driven by the high number of wells to be drilled, accounting for 32% of total spend. China, Russia, Oman and Argentina are expected to account for 46% of total forecast expenditure. Wells drilled, average well depths and the complexity of workscope drive the drill bits market. Year-on-year growth is expected over the forecast, as the number of wells drilled recovers from the nadir of 2020. Further upside comes as operators continuing to develop more complex and challenging reserves as conventional plays mature.
Jack Baxter
Analyst, Onshore
[email protected]
Updated – 1st March, 2021
THIS MONTH WESTWOOD PROVIDES AN OUTLOOK FOR FISHING SERVICES, WHERE EXPENDITURE IS EXPECTED TO REACH $24BN OVER 2021-2025 WITH ACTIVITY IN CHINA, RUSSIA AND THE US FORECAST TO DRIVE SPEND.
China: Ambitious government production targets are expected to drive companies such as PetroChina and Sinopec to drill a high number of complex horizontal wells, at formation depths of up to 5000m. This is anticipated to drive demand for fishing services due to the higher risk of losing downhole tools in HPHT and horizontal wells. Westwood forecasts that expenditure will total $8.7bn over the 2021-2025, 24% higher than the previous five years.
Russia: Operators have continued to increase the proportion of wells drilled horizontally in recent years, with Rosneft reporting that 67% of the wells they drilled in 2020 were horizontal. This, coupled with some of the highest levels of drilling activity globally, will place Russia as the third largest fishing services market over the forecast, with spend totalling $4.2bn.
Canada: ExxonMobil has joined other companies, such as Total, in removing the majority of Canadian projects from its proven reserves as the low oil price impacts high-cost oil sands projects. Despite seeing the lowest levels of drilling activity since the 1970s in 2020, Canada was still in the top five onshore drillers globally, and this is expected to remain the case over the forecast. As a result, it is forecast to see the fourth highest fishing expenditure with a total of $1.3bn over 2021-2025.
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Fishing services are one of 21 service lines covered in Westwood’s World Drilling & Well Services report, the latest edition of which has just been released. Click here to get a sample report or more information.
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Fishing involves the recovery of unwanted objects or downhole tools from the wellbore, operations are required during the majority of well drilling and workover operations. The number of days required to drill a well, as well as the complexity of operations (HPHT drilling, horizontal/deviated wells) drive demand within the market, which Westwood expects to total $24bn over 2021-2025.
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The USA, China and Russia account for 74% of onshore wells drilled globally, with a large proportion of these wells expected to be either horizontal or deviated. As a result, fishing services expenditure will be dominated by these three countries. Notably, both Russia and China will see forecast fishing spend increase compared with the hindcast as they pursue increasing horizontal drilling going forward. However, the USA is expected to see forecast spend fall 13% compared to the hindcast as uncertain oil prices subdue drilling and completion activity.
Jack Baxter
Analyst, Onshore
[email protected]
Updated – 1st February, 2021
This month Westwood provides a summary outlook for the Slickline Services sector, where expenditure is expected to reach $12bn over 2021-2025, driven by activity in China and the USA.
USA: Despite a dramatic fall in activity in 2020, and continued downward pressure on activity expected through to 2025, the USA is still expected to see significant levels of completion and workover activity over the forecast. As a result, slickline services spend is estimated to total $4.2bn over 2021-2025, 35% of the global total.
Saudi Arabia: Saudi Arabia’s long-term goal to reach a maximum sustainable production capacity of 13 mmbbl/d and double gas production by 2030, will drive drilling, completion and workover activity over the forecast. As a result, slickline services expenditure will increase 37% by 2025. However, OPEC production cuts and the recent cancellation of key tenders for the Jafurah unconventional project pose risks to the country achieving these targets.
Argentina: Following a 54% decline in 2020, drilling activity will recover somewhat, however, annual wells drilled are forecast to remain below 2019 levels. Slickline services spend is expected to total $253m over 2021-2025, however, expenditure will remain below 2019 levels throughout the forecast, as high breakeven prices in the Vaca Muerta hamper international investment, despite the government’s implementation of measures to prop up oil and gas prices.
- Despite being an older oilfield technology, slickline remains a commonly used well intervention tool. Westwood expects global onshore slickline services spend to total $12bn over 2021-2025, similar to the previous five-year period. However, growth in Chinese activity will drive Asia’s forecast expenditure to grow 18% compared to the hindcast, while North America will experience a 10% decline in spend between the hindcast and forecast.
- Combined, North America and Asia will account for 71% of onshore slickline services spend, driven by the high levels of drilling, completion and workover activity in the USA and China. Eastern Europe & FSU is expected to account for 14% of the total, driven predominantly by Russia, while countries such as Argentina, Colombia and Ecuador will support demand in Latin America.
- Argentinian NOC YPF has announced plans to increase investment by 73% in 2021, the majority focused on rebuilding oil & gas production following a 10% decrease in production in 2020. However, this remains contingent upon the success of a bond restructuring bid that is currently underway, with bondholders given until the 8th of February to accept the offer.
Jack Baxter
Analyst, Onshore
[email protected]
Updated – 6th January, 2021
USA: The USA is anticipated to lead global perforation services expenditure over 2021-2025, with spend totalling an estimated $4bn. Perforation spend will be one of the few service lines that are expected to see higher spend in the forecast compared to the hindcast, with spend expected to be 12% higher than the previous five years. This is a result of both the high number of completions expected over the forecast, as well as a significant wellstock requiring workover operations. Demand for perforation services was hit hard in 2020, falling 39% and while minimal growth (<1%) is expected in 2021, spend is expected to recover at a stronger rate beyond that.
China: Accounting for 21% of global forecast perforation spend, China is expected to see strong growth over the forecast. This is due to ambitious production targets to ease the reliance on fuel imports, which are expected to lead to a large increase in drilling and completion activity from both conventional and unconventional developments.
Russia: Russia is still expected to account for 14% of total perforation expenditure 2021-2025. Although OPEC+ agreements will continue to constrain production in the near-term, Russia and Kazakhstan will be permitted to ease their agreed cuts by a combined 150 kbbl/d by March 2021. This, as well as Russia’s large wellstock and need to meet export agreements, are expected to support continued high demand for perforations services.
- From this edition of the DWS spotlight, the forecast period will cover 2021-2025 rather than 2020-2024.
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Completion and workover activity drives global onshore perforation spend, which is expected to total $9bn between 2021-2025. Those countries with a significant number of drilled but uncompleted wells (DUCs), as well as countries with a large wellstock, will account for the largest proportion of expenditure. Unlike the majority of other DWS service lines, Westwood anticipates forecast perforation spend increasing on the previous 5-year period, due to the relative resilience of workover operations compared to new drilling activity through a downturn.
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So far in 2021, there has been a notable increase in oil prices, helped by OPEC’s recent decision to extend and, in some cases, deepen production cuts. While uncertainty remains prevalent, perforation expenditure is expected to see year on year increases from the nadir of 2020, with total spend in 2025 expected to be 56% higher, as completion activity improves in line with an expected improvement in oil price
Jack Baxter
Analyst, Onshore
[email protected]
Updated – 1st December, 2020
USA: The USA will continue to lead global completion equipment expenditure over 2020-2024, with spend anticipated to total $11bn. Despite this, demand for completion equipment services within the USA over 2020-2024 will be 14% lower than the previous 5-year period, predominantly due to the expectation of continued oil and gas pricing pressure throughout the period.
China: Long-term production targets, aimed at improving China’s energy security are expected to be pursued, with unconventional developments driving gas production growth. The focus on unconventional gas is anticipated to drive demand for completion equipment services, which is forecast to grow year-on-year, reaching $2.1bn in 2024, 29% higher than in 2020.
Russia: Russia’s completion equipment services market has increased in recent years, as operators have increased horizontal drilling activity to improve production at mature fields. Continued horizontal drilling activity is expected to drive demand for completion equipment services over the 2020-2024 period, totalling $5bn.
Argentina: A target to double production by 2023 is unlikely to be achieved as subdued oil prices, infrastructure bottlenecks and a severe recession slowed progress in 2019. This has been exacerbated in 2020 by the price collapse which brought drilling activity to a near standstill in Q2 2020. Improvement is expected over 2021-2024 but activity will remain suppressed unless there is a significant increase in commodity pricing, causing completion equipment to fall by an estimated 30% compared to the previous 5-year period.
- As of December 2020, Westwood anticipates global onshore completion equipment services will total $30bn over 2020-2024. Expenditure is expected to see year on year increases from the nadir of 2020, with total spend in 2024 expected to be 47% higher, as drilling activity improves in line with an expected improvement in oil price. Crucially, however, expenditure in 2024 is expected to remain 10% below 2019 levels.
- The completion equipment services market is dominated by the world’s biggest drillers, with the USA, China and Russia accounting for 81% of all spend in this service line over the forecast.
Jack Baxter
Analyst, Onshore
[email protected]
Updated – 9th November, 2020
Russia: Russia is expected to lead global rig & crew expenditure over 2020-2024, with spend anticipated to total $39bn. Demand for rig & crew services will be driven by Russia’s relatively stable drilling market, longer average footage requirements and comparatively high dayrates compared to other areas.
Colombia: EcoPetrol’s better than expected Q3 2020 results, as well as Nabors Industries’ positive outlook for Latin America, have led to an upward revision to Westwood’s wells drilled forecast in Colombia, driving an increase in rig & crew services spend compared to Westwood’s October expectations.
China: Despite challenged oil prices, long-term production targets aiming to improve China’s energy security are expected to be pursued. As a result, drilling activity in China is forecast to experience strong growth beyond 2021, with demand for rig & crew services totalling $33bn over 2020-2024.
Africa: Key projects in Kenya (Lokichar) and Uganda (Tilenga-Kingfisher) appear to be moving towards sanctioning after many delays, providing a potential boost to Africa’s drilling market and rig & crew services in the later years of the forecast.
- As of November 2020, Westwood anticipates global onshore rig & crew will total $144bn over 2020-2024. Expenditure is expected to see year on year increases from the nadir of 2020, with total spend in 2024 forecast to be 36% higher, as drilling activity improves in line with an expected improvement in oil price. Forecasted expenditure is expected to peak in 2024, but is still expected to be below 2019 levels, highlighting the continued economic pressure that is expected to weigh on developments.
- In November 2020, Westwood has revised up drilling expectations to several countries within the wells drilled forecast. Both Colombia and Argentina have seen positive revisions to wells drilled compared to October expectations, due to positive rig data and reports from rig contractors.
- The rig & crew market is largest for the world’s biggest drillers, with Russia, China and the US accounting for 67% of all spend in this service line over the forecast.
Jack Baxter
Analyst, Onshore
[email protected]
Updated – 9th October, 2020
USA: Second only to China for total wells drilled over 2020-2024, and with higher drilling fluid services requirements per well, it is the US that is expected to continue to lead spend in this service line. Despite this, the impact of the oil price crash on drilling activity is expected to lead to a major contraction in the drilling fluid services market over the forecast, with expenditure expected to be 48% lower over 2020-2024 than the previous 5-year period.
Oman: Oman is the largest onshore driller in the Middle East and is expected to see a continued high level of spend for drilling fluid services. This is a result of the extensive use of enhanced oil recovery techniques that are used to maintain production at the country’s major producing fields.
Argentina: Despite a significant downward revision to Argentina’s drilling outlook, continued drilling at unconventional plays is expected to support drilling fluid services. As a result, drilling fluid services spend per well is expected to be higher than the global average, leading to an estimated expenditure of $0.4bn, the seventh highest globally.
Middle East: Many of the region’s most productive fields are mature, thus requiring intensive drilling and workover activity maintain production levels. As a result, countries such as Saudi Arabia and Kuwait are expected to see significant spend within the drilling fluid services market segment.
- As of October 2020, Westwood anticipates that global onshore drilling fluid services will total $26bn over 2020-2024. Expenditure in 2020 was 50% lower than in 2019 and is expected to fall a further 2% in 2021 as continued low oil prices, as well as operator budget cuts, impact drilling activity in key demand countries, especially the USA. However, beyond this point prices are expected to recover, with spend in 2024 expected to be 49% higher than the nadir of 2021.
- Over 75% of global drilling fluid services expenditure comes from the USA, China and Russia, due to the high number of wells drilled in order to maintain production at their assets.
Jack Baxter
Analyst, Onshore
[email protected]
