What are oilfield services?
Oilfield services (OFS) refer to all the services that support onshore as well as offshore oil and gas extraction and production processes. These services include identification of oil and gas reserves, drilling and formation evaluation, oil well construction, completion services, and oil and gas production. Oilfield services also include identification of oil and gas reserves, drilling and formation evaluation, oil well construction, completion services, and oil and gas production.
The good news for oilfield services companies is that the industry is expected to soar to greater heights and profitability in the years to come. In fact, the spend in this industry will rise at a rate of over 4%. (Source: Global Oilfield Services Market Intelligence Report). Here is a comprehensive oilfield services market overview that encapsulates various market factors and growth patterns that are likely to affect the oilfield services market in the next five years:
Oilfield services market overview
The gradual recovery of global oil and gas prices will be the major factor contributing to the growth of the oilfield services industry. In 2017, North America was the largest market for OFS. The demand for OFS from the shale industry was the major factor contributing to the demand from the region. Furthermore, with the rising demand for energy, especially from the APAC region, the consumption of oil and gas for power generation has increased. Factors such as growing population and industrial development are driving the need for energy is fueling the demand for oil and gas, which is a major raw material for power generation companies.
Procurement in the oilfield services market could often prove to be a difficult task. One of the major hindrance faced by oilfield services companies is that oil and gas E&P activities are subject to various regional and federal regulations. These regulations are affected by factors such as changing governmental policies. Buyers need to keep track of these changes to ensure suppliers’ compliance with the same. This is essential to ensure that suppliers do not face any regulatory actions that will affect the drilling schedule of buyers. Also, buyers can face regulatory actions in case of any non-compliance on the part of suppliers during operations at buyers’ facilities.
There are basically three types of pricing models in the oilfield services market:
- Project-based model: In this model, buyers are charged a fixed amount for an entire project, and oilfield services companies provide all the services required for the project. The charges for these services do not vary during the service contract period. Buyers are charged additional fees for any additional services that are not part of the actual service agreement.
- Cost-per-day model: In this model, buyers are charged based on the time during which oilfield services companies’ resources are utilized. This model is ideal for situations where consulting and advisory services are required as part of OFS. This model can also be used in case of drilling equipment rentals, where buyers need to rent equipment such as drilling rigs for a portion of the entire OFS operation.
- Volume-based model: This model can be used in cases where procurement of products such as drilling fluids and OCTG is required. In this model, the prices are mutually agreed upon by the buyers and sellers for the duration of the contract period. The pricing is arrived based on pricing and demand forecasts. These prices include transportation and freight charges.
With the growing exploration of deep-water oil and gas reserves, increasing use of ROVs is observed. These devices enable drilling operators to access undersea locations that cannot be reached safely by divers and help perform inspection and repair of undersea structures and components. ROVs aid the development and maintenance of oil and gas resources in deep-water environments. They provide operators access to locations where divers cannot reach safely, helping them manage undersea operations such as inspection and repair of undersea components and structures at deep-water oil and gas sites.
SpendEdges’s latest report on the global oilfield services market provides in-depth insights on the procurement best practices, pricing insights, supply market insights, and top oilfield services companies.