Douglas-Westwood

Offshore contractors eye up the size of the O&M prize

Press release   •   May 31, 2012 11:01 BST

Offshore contractors eye up the size of the O&M prize
The 2nd edition of the World Offshore Operations & Maintenance Market Forecast, by Douglas-Westwood (DW)
forecasts over $335 billion worth of expenditure from 2012-2016 on offshore oil & gas operations & maintenance
(O&M). With O&M markets considerably less vulnerable to economic downturn than their capital-led counterparts
DW predict growth of 8% per annum during the forecast period.
Industry Drivers
Offshore O&M activity is driven by a variety of supply-side and demand side factors:
 Growth in global energy demand which, for the medium term, means demand for hydrocarbons. The long
term trend towards increasing energy consumption is clear.
 As onshore reservoirs continue to mature and new prospects become few and far between, a greater
proportion of oil and gas production will be met by the offshore sector.
Cost inflation and the price of oil do not have such an impact on O&M activity as the market for these services are
more robust than those led by capital expenditure. Oil price fluctuations do not generally have the same level of
impact on O&M expenditure compared to capital expenditure related activities such as drilling and field
development. This is mainly due to O&M expenditure being vital to ensuring ongoing production levels, the
principal revenue stream for offshore operators, are maintained. As a result DW expect that the majority of the
markets covered in the World Offshore Operations & Maintenance Market Forecast are considerably more robust
than those relating to the initial development of oil and gas fields with any significant upturn (or downturn) in global
expenditure being driven principally by industry cost inflation (or deflation).
Despite this a number of the services covered in this report such as well stimulation, wireline operations, subsea
well intervention and platform drilling are highly price sensitive and their economic viability is dependent upon a
number of criteria including oil price, vessel,unit & rig rates and potential upside in oil or gas flowrates.
Market Forecast
Offshore oil & gas O&M covers a variety of sectors:
 Operations-related:
o Production Services (power generation, produced water management, wireline services and
stimulation services)
o Support Services (hotel services, deck crew and miscellanous personnel)
o Platform Drilling (rig & crew, well construction & integrity and consumables)
o Logistics (crew boat, platform supply vessels and helicopters)
 Maintenance-related:
o Asset Services (fabric maintenance and floating platform lease market)
o Subsea Inspection, Repair and Maintenance (field related, subsea well intervention and subsea
asset integrity)
In 2011 the global demand for offshore O&M services was over $52 billion, having grown at a compound rate of
over 6% over the prior five years. Over the next five years we expect a greater level of growth as the market
recovers from the effects of the global downturn of 2008-2009. This will be driven by a combination of high oil
prices, buoyant offshore development activity and rampant price inflation for equipment and services.
Whilst global offshore drilling activity dropped by an estimated 14% between 2008-2009, total offshore production
(the principal driver for all operational activity) grew by 1%. The global offshore O&M market fell, but only slightly,
despite widespread price deflation for equipment and services.
Historical dominance of mature western basins is set to be challenged. Between 2007-2011, 40% of global O&M
demand was accounted for by Western Europe and North America. Although DW expect market growth in all
regions (despite the UK and Rest of Western Europe regions facing terminal production decline) we expect the
Western Europe and North American share of global demand over the forecast period to drop by a few percentage points. 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.
The Asset Services market has seen a flurry of M&A activity in recent years as the sector has expanded. Recent
activity included Wood Group acquiring PSN in 2010 to expand its brownfield services offering, Cape acquiring
Shoreguard in 2011 to strengthen its regional presence in the Asia Pacific region and Stork Technical Services
acquiring RBG in 2011 as a means of increasing global presence in the sector.
Key Themes
Production services dominate O&M market expenditure. Over the 2007-2011 period demand for production related
services accounted for 44% of global O&M demand. These services are directly associated with production levels
from offshore facilities and are intensified as an oil or gas reservoir matures and requires additional effort to sustain
production. The inevitable maturing of offshore fields will drive compound growth of over 7% in the production
services sector as operators struggle to come to terms with decreasing downhole pressure and increasing water
cuts.
The Asset Services market is set to outgrow all other market sectors. This growth is a function of both increased
volume and complexity of activity in the sector and also the propensity to lease production platforms such as
FPSOs. This will drive significant compound annual growth in the Asset Services market over the next five years of
over 12%.
About the report, author and company:
The World Offshore Operations & Maintenance Market Forecast 2012-2016 contains:
 Unique and proprietary data – historic and forecast spend breakdowns for Africa, Asia, Australasia,
Eastern Europe & FSU, Latin America, Middle East, North America, Norway, Rest of Western Europe and
the UK.
 Regional forecasts – detailed by production services; asset services; support services; subsea inspection,
repair & maintenance; platform drilling services and logistics.
 Macro-economic overview – of the market, considering global oil supply & demand; cost inflation & oil
price, the role of offshore production and the oil & gas supply chain.
 Competitive landscapes – an analysis of the main contractors for each O&M sector.
Report details: http://www.douglas-westwood.com/shop/shop-infopage.php?longref=935~0
Douglas-Westwood carries out advisory work, strategy development, business research and analysis for the
international energy industries. We are the leading provider of commercial and market due diligence on the oilfield
equipment & services sector and also provide services to players in upstream and downstream oil & gas, power
and renewables. In the past three years, we have provided services worldwide on refinancing, M&A deals and
IPOs exceeding $15 billion.
Douglas-Westwood has clients in more than 70 countries and to date over 750 projects have been completed. The
company has offices in Aberdeen, London, Canterbury, New York and Singapore, and act as advisers to industry
worldwide, with clients ranging from oil majors and contractors to equipment manufacturers, financial institutions,
research organisations and departments of government.
www.douglas-westwood.com

Established in 1990, Douglas-Westwood is an independent employee-owned company and the leading provider of business research & analysis, strategy and commercial due diligence on the global energy services sectors. We have offices in London & Canterbury (England), Aberdeen (Scotland), Singapore and New York (USA)  and to date have completed more than 750 projects to clients in 70 countries.