Energy transition projects could replace up to 40 percent of the OFS industry’s lagging upstream revenue
By Ikenna Omeje
Around $90 billion, or 40 percent of the revenue from the top 50 global service market, could potentially be replaced by energy transition projects, such as clean energy infrastructure and renewable energy production development services, Rystad Energy has said.
The independent energy research and business intelligence company providing data, tools, analytics and consultancy services to clients said the new market dynamics is as a result of the impact of Covid-19 pandemic, adding that the oilfield service market is not likely to rebound to 2019’s activity level until 2023.
The findings, Rystad said was based on its analysis of the activity of the top 50 oil and gas suppliers, which together, it said earned $220 billion in upstream revenue in 2019, noting that $100 billion of which originated from well services and commodities.
“Many services provided by well-focused suppliers will be challenging to deploy in the context of energy transition operations, especially fracking services, OCTG and drilling services and tools. However, the top contractors providing engineering, procurement, construction and installation (EPCI) services – which earned around $55 billion in 2019 from the oil and gas industry – will find it easier to apply their competencies towards the green shift,” the company said.
Speaking on the analysis, Rystad Energy, Head of Energy services Research, Audun Martinsen said: “Around $90 billion, or 40 percent of the revenue from the top 50 players in the global service market, could potentially be replaced by energy transition projects, such as clean energy infrastructure and renewable energy production development services. However, the supply chain industry must also look to avenues outside of the energy transition to stay afloat.”
On the current opportunities that abound in the oil service industry, the company said: “In terms of market opportunities, most traditional oilfield service suppliers are looking to expand into low carbon segments, meaning technologies or services aiming to reduce or prevent emissions from oil and gas extraction and production. This can be done by offering more efficient operations and digital solutions. This is a space where most suppliers, regardless of current exposure in the service market, have a role to play.
“Another emerging market within the energy transition is clean energy infrastructure, where suppliers can provide services to support blue and green hydrogen infrastructure, carbon capture and storage, or energy storage in general. This is a market where engineering houses, fabricators and equipment manufacturers will find big opportunities for growth and for synergies.
“A third option within the energy transition is to supply the end-to-end development and operations of renewable power generation itself, for example by developing solar power plants, wind parks offshore and onshore, and geothermal energy. The solar energy supply chain is highly fragmented and has become essentially out-of-box, yet the wind market offers great potential for offshore contractors to support the development of offshore wind.
“However, the risk and investment required for expanding into other energy markets beyond oil and gas will not be feasible for all oilfield service providers.
“In terms of growth opportunities, the clean energy market represents a fast-growing industry. The installed capacity of all utility-scale global renewable energy assets has doubled every fifth year since 2010, and will total 1000 gigawatts (GWAC) in 2020, comprised of 600 GWAC of onshore wind capacity, 284 GWAC of utility PV capacity and 34 GWAC of offshore capacity. By 2025, we expect this number grow by at least 50 percent to 1500 GWAC, potentially reaching 1800 GWAC of global capacity in our high case.”