"Sustain your Business Growth from the Impact of COVID-19 Pandemic."
“The impact of the COVID-19 outbreak on the Oilfield Services Market is expected to be momentous as major players are reducing their capital expenditure to sustain in the market.”
As the number of infected cases is doubling day-by-day, the economic progress in almost one-third of the countries has come to a halt. The world economy is shrinking due to coronavirus pandemic, severely hitting economic activities around the world. Many companies are experiencing heat due to a sharp fall in crude oil prices in the international market. As on April 22, 2020, the West Texas Intermediate (WTI) prices have reached historic low to negative USD 37 per barrel. Oilfield services companies and operators are deferring investment in new projects to mitigate the impact. Government entities and international organizations are working together to provide impetus to the hydrocarbon industry through strategic planning, bilateral talks, and tax incentives to ease the impact, with constant negotiations taking place between U.S., China, Russia, and OPEC+ producers.
Based on the analysis by Fortune Business Insights, the short-term impact of COVID-19 is expected to cause a huge decline in the annual growth rate of the global Oilfield Services Market from 3.2% to -26.5% in 2020. The global Oilfield Services Market, which was projected to be worth USD 261.16 billion in 2020 before the outbreak of the pandemic, is now expected to generate USD 188.75 billion this year.
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Plummeting Crude Oil Prices and Subdued Economic Activities
The spread of nCOVID-19 across the world is severely impacting the global economy. Coronavirus engulfed 185 countries, putting restrictions on businesses and non-essential activities to contain the virus. Subdued economic activities across the globe ensued a sharp fall in demand for crude oil. For the first time, in an unprecedented wipe-out, crude oil plunged to below zero in April 2020. Also, industrial and economic activities have come to a grinding halt as governments around the globe intend to extend lockdowns due to the swift spread of the pandemic.
The sharp decline in crude oil prices has prompted companies to take decisive steps to survive in this volatile market. For instance, In April 2020, Baker Hughes announced to slash its net capital expenditure (CAPEX) by over 20% versus its 2019 levels. The company’s plan to reduce the CAPEX will result in restructuring, impairment, and mitigate the impact of the global pandemic to its business operations.
Oversupply of Oil and Price War Between US, Russia, and Saudi Arabia
The oil demand was already weak before the emergence of coronavirus due to the US-China trade war. The nCOVID-19 outbreak further marks a significant impact on the already oversupplied oil market in 2020 Q1 & Q2. Moreover, Saudi Arabia kicked off a price war with Russia at a time when the world is dealing with the pandemic outbreak, decimating supply chains and fueling panic buying and grounding. The conflict between the two countries translated in a sharp decline in oil prices, and subsequently, prices plunged to negative in April 2020. However, both the countries agreed to slash production with other members of the OPEC+ in an effort to lift the market in the pandemic driven situation.
Resilient Impact on China, the Largest Consumer of Crude Oil
Coronavirus emerged in Chinese city of Wuhan in late December 2019. Subsequently, the virus spread to other countries across the world, putting global economic health at risk. The Chinese government imposed lockdowns in various parts of the country to contain the spread of the virus. I Industries dependent on supply chains, material procurement, cash flow, downstream demand, logistics, and labour movement have been severely affected. As China is one of the largest consumers of hydrocarbons and subdued economic activity, putting the major oil supplier countries in a dire situation.China is paving the way to open its economy, which is beneficial for market prospects.
The Chinese company, China Oilfield Service Limited, is one of the leading service providers in the Asia offshore market, covering a wide range of oilfield services. It accounts for a significant share in the global Oilfield Services Market.
Pandemic Worsening the Public Health Sector
According to Johns Hopkins University & Medicine, around 185 countries have been affected by the pandemic outbreak. Day by day, the situation is worsening in different parts of the world, swallowing a considerable part of the global GDP. The infected cases are expected to surpass the 3-million mark with more than 2 lakh deaths already recorded around the world. Though the virus has emerged in China, the US has been severely hit by the global pandemic, making it the country with the maximum infected cases and deaths recorded in the world. On the contrary, European countries such as Spain, Italy, UK, Germany, France, and others are also facing severe threats due to the pandemic outbreak. Almost 2/3rd of the population in Europe is in some form of lockdown or shutdown imposed by authorities to contain the spread of the virus. To handle the worsening situation, the World Health Organization (WHO) is collaborating with scientists, pharmaceutical companies, and research & development centers to develop a vaccine as soon as possible to mitigate the impact of the coronavirus.
“Slash in Capital & Operational Expenditure Coupled with Deferring Upstream Projects to Majorly Impact Drilling Services”
The Drilling Service Market was valued at USD 87.96 billion in 2019 and accounted for around 34.3% of the Global Oilfield Services Market
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The hydrocarbon industry is facing severe consequences on account of oversupply and plummeting crude oil prices due to the spread of the coronavirus. Many countries have imposed lockdowns to contain the virus, putting businesses around the world on virtual standstill. Subdued economic activities and ban on non-essential services are further crunching the already fallen market prospects. In order to cope with the situation, several companies are taking constructive steps to sustain in a fiercely challenging environment such as slashing CAPEX & OPEX, along with postponement of upstream projects. Royal Dutch Shell announced in April 2020 that it would delay a final investment decision (FID) on the Crux gas project in offshore Australia to balance with the ongoing economic slowdown due to COVID-19 pandemic.
Market segments with a low level of exposure to the COVID-19 outbreak
Market segments with a high level of exposure to the COVID-19 outbreak
“Leading Players Account forAapproximately 45% Share of the Global Oilfield Service Market”
Every business sector is facing the crunch and downturn due to the pandemic outbreak across the globe. The spread of the coronavirus has not only put human lives at risk but has also slashed the global economy. However, each company has a different strategy to cope with the situation according to their policy. The impact of the outbreak will vary according to regional scenarios and measures taken by the national governments to contain the virus and provide a stimulus package to businesses. Meanwhile, small and medium scale companies are projected to go bankrupt on account of extended lockdowns and non-availability of liquidity. Similarly, the giant companies are acting decisively to mitigate the impact of the pandemic outbreak through slashing of annual budgets, deferring development projects, employee reduction, and others. For instance, ExxonMobil is slashing its USD 10 billion spending plan in response to low energy prices caused by collapsing demand. The cut by the company will assist in surviving in a downturn.
Top 10 Oilfield Service Companies
Share in Global Oilfield Services Market (2018)
National Oilwell Varco
Revenue Growth Projections Scaled Back by Major Oilfield Service Companies due to the Impact of COVID-19
The report provides a detailed qualitative and quantitative analysis on the level of impact of COVID-19 on major oilfield service providers along with the measures taken by these companies to minimize the impact.
“The North America Oilfield Services Market Value stood at USD 124.43 Billion in 2019 and Accounted for More Than 48% of the Global Oilfield Services Market Share”
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The level of impact of the COVID-19 outbreak will vary across regions as well, and the level of exposure experienced by different regions and countries will depend on various factors such as:
The report provides a detailed analysis of the level of impact of COVID-19 across different regions/countries by considering these factors.
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