DW: Oil Price Downturn Impacts North American Land Rig Market More
UK's Douglas-Westwood, an energy business strategy, research and commercial due-diligence services provider, discusses "Oil Price Downturn to have Significant Impact on North American Land Rig Market in 2015 with International Market More Resilient" in its latest edition of DW Monday.
The recent oil price downturn is expected to have a significant impact on the global land rig market in 2015, as operators announce planned cuts to expenditure. Following a 24 percent rise over the 2010-2014 period, the number of active drilling rigs is expected to fall 12 percent in 2015.
The North American market, which is particularly susceptible to fluctuations in commodity prices, is expected to see the largest impact, with the active drilling rig fleet forecast to decline by 29 percent. Notably, Apache Corporation has announced plans to cut spending on its North American assets by 26 percent in 2015.
In comparison, the impact of the oil price downturn on the international market is expected to be less severe. OPEC’s decision in November 2014 not to cut production indicates that drilling activity in the key Gulf producing states, and subsequently demand for land rigs, is unlikely to be affected in the near-term by the low oil price environment. In contrast, Russia’s economy is heavily reliant on oil exports, and the recent economic sanctions imposed are expected to contribute to a further decline in drilling activity in 2015, causing the number of active drilling rigs to stagnate. In Latin America, the oil price downturn has placed increased financial pressure on Brazil’s Petrobras. Venezuela has a high breakeven price and has also been significantly impacted. Douglas-Westwood is forecasting a decline of 4 pecent in the Latin American active rig fleet in 2015.
Post-2015, the outlook for the market is more positive, with the global active rig fleet forecast to increase by 2 percent over the next five years as drilling activity increases, reaching just under 6,100 units in 2019. However, there remains uncertainty within the market, and demand for high HP rigs is likely to be affected if high Capex unconventional projects become uneconomic.
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