Service Companies May Struggle in New Era of Megaprojects



Service Companies May Struggle in New Era of Megaprojects
A WoodMac analyst explains why the sanctioning of some large LNG projects may mean trouble for service companies.

With oil and gas megaprojects back on the horizon, the industry is waiting with anticipation to see if companies will repeat mistakes from the past.

Bloomberg recently reported that the largest oil and gas companies across the world are preparing to sanction numerous megaprojects since the onset of the downturn in 2014. Essentially, they’ll be tested on their capital discipline.

But some industry professionals feel that the real test will be finding the skilled labor to execute these projects – an issue that was exacerbated by the huge number of layoffs during the downturn.   

Wood Mackenzie research director Angus Rodger doesn’t believe this will be an area of concern for the companies in question.

“The size and scale of the projects they are sanctioning remain far smaller than when we were in the era of $100 oil,” Rodger told Rigzone. “And as they ramp back up to bigger projects, they will be able to ramp up recruitment also.”

The important pinch point for Rodger is with service companies, who have had a “horrid time” during the downturn being forced to shed staff and get down to their bare bones.

“When we see the ramp-up to bigger projects, particularly in the LNG sector, this bottleneck could be particularly acute,” he said. “If lots of large LNG projects are all sanctioned within a relatively limited window, say 2018-2020, concern about whether enough capacity in the LNG service sector exists to successfully deliver all these projects is very much warranted.”

During the downturn, companies found ways to operate efficiently with a much leaner workforce, often relying on technology.

While Rodger agreed that digitalization helps with better drilling delivery and well placement, among other things, he believes the delivery of megaprojects will either succeed or fail based on the planning, engineering and execution abilities of the operator.

“That is very much a human-based outcome,” he said.



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