Dutch Oilfield Services Analysis 2016
We are pleased to present our 2016 Dutch oilfield services (OFS) industry analysis in which we analyzed the financial results of 2015 and discuss the dynamics of the industry going forward.
Highlights – looking back
The data available over 2015 shows us an overall decrease of 5% in revenues generated by the Dutch OFS industry compared with 2014, dropping to a total of €24.7b.
The continued low oil price had a negative effect on the Dutch OFS industry in 2015. Compared with 2014, revenues decreased in the reservoir & seismic segment, the exploration and production drilling segment and the engineering, procurement and construction segment. The Operations segment however showed an increase in revenues (being at the end of the industry cycle). The overall decrease in revenues explains why less people were employed in the Dutch OFS industry than in 2014. Despite all this, the OFS industry remains an important factor in the Dutch economy with a strong heritage and an excellent reputation across the globe.
- Reservoir & seismic
This segment saw a decrease of 11% to €3.1b in 2015. Exploration spending which the RS segment heavily relies upon, has sharply decreased in 2015. New, long-term potential on the Dutch Continental Shelf (DCS) is expected to come from shale gas, tight gas and exploring at greater depths. Cost-intensive projects that had low interest in 2015 due to the low oil price.
- Exploration & production drilling
The segment shows a slight decrease, down from €1.625b in 2014 to €1.617b in 2015. Drilling on the DCS, which is one of the most cost-intensive production areas worldwide, was limited in 2015. This can be attributed to the mature nature of the North Sea.
- Engineering, procurement and construction
The segment is the largest in terms of revenue, dropping to €11.8b in 2015, a decrease of 7% compared with 2014. Companies within this segment peaked in 2014, with projects sanctioned before the dramatic drop in oil prices having been largely developed and many reaching completion in 2015.
This segment shows positive results in 2015, a 2% increase in revenue compared with 2014, totaling €8.2b. Since this segment is at the end of the cycle, it is the last to show the adverse effect of the oil price remaining low, with order books providing work over the course of 2015. Our data however, does appear to show stabilized margins in absolute terms in 2015, indicating a decrease in relative profitability.
Looking forward: Challenges and opportunities
In the light of recent developments, for OFS companies to operate in a sustained low oil price environment, we identified the following challenges and opportunities:
- Offshore wind farms are a crucial part of sustainable energy policies. The construction and operation of these farms are similar to activities already deployed by the OFS industry. Dutch OFS companies can implement their current product and service offerings to accommodate the offshore wind industry.
- The Dutch OFS industry can take a leading role in decommissioning activities on the DCS. Especially the Rotterdam area, with hits resources and infrastructure, has the opportunity to become Europe’s leading hub for decommissioning oil platforms.
- Reducing costs and increasing efficiency have resulted in innovative technologies throughout the sector. Digital innovations, like drones, IT data management and Internet of Things technology, and physical like new materials for pipelines. The Dutch OFS industry has great potential to implement new, innovative technologies leveraging its strong heritage and the entrepreneurial and innovative spirit of hundreds of smaller OFS companies.
- Strategic collaboration agreements and mergers between OFS companies and operators illustrate a fundamental shift in the operating model. Operators and suppliers are working together as one integrated or aligned team to reduce costs and gain efficiencies.
- Continued reduction of the workforce will result in talent loss, as engineers and designers become part of the reduction. This could have severe consequences on the long term, as availability of highly qualified experts could become scarce in the event of an oil price recovery.
- An international footprint is needed for Dutch OFS companies to secure revenue going forward. The reduction of DCS production sites triggers the need for an international order portfolio, which most of the larger OFS companies have already accomplished.
Comparison with the Norwegian and the UK oilfield services sectors
Similar surveys are performed in Norway and in the UK. We compared the results of those three geographical areas. The results are incorporated in our report, as well as available through this link. We hope you find the report useful, and we welcome any feedback you may have.