The global oil & gas services industry has witnessed an important business barometer, the recent rig usage decline has resulted in less utilization of oilfield equipment and services. The service industry also faces key challenges with supply chain, workforce management and cost overrun challenges for EPC projects across the value chain. Even major O&M/turnaround maintenance projects are being pushed back as companies focus only on critical operational maintenance to manage opex.
Pritam Kad, Oil & Gas Analyst at GlobalData, comments: “Lower crude demand and an oversupplied market is creating an imbalance in the industry. Furthermore, capex reduction by oil and gas majors amid a difficult operating environment is resulting in a depressed business outlook for the overall services industry. Market capitalization of oil and gas services companies has declined substantially and companies are now facing numerous challenges, such as increasing pressure on contract pricing, discounts, margins, compliance, negotiations as well as liquidity and financing, supply chain and workforce management.”
In response to the challenges in the oil and gas services industries, service companies are announcing measures, such as capex-opex reduction as per client’s re-alignment and halting non-critical activities to manage liquidity and stay afloat. These companies are also optimizing resource strength by adopting a furlough/lay-off strategy, as many projects are either temporarily put on hold, withdrawn or delayed. Additionally, service companies are also re-evaluating their existing supply chain structure and finding ways to manage equipment supply and project risks.