The landscape of oilfield service has historically been a highly disruptive market. From innovation to consolidation and world trade dynamics, the industry is constantly evolving, and service companies have to stay responsive to continue delivering relevant, effective solutions for producers. In this article, we will discuss some of the key trends that are shaping our future and highlight opportunities for improvement.
Trend 1: Technology
Shale plays have completely changed the USA petroleum industry over the past decade. The shale play developments have been made possible by technological developments in directional drilling, manufacturing, big data, and well site automation. Shale plays have allowed the USA to become a petroleum exporter instead of depending on non-secure imports, which is reinvigorating the oilfield service industry on North American soil. A decade ago, there were only a few on-land wells producing more than 500 barrels of oil per day. Now, most shale wells are running online between 500 to 3,000 barrels of oil per day. This will pay for development of more advanced technology, and will hopefully continue the cycle of new and more advanced technology.
Trend 2: Consolidation
The oilfield service market has seen a mass-consolidation of corporations in the last few years. It has become the norm for big players like Halliburton, Baker Hughes, and Schlumberger to buy up smaller competitors, but this activity also creates a lot of instability within the industry.
In the long run, these consolidations lead to less competition in the marketplace, ultimately causing oil companies to face higher prices from their service providers and get fewer choices. When companies merge, it is expected that some product lines will be discontinued to reduce redundancy. However, with just a few large competitors occupying the market, customers can feel stuck with limited options. Over time, this perception can erode trust and satisfaction with service providers, which will have a negative impact on the industry as a whole. When customers lack brand loyalty, service companies are at constant odds with one another to offer a better “deal,” and the quality of service itself will inevitably decline because providers end up competing on price alone.
Trend 3: Disruption
Generally, corporate consolidations are motivated by cost-savings, which is usually achieved by laying off employees. It is understandable then, that oilfield service quality suffers during M&A activity. If a company’s employees do not feel they have job security or are dissatisfied about the merger, then their communication with customers will reflect these attitudes.
Trend 4: Geo-Politics
Finally, political events will have a significant impact on the global landscape of the oilfield service industry. For instance, activities in the Middle East, Asia Pacific, Syria, Yemen, Latin America, and specifically Venezuela have all caused fluctuations in the oil price and instigated controversy over import and export agreements. In some cases, these events can make it impossible for countries in turmoil to pay off their debts or invest in oil production, thus affecting market geography.
How Service Companies Can Adapt
Customers are currently experiencing a lack of service, equipment, and technology required to produce from their wells. For example, the current technology required to produce Shale plays is still inadequate. Therefore, service companies should be focused on providing more specialized offerings that go beyond a one-size-fits-all approach. Now that oil companies are forced to drill in deeper, hotter environments and produce from more mature wells, they are seeking out oilfield service companies that can deliver a more holistic approach. This means providing solutions that incorporate aspects of service, equipment and technology to address customers’ specific challenges.
At Valiant, excellent service originates from our people, and we pride ourselves on the fact that Valiant has seasoned, experienced professionals at all levels of the company, from the C-suite to the wellhead. We are also one of the only independent, national oilfield service providers left, making us unique in the fact that we can be more responsive and adaptive to market changes than larger competitors.