Global demand to rise 3.7% annually through 2016
Worldwide demand for oilfield equipment is forecast to increase 3.7 percent per annum through 2016 to $106 billion, an improvement from the 2006-2011 pace. Demand gains will be fueled by a substantial uptick in oil and gas production as the world economy distances itself from the general economic weakness surrounding the 2009 global recession. Growth in oil and gas output is expected to be especially strong in developing regions, where increasing energy requirements and improving infrastructure will contribute to more drilling activity.
Developing countries to see fastests gains in demand
Through 2016, most of the faster gains in oilfield equipment demand will occur in a variety of smaller developing countries. Among larger markets, gains will tend to be more moderate. China, which dominates demand in the Asia/Pacific region, will experience steady growth as its energy consumption continues to rise. Russia, the world’s largest energy producer, will see oilfield equipment demand grow at a below average pace, but this will represent a substantial improvement on a weak 2006-2011 performance. Growth in demand for oilfield equipment will be especially rapid in Brazil, which is expected to see a major boom in oil and gas production as a number of large discoveries from the later part of the preceding decade are developed.
The oilfield equipment market will be relatively weaker in developed regions, although North America and Europe are still expected to see improvements from the pace of the 2006-2011 period. Demand for oilfield equipment in the US will rise at about the world average as the continuing shale gas boom somewhat counteracts an overall slowdown in oil and gas production. In the UK, demand for oilfield equipment is expected to be held back by declining oilfield output, continuing the trend of the past decade. Weak demand growth will not be limited to wealthier nations, however Argentina, Mexico, and Venezuela will all be among the world’s more sluggish markets.
Equipment price increases expected to continue
The discovery of new reserves and the depletion of existing ones has led to new extraction techniques and increased complexity of drilling, raising the costs of production. Going forward, technological advancements leading to increased drilling efficiency will serve to constrain costs somewhat, but the necessity of developing new techniques to capitalize on unconventional reserves, particularly shale oil and oil sands, will continue to raise prices.
Industrialized countries to remain key producers
Global production of oilfield equipment is concentrated in larger developed economies, which possess greater capacity for manufacture of hightechnology industrial machinery. The pattern of production is substantially different from the distribution of demand, and only a few countries are net exporters. The US is by far the biggest producer, accounting for 44 percent of oilfield equipment output in 2011. Russia, China, and Canada are also major producers, but are all net importers. Although oilfield equipment manufacturing in most smaller countries is expected to grow along with demand, production of larger, more technologically intensive components is expected to remain concentrated in larger industrialized nations.
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