A Fifth of European Oil Services Firms at Risk: Rystad

Around a fifth of Europe’s mid- and small-sized oilfield service companies face insolvency as the Covid-19 epidemic cuts purchases by about $4.5bn year-on-year, according to analysis published March 17 by Norwegian consultancy Rystad.

As more countries introduce harsher containment measures on their populations, including restrictions on air travel, energy demand will shrink. Oil prices have fallen to $30/barrel at time of press, while output from Saudi Arabia is expected to rise next month, a move that will also hit shale oil producers in North America. 

Rystad said the European service market, which was expected to stay largely flat this year from the 2019 level of $47bn, is now facing a number of hurdles because of the outbreak. Cross-border travel limitations, supply insufficiencies, quarantines and capex reductions are only some of the market’s challenges.

Bankruptcies will have to follow as a result, especially for the 1,000 or more mid- and small-sized suppliers in the UK and Norway. Over 200 companies could become insolvent, Rystad Energy estimates. More companies could be added to this number when the rest of Europe is included.

It said the present crisis is worse than the one triggered in 2015 by the oil-price fall, estimating that at a recovery back to 2019 levels could take four years.

Covid-19 accelerated the downward trend of the oil price, pushing many field development projects out in time. In early March, Aker Solutions warned its 6,000 employees in Norway about likely temporary lay-offs in 2020, and this is likely to be repeated across the sector, Rystad said.

Another consultancy, Wood Mackenzie, commenting March 17 on what would have been exciting news just a few months ago – French major Total's gas and condensate Isabella discovery in the UK North Sea – said that the high-pressure, high-temperature reservoir's "progression is likely to be put on the backburner at current prices."