How the Crisis Has Hit the Oilfield Services
The global economic crisis caused by the Covid-19 pandemic has hit not only the oil and gas exploration and production industry but also related businesses, primarily oilfield services. Reduced capital expenditures by oil and gas operators have left hundreds of contractors without orders, without revenue, and without prospects.
In Kazakhstan, about 2000 oilfield service companies are industry players, employing around 200 thousand people. According to forecasts, at least 80-90 thousand of them will be released from duties this year. There are no new contracts, and none are expected.
Kazservice, the Association of oil service companies of Kazakhstan, says that many service operations are reduced due to low oil prices, and indicators may fall back to the level of 2015 when the crisis also hit the Kazakhstani oil and gas industry.
"In particular, this applies to drilling and well repair. We felt the crisis in 2015 when oil prices plummeted to $28 per barrel. At the time, oilfield service operations were reduced by 40%, and the number of wells drilled was 684, a historical minimum for 15 years," – says Nurlan Zhumagulov, General Director of the Association. Last year, 1,100 wells were drilled on operators' orders, and it is already clear that this figure will significantly decrease this year.
Due to the lack of orders, almost half of the oilfield service companies in Kazakhstan were on the verge of bankruptcy. "Now we have to survive. Uncertainty will remain until the end of the year. Those companies that have been able to diversify may retain capital, but we will see many failed businesses and the unemployed in general. Until the end of the year, not a single new project will launch. If Tengizchevroil's Future Growth Project works, it would be a big plus," – said Rashid Zhaksylykov, Chairman of the Presidium of the Association of oil service companies of Kazakhstan. In his opinion, the situation will not change until at least the summer of 2021. Demand for oilfield services will resume only in 2022, when oil prices may rise.