Home » Business » Biz Commentary
China oilfield services companies to post strong growth
Print Edition
China’s onshore independent oil field services sector has bright growth prospects given the burgeoning demand for high-end services and the robust increase in upstream expenditure in the country. However, a disciplined approach to growth is essential if credit quality of operators is to be maintained.
The in-house oilfield services arms of the two onshore national majors — China National Petroleum Corp and China Petroleum and Chemical Corp — dominate the sector, accounting for around 70 percent of the total expenditure on oil-field services. We believe the sector will post a growth rate in the low-teens on average over the next decade, although the market for independent service providers is relatively small and highly fragmented.
China continues to be a large net importer of oil and gas despite a massive increase in onshore upstream expenditure to prop up domestic production. Total sector expenditure in 2012 was around US$37 billion, which had increased at a compounded annual growth rate of 12 percent over the last five years. This trend will continue and demand for oilfield services is, therefore, on a strong uptrend.
More importantly for independent oil-field service providers, the increasing emphasis behind unconventional oil and gas provides more opportunities — especially for those that have the required technical capabilities. For example, the typical life of an unconventional low-permeability well is only one-third (or even shorter) of a conventional well, which means substantially higher drilling activities are required compared to conventional operations to maintain production. Additionally, increasing reliance on low permeability reserves means higher demand of well stimulation services, such as directional drilling and multi-stage hydraulic fracturing.
The higher technical requirements benefit independent oilfield services providers as they are more flexible and more adaptive to new technologies, new equipment, and new techniques. Assuming the capital and human resource limitations are addressed, this would result in above average growth for independent oil field service providers in China.
China’s intention to combat pollution and increase use of natural gas and shale gas also underpins demand of high-end oilfield services. The more sophisticated operators, which provide services for tight gas wells and in the longer-term shale gas wells, will receive more work orders in the next three to five years.
The different factors and trends mentioned above will benefit the entire sector and the independent operators with higher capabilities in high end services will benefit even more. Large established operators have an edge to enlarge their scale further as track record and capital matter in this business.
- About Us
- |
- Terms of Use
- |
-
RSS - |
- Privacy Policy
- |
- Contact Us
- |
- Shanghai Call Center: 962288
- |
- Tip-off hotline: 52920043
- 沪ICP证：沪ICP备05050403号-1
- |
- 互联网新闻信息服务许可证：31120180004
- |
- 网络视听许可证：0909346
- |
- 广播电视节目制作许可证：沪字第354号
- |
- 增值电信业务经营许可证：沪B2-20120012
Copyright © 1999- Shanghai Daily. All rights reserved.Preferably viewed with Internet Explorer 8 or newer browsers.
