Global Recoverable Oil Declines Sharply

(Global) Non-OPEC Countries Face Steep Losses

The amount of commercially recoverable oil globally is likely to be reduced by as much as 282 billion barrels following the Covid-19 downturn, according to research consultancy Rystad Energy.

The firm predicts that global total expected remaining recoverable oil resources decrease to 1,903 billion barrels, 42 percent of which are in OPEC territory, with the remaining 58 percent located outside the alliance.

“Non-OPEC countries account for the lion’s share of 'lost' recoverable resources with more than 260 billion barrels of undiscovered oil now more likely to be left untouched, especially in remote exploratory areas,” said Per Magnus Nysveen, Head of Analysis at Rystad.

Oilfield services

This record decline is forecast to be tied with a sharp fall in global demand for oilfield services. Rystad predicts that the total value of exploration and production company purchases is expected to drop 25 percent in 2020 impacting breakbulk operators for some time.

“Despite the recovery in oil prices, it will take many quarters before all segments of the supply chain see their revenues deliver consistent growth. In case of an upturn, operators would prefer flexible budget items with production increments and high-return investments with short pay-back times. Therefore, we expect well service segments to be the first to recover, while long-lead segments will pick up much later,” Audun Martinsen, head of energy research at Rystad.

Despite the gloomy outlook for the near-term, Rystad forecasts the sector will start to recover in 2021 and the recovery will accelerate further in 2022 and 2023, although purchases will not return to the pre-Covid-19 levels of US$639 billion achieved in 2019.

U.S. Jobs Impact

The impact has already been felt in some of the most precarious upstream markets, particularly the U.S. where the shale gas industry has been decimated. Rystad estimates that more than 100,000 oil and gas jobs have already been lost in the U.S., and wages will fall at least 8 percent to 10 percent in 2021.

“The U.S. oil and gas labor market is amongst the world’s most severely hit by the downturn that the Covid-19 pandemic has brought,” Rystad said in a statement, adding that the four oil and gas segments most affected are: support activities for oil and gas operations, pipeline and gas and related construction, drilling of oil and gas wells, and oil and gas extraction.
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