International Land Rig Utilization Improves

Strong Growth Seen Despite North America Market Subdued

Low growth in the North American land rig market is driving a subdued outlook for the global sector in 2019 despite an uptick in onshore rig utilization, according to research consultancy Westwood.

Highlighting a "significant rebound" in the sector over 2017 and 2018, the firm notes that the high-volume North America market remains slow following the oil price decline in fourth quarter of 2018, and is constrained by limited pipeline takeaway capacity.

“Sentiment within the North American market for the first half of 2019 has been cautious. In particular, the Canadian market has experienced challenging conditions, with widening price differentials and lack of access to market for Canadian crude,” Westwood noted.

The firm’s forecast predicts that North American drilling activity and rig demand will remain relatively flat in 2019-2020, with the market expected to pick up from 2020 onwards., especially due to potential for “significant growth” in rig demand in Canada

Asia-Pacific Takes Lead

Despite the slowdown in the North American sector, Westwood reports that international trends conintue unabated as high volume markets in Asia and the Middle East are investing significantly in midstream infrastructure.

“Asia-Pacific is expected to be a key focus area for growth in rig demand, with China having announced plans to increase unconventional exploration and development, as well as enhance output at a number of large, existing fields. India has also announced fiscal incentives aimed at increasing production from existing fields,” a Westwood analyst said.

Post-2019, the sector is expected to pivot to more “sustained growth” in rig demand, including in North America where new pipeline capacity is anticipated, and in the longer-term, “key opportunities for growth in the global market will come from Asia-Pacific, Latin America, and MENA.”

MENA Adds Upside

Outside of the Asia-Pacific sphere, the Middle East-North Africa region, Algeria, Iraq and the UAE are all expected to be feature among the fastest growing markets over the next two years.

“The wider region has a strong outlook, despite the OPEC decision to extend the December 2018 OPEC production cuts for a further nine months until March 2020, reducing some oil drilling,” Westwood ssaid.

Headquartered in London, Westwood Global Energy Group provides market research and consulting services to the energy industry worldwide.