DESPITE new drilling programmes expected to come on stream this year, several local energy service sector companies are not optimistic about the future as there is a decrease in demand for their services.
The grim outlook was contained in the February 2018 edition of the Energy Chamber’s newsletter in an article titled, Energy Services Sector Survey Q4 2017. The Chamber stated that service companies are also feeling a downward pressure on their margins despite an increase in commodity prices saying, “this might be leading to the low levels of optimism still felt by service companies.”
“Sixty-four per cent of energy services companies polled by the Energy Chamber indicated that the value of their business was down in the last quarter of 2017. Fifty per cent of the respondents indicated this was due to less business opportunities and 44 per cent indicated that it was due to a decrease in the demand for their services.”
The Chamber noted that 61 per cent also indicated the volume of their business was down in the last quarter of 2017 while 70 per cent indicated that this was due to the lack of contracts/projects.
While there are indications from the major upstream companies that the volume of work is set to increase, this is not reflected in the views of the service companies polled. One reason could be that there is a smaller group of companies that may be benefitting from the increased opportunities due to consolidation.
With most contractors indicating that the value and volume of their business are down, this certainly paints an alarming picture of this sub sector, the review stated. There was also decreased employment over the final three months of 2017. Energy services companies are the largest employer in the energy sector, accounting for over one third of total energy sector jobs and includes a large number (around 300 - 400) of small to medium-sized locally owned companies, the Chamber stated.