Cold weather hits Permian crude output: Update

Service firms talk up long-term gas prospects

Service firms talk up long-term gas prospects

New York, 29 April (Argus) — Leading oil field service firms are bullish on the outlook for natural gas demand in coming years even though the fuel remains stuck in the doldrums for now, with US prices near pandemic lows amid oversupply after a mild winter. "This is the age of gas," Baker Hughes chief executive Lorenzo Simonelli says, adding that global demand for the power plant and heating fuel is due to climb by almost 20pc through 2040. "Gas is abundant, lower emission, low cost, and the speed to scale is unrivalled," he says. Halliburton also sees natural gas as the "next big leg of growth" in North America, driven by demand for LNG expansion projects, although its current plans do not envisage any comeback this year. Given a shrinking fracking fleet and lack of new equipment being built, the stage is set for an "incredibly tight market" in future, chief executive Jeff Miller says. A recovery in natural gas activity in the US may not happen until the end of this year or even 2025, Liberty Energy chief executive Chris Wright says. "Customers need to see that prices have firmed, that export volume demand actually is pulling upward at a meaningful rate," he says. On recent first-quarter earnings calls, service firms were upbeat about international growth prospects in the face of escalating geopolitical tensions in the Middle East. The backdrop remains one of growing demand for oil and gas and an "even deeper focus" on energy security, according to Olivier Le Peuch, chief executive of SLB, the world's biggest oil field service company. SLB, formerly known as Schlumberger, expects overseas growth momentum to make up for a slowdown in North America this year. "The relevance of oil and gas in the energy mix continues to support further investments in capacity expansion, particularly in the Middle East and in long-cycle projects across global offshore markets," Le Peuch says. But results in North America will be depressed by the combination of low gas prices, capital discipline and producer consolidation. International rescue Halliburton expects international revenue growth in the "low double-digits" for the full year, with some margin expansion given the tight market for equipment and labour. Steady activity levels are seen in North America after land completion activity bottomed out in the fourth quarter of 2023 and rebounded in the first quarter. "The world requires more energy, not less, and I'm more convinced than ever that oil and gas will fill a critical role in the global energy mix for decades to come," Miller says. The positive outlook is reinforced by customers' multi-year activity plans across markets and assets. Baker Hughes forecasts "high single-digit growth" when it comes to the outlook for international drilling and completion spending this year. But customer spending in North America is expected to fall in a "low to mid-single-digit range" when compared with 2023. "We continue to anticipate declining activity in the US gas basins, partially offsetting modest improvement in oil activity during the second half of the year," Simonelli says. Beyond 2024, upstream spending is seen growing further across international markets, albeit at a "more moderate" pace than seen in recent years, according to Baker Hughes. SLB paced a decline among oil service stocks at the end of January when state-controlled Saudi Aramco scrapped plans to increase crude output capacity to 13mn b/d from 12mn b/d. But Saudi Arabia has stepped up its plans to boost gas output, by 60pc by 2030. This new energy mix was not anticipated six months ago, but it will "not have a natural impact on our ambition for growth" in Saudi Arabia, Le Peuch says. And Saudi gas plans will require substantial investment in gas infrastructure, which is a "long-term net positive" for Baker Hughes, Simonelli says. By Stephen Cunningham Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.