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wo years after the oil price slump, what
is the status of the O&G industry? How Two years after the oil price
has the competitive arena changed
and what is the positioning of Italian slump: the new industry
players? What are the actions needed
T for a structural winning strategy? equilibrium
To answer these critical questions we have con-
ducted an in depth analysis of the oil price impact
on market dynamics and of the key root causes 1 The Oil price slump has deeply impacted
of change, and we have assessed the competitive all industry players
position of key players, with a special focus on
Italian EPCs, OFS and component manufacturers.
We will soon present the results of this research a Major Oil companies have lost ground to
and we are pleased to share the findings of our National Oil Companies, and are now refo-
assessment in a series of two articles. The pres- cusing on core business
ent article focuses on the new equilibrium of the
industry and the new positioning of Italian players; Capex reduction. To understand the effects of
the second article will further deep dive into the market dynamics on EPC contractors, OFSE and
root causes of such changes and outline the ac- OEM players, we first need to understand how oil
tions that Italian players shall take to regain com- companies reacted to oil price slump. As shown
petitiveness. in figure 1, the most direct consequence of the
After last November OPEC summit’s decision to 60% decrease in oil prices since 2014 has been
cut production by 1.2 M barrels/ day, the oil price a decisive cut in Oil Companies spending, mainly
has increased again (even exceeding 50$/ barrel), in Upstream activities (-24% Capex between 2014
after a reduction of ~60% since 3Q2014. However, and 2015).

Figure 1-Upstream global Capex by segment

two consecutive years of low oil prices have pro- Decommissioning capex increase. Within
foundly reshaped the industry, thus accelerating the Upstream segment, well capex and explo-
a structural evolution that was already in progress ration activities have suffered the most, with
and setting the stage for an investments decreased by around 26% and
era of new equilibrium. 30% respectively in two years. However, while
In this new context, Italian the crude crash has forced oil companies to cut
A direct consequence of the O&G players suffered not spending in both new projects and modifica-
decrease in oil prices since 2014 only from the sharp reduc- tion, it has also driven decommissioning expen-
has been a decisive cut in Oil tion in investments that fol- ditures for aging and unprofitable fields, thus
Companies spending, lowed the oil price slump, providing new opportunities for Oil Field Ser-
mainly in Upstream but also registered a loss vice and Equipment providers (OFSE). Indeed,
of relative competitiveness as shown in figure 2, decommissioning costs
with respect to other play- have increased by 41% from 2014 to 2015, with
ers, local suppliers in par- more than 600 fields expected to shut down
ticular, thus requiring a structural set of actions to mostly in China, Australia, Indonesia and Malay-
restore their competitiveness. sia in the next ten years.

Impiantistica Italiana - Gennaio-Febbraio 2017 29