GALVESTON, Texas—The oil and gas industry is in a good news-bad news place right now, but there’s plenty of reason for optimism.
Spears & Associates Vice President Richard Spears told a keynote luncheon audience at the Artificial Lift Conference and Exhibition hosted by the Society of Professional Engineers (SPE) that while there’s a lot to like—and to worry about—in the industry right now, people should focus on the things they can influence. Looking forward, he projected an annual 8% increase in the global artificial lift market through 2025.
Currently, he said, the industry is enjoying high oil prices, record gas prices, high operating company and oilfield services profits, strong demand, technology advances and innovation, and dividends.
“I don’t care if [oil prices] are $90/bbl, $100 or $110, anything over $65 is good news,” he said. And gas prices are “great for us, terrible for the consumer.”
Those high prices are contributing to high oil company profits, he said. And while oilfield services profits “have been higher, they are very good right now,” Spears said. Demand is very strong “for every molecule, drill bit and sucker rod,” he added.
“If you look at the rate of change in the artificial lift industry since 1996 on, if the industry grows, it grows at 8%. Some years it’s 12%, some years it’s 5%, but the default rate is 8%.”—Richard Spears, Spears & Associates Inc.
The oil and gas industry is responding with technology advances, he said, and innovation “is running rampant in the industry right now.” Also, the industry is returning dividends to its shareholders and “earning back some of the trust it destroyed over the last 20 years with investors.”
While that is a lot to like, the oil and gas industry also has to face up to a few hard realities. First is that population growth, which drives a corresponding energy demand, has slowed, he said. Other current concerns include budgets, oilfield inflation, lack of exploration, hostile politics in the U.S. in relation to the oil and gas industry, lack of capital, lack of available personnel in certain hot spots, and the threat of recession.
Many operating companies exhausted their budgets early this year, he also noted.
“I don’t think I’ve ever heard that in August, but we were hearing it from our guys in the field in June,” Spears said. “We usually run into that around Halloween, November. Not in June, not in July, not in August.”
Fortunately, he said, those budgets will reset at the turn of the year, so he views this as a temporary issue.
Demand has led to oilfield inflation, but Spears expects that to stabilize. At the same time, oilfield services has limited access to capital, making it hard for those companies to grow, he said.
And while oil and gas prices have been high, the industry has not invested in exploration. “The amount of money being spent on geophysical is practically zero,” he said but added, “eventually we’ll start thumping underground, looking for oil and gas.”
At the same time, the U.S. oil and gas industry is facing one of the “more hostile political environments” it has ever faced, he added.
Personnel are in short supply, especially in places like the Permian Basin, he said. “We already offer them a thousand dollars a day to be a directional driller, and they won’t do it.”
And, lastly, he said, the oil and gas industry is operating under the threat of a recession.
Of those items on the good news and bad news side of things, he said, there were quite a few that people and companies can’t really control, including oil price, gas price, demand, population growth, politics, lack of oilfield capital, lack of personnel and the threat of recession.
Time would also eliminate some problems, he added, such as the budget issue, oilfield inflation and lack of exploration activity.
With those items stricken off the lists of good or bad news, he said, that left things that the companies could actually control, such as profitability, technology advances and how they innovate and dividends.
Looking forward to 2023, Spears expects some growth in most of the artificial lift markets.
Rod lift was projected for $2.3 billion in 2022 and $2.6 billion in 2023; electric submersible pumps were projected at $6 billion in 2022 and $6.7 billion in 2023. Progressing cavity pumps were forecast at $400 million in 2022 and $500 million in 2023, while hydraulic lift was forecast at $300 million this year and $400 million next year. Gas lift was forecast at $900 million in 2022 and $1 billion in 2023, while the plunger lift market was forecast to remain steady at $500 million this year and next.
And overall, he expects the overall global artificial lift market to hit $11 billion this year, $12 billion in 2023, $13 billion in 2024 and $14 billion in 2025.
“If you look at the rate of change in the artificial lift industry since 1996 on, if the industry grows, it grows at 8%. Some years it’s 12%, some years it’s 5%, but the default rate is 8%,” Spears said.
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