Smith Market Blog

OTC 2014: Big event parallels big growth areas and supply chain agility


Today is the last day of the 45th anniversary Offshore Technology Conference 2014 (OTC 2014) and it has been a record-breaking show all around. The enormity of OTC is quite astounding and is only matched by the amount of enthusiasm and technological innovation designed to improve the Oil & Gas (O&G) industry.

Massive demand growth

The OTC buzz from the trade show floor, conference discussions, and from industry analysts, is that O&G CAPEX will see growth this year and rise significantly over the next five-years. As industry analyst John Westwood, from Douglas-Westwood, discussed at OTC (you can read more about the luncheon discussion in the OTC 2014 Show Daily for Day 3, p.10), the O&G industry is facing a big growth event because of demand increases. Westwood estimated 130% CAPEX growth through 2020 which would equal US $260 billion. As the OTC 2014 Show Daily (p. 10) also noted, Westwood expects "[m]ore than 670,000 development wells will need to be drilled worldwide through 2020."

Citi Research's review of OTC echos the trade show buzz as they too see similar growth patterns. More specifically, the growth and rising demand is increasing drilling events and 24-hour operations which is having an impact on tool use and tool lifespans, requiring more CAPEX investments because of the need to refurbish and/or replace downhole tools (p. 1, 4 ff.).

Importantly from OTC, there is much talk about the increase in North American growth from fracing as well as the opening of Mexico's reserves for offshore Exploration and Production (E&P). The news around Mexico's reserves opening, with privatized bidding to begin in mid-2015, could bring significant changes in the global E&P and possibly deepwater production supply in the next five-years, as The Houston Business Journal details.

Knowing your expanding supply chain and supplier critical

The demand is strong for additional supply, but there are still price pressures in E&P which means that understanding the growing supply chain and supplier capabilities and expertise is going to also grow in importance. Not only is there the requirement on the E&P side for more efficient and productive operations, which means improving margins across the board, there is also a growing movement toward the intelligent well, much as other industries have seen growth in "smart" or "intelligent" operations thanks to technology advances.

In the case of O&G, we have experienced a considerable amount of technology growth over the recent decade. As with other industries, the recent wave of intelligent operations across the E&P activities is increasing the range and types of components needed not only onboard downhole tools, but also in field sites, rigs, and at the main data centers so that complex analyses can be quickly performed and acted upon in the field.

Having a strategic solution for partnering with experienced and knowledgeable suppliers for goods and services is a point that Westwood reiterated during the luncheon. Agility is critical to support so many sites with a wide variety of parts and services. With the expanding set of electronic components needed in the field, it is important to note that not every supplier has the experience or capability to handle these sensitive components and ensure quality and conformity while being able to meet the logistical demands of O&G companies. Smith is proud to be one of the longstanding, top-quality service and component suppliers for over 30 years with special attention to the O&G industry.

Todd Burke, Senior Account Executive
Written on Thursday, 08 May 2014 15:25 by Todd Burke, Senior Account Executive

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