HOUSTON: Schlumberger Ltd, the world's No. 1 oilfield services provider, said it expects a "significant global supply deficit" of crude oil, assuming steady growth in demand, given the sharp decline in spending on exploration and production.
Energy companies have halved their E&P budgets since oil prices began their slump in June 2014, scaling back drilling to focus on the most prolific oil fields, a strategy called high-grading.
"As the opportunities for activity high-grading are exhausted, we should see a further acceleration in the global production decline," Schlumberger Chief Executive Paal Kibsgaard said on an earnings conference call on Friday.
The IEA, which coordinates the energy policies of industrial nations, earlier this month raised its forecast for global oil demand growth by 0.1 million barrels per day (bpd) to 1.4 million bpd in 2016 and 1.3 million bpd in 2017.
Schlumberger reported a better-than-expected adjusted profit for the second quarter on Thursday, and said it was considering rolling back pricing concessions.
The view echoed that of smaller rival Halliburton Co., which said on Wednesday that "deep, uneconomic pricing cuts" would have to be reversed.
"Inevitably service industry pricing has to recover and as it does, this will consume a large part of the E&P investment increases intended for additional activity, which will further amplify the pending oil supply deficit," Kibsgaard said.
Oil producers have said their ability to keep pumping oil without spending more was due to lower prices for oilfield services and better production techniques that drastically lower costs for each new well, while yielding more oil.
But Kibsgaard said the low costs were not indicative of a "permanent improvement in the underlying industry performance", emphasizing there had be no fundamental changes in technology, quality efficiency, collaboration or the industry's business model.
"What has taken place over the past 21 months is instead a redistribution of the profit and cash flow shortfall from previously sitting mostly with the oil producers to now representing an unsustainable burden for the supply industry."
Schlumberger's shares were down 0.7 percent at $79.43.
Schlumberger sees 'significant global oil supply deficit'
Schlumberger sees 'significant global oil supply deficit'
Saudi minister launches $810m infrastructure and industrial projects in Sudair
RIYADH: Minister of Industry and Mineral Resources and Chairman of the Board of the Saudi Authority for Industrial Cities and Technology Zones, known as MODON, Bandar Alkhorayef, launched capital projects valued at approximately SR3 billion ($810 million), covering infrastructure, water, electricity, and ready-built factories.
He also oversaw the signing of several supporting industrial contracts in Sudair City for Industry and Businesses in the presence of MODON's CEO, Majed Al-Argoubi.
The announcement came during the minister’s visit to Sudair City for Industry and Businesses, where he inaugurated a number of infrastructure development projects worth SR1.8 billion.
These included upgrades to road networks and water and sewage systems, construction of a 12,500-cubic-meter water reservoir, and the launch of the fourth phase of infrastructure development, covering 6 million sq. meters.
The visit also included a review of the construction of a 200 megavolt-amperes electrical substation, as well as a project to build 44 ready-built factories to enhance the city’s readiness to attract industrial investment and improve services for entrepreneurs.
The minister also witnessed the signing of six industrial and investment contracts and a memorandum of understanding with the private and public sectors, with total investments exceeding SR1billion.
The agreements are part of the authority’s efforts to create an attractive investment environment locally and internationally, support the localization of industries, and enhance local content, as well as improve the quality of life in industrial cities.
In the field of human capital development, MODON signed an SR16 million contract with the Majmaah Chamber of Commerce to establish a state-of-the-art training center. The hub aims to develop specialized national competencies that support the growth of the industrial sector and includes an incubator dedicated to the children of industrial city employees.
The series of partnerships concluded with a MoU with AJEX, which will provide shared logistics and transport services at Sudair City for Industry and Businesses.
The initiative is designed to enhance the quality of logistics services for investors, a critical factor in enabling sustainable industrial sector growth.
These partnerships align with the objectives of the National Industrial Strategy, which seeks to build an advanced industrial base, strengthen national supply chains, enable high-value-added industries, and increase the industrial sector’s contribution to gross domestic product.
