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There is a prominent transition happening in oil field services.

The shared global ambition to align with the targets set in the Paris Agreement is putting pressure on the oil and gas sectors, as economies race to transition to renewables, there is a new breed of oil and gas services companies filling the gaps left by those companies unable or unwilling to make the change.

Europe’s Oil Field Services companies are committed to the change, with around 82% of them redefining their core business models:

  • 42% transitioning to Wind/Solar/Hydro Power coupled with Battery Storage
  • 22% are transitioning to Carbon Emissions Management
  • 18% are moving to Clean Hydrogen

The new era will be characterised by 4 primary characteristics:

  1. Intense competition
  2. Decreasing investment in new exploration
  3. New technology and business models
  4. Increasing public, investor and government pressures to move away from fossil fuels

This means that in order to successfully survive and transition oil field services companies will have to innovate in:

  1. Product development
  2. Carbon emissions related services
  3. As-a-service business model

So, how will this look in the next 12 months for European oil field service providers?

  • 85% of companies will invest in robotics and automation
  • 83% will invest in enhanced oil recovery
  • 82% will engage in manufacturing-as-a-service
  • 81% will expand into carbon capture
  • 76% will outsource components manufacturing to niche specialist suppliers

Manfred Vonlanthen, CEO of Swire Energy Services, says there are two types of oil field services companies:

“Some are saying ‘let’s just ride into the sunset’ and make as much money as we can for as long as we can, focusing on efficiency, technology and maybe some new business models. Others plan to use the cash they are generating to finance the transition and have some clear targets on how they intend to do this. All this decision-making is starting now, and everything will happen within the next 10 years.”

The top 50 oil and gas service companies could replace up to 40% of their 2019 revenue of $220 billion by servicing the renewable markets, according to consultancy Rystad Energy. (1)

Among those diversifying their portfolios is Baker Hughes, which is repositioning itself as an energy technology company and looking to expand services to energy and industrial customers.

“We are already expanding into new frontiers, like hydrogen and carbon capture, that will come to play central roles in the energy transition,”  Baker Hughes CEO and Chairman Lorenzo Simonelli has said previously.

In an effort to grow its portfolio in carbon capture storage and utilisation (CCSU), Baker Hughes acquired Norwegian technology solutions provider Compact Carbon Capture in 2020 and has recently signed an agreement to explore CCSU opportunities with an Italian offshore fabricator Rosetti Marino.

The rapid expansion in wind, particularly off-shore wind has attracted oil field services companies such as Swire Energy Services to reposition their product and service offering. Swire has chosen to establish a dedicated offshore wind division and in 2021 acquired wind services provider ALL NRG, a Danish company, and invested in Bladelnsight a Portuguese wind technology company. The flip side to energy generation through renewables is battery storage, which is essential for integrating intermittent generation to demand. Meaning there are significant opportunities to be explored as regenerative energy sources come on stream.

Another Danish company, Welltec has moved into carbon capture and storage.

“Carbon capture is experiencing an exponential growth in interest from governments and industry players” says Peter Hansen CEO of Welltec. Using knowledge derived from an extensive track record in oil and gas markets, Welltec will be testing materials in its new CO₂ flow test centre, as a part of a consortium working on Greensand, Denmark’s carbon storage pilot project. “Our role is in storage and well completion design” says Hansen. “Monitoring and selecting materials such as packers, valves and systems that can be sustained in the harsh corrosive environment of CO2.”

The challenge then is innovation…the speed of innovation, how innovation can be scaled and the cost. Many oil field services companies are heavily leveraged (possibly over-leveraged) many with debt that is still to mature. The answer then would be collaboration and innovative business models. Supply chain partners are being increasingly invited into partnerships but the key is to have business models where the risk is shared between the parties.

In the UK for example, the main drivers are Predictive Maintenance, Use of Knowledge in CCSU, Manufacture-as-a-Service and moving the supply chain closer to manufacture. Many of the oil field service operators are looking at adopting leaner operations by outsourcing to specialist suppliers of choice. The business model being an Asset-Light Business Model with a focus on the core business.

Tyler Fowler, Marketing Manager for Baseline Energy Services, told Oilprice.com that the oil field services companies that adopt new technology and move forward with more eco-friendly business models will survive and thrive.

“We see service diversification, geographic dispersal, the movement towards subscription revenue models, and a prioritisation of services that achieve ongoing cost reductions for upstream operators as key attributes of the successful OFS [oilfield services] companies in a post-oil future” said Fowler.

The Environmental Credibility Edge

Companies that are able to establish good environmental credibility will not only secure their reputations but will be able to positively impact on how funding is awarded, so good business sense.

Companies in Europe are adopting ESG principles at speed and so whether the move is a proactive or a reactive response, companies are being encouraged to move in the sustainability direction.

How does Northpoint fit into this changing and challenging period of transition?

Northpoint provides powder coating solutions for the Oilfield Services Sector (and others) and has been servicing this sector for decades. Our coating applications provide:

  1. Long-term asset protection, Northpoint has over 30 years’ experience of providing services to this sector
  2. A low carbon footprint for coating application
  3. Detailed Project Quality and Inspection Test Plans that reflect the exact customer requirements
  4. Northpoint acts as a collaborator, able to contribute to both the supply chain partner (who is typically Northpoint’s customer) and directly into the ultimate client requisition process
  5. Coating services are provided with evidence of deliverables passed-off by NACE III and NACE II level inspectors
  6. Northpoint has been accredited to ISO 9001 for over 20 years continuously

If you are part of the oil field services supply chain and looking for a trusted partner for pipe fittings and support steelwork coating solutions, Northpoint can help. Contact our experienced team today for expert advice on powder coating application for the demanding environments that the oil sector presents. Our transportation fleet provides collection and delivery services around the UK.

Contact us today! 

Blog Author: Philip Dawson MBA, Technical Advisor to Northpoint Ltd

*All data care of ProtoLabs