Rystad counters ‘lower for longer’ theory

However, managing partner Jarand Rystad is concerned that oil companies could be storing up trouble for the future as they continue to cut costs, postpone capital investment and lay off highly skilled energy staff whilst continuing to pay dividends.

Rystad analysts note that capex fell by a quarter in 2015, and is likely to fall by another 21% this year. More than $200bn of investment is estimated to have been deferred with a disastrous impact on many energy service providers who have been forced into laying off staff and instituting major cuts of their own.

However, for firms which survive the downturn, there could well be a rapid reversal in fortunes. Rystad experts believe that the purchase of oilfield services could rise at a cumulative annual growth rate of 12% between 2017 and 2021. But a shortage of expertise in Norway’s offshore sector, much of which is likely to be developed in complex subsea structures, could well lead to significant price inflation.

Rystad experts estimate that only a quarter of the reserves required to replace those that were consumed in 2015 were actually developed. Overall, global reserves fell by 26bn barrels.