The decline in exploration and production caused by the Covid-19 pandemic and record-low oil prices will cause the seismic industry to suffer most in the oil and gas sector, according to an analysis by energy intelligence firm Rystad Energy.
The company estimates that seismic revenues will drop by 51% in 2020 in a $30 Brent scenario and by 77% if the Brent falls to $20, compared to levels seen in 2019.
Rystad Energy oilfield service analyst Binny Bagga said: “Seismic companies across the board have started to adjust their business plans to better prepare themselves for this downturn. Most companies have implemented cost-cutting measures which include layoffs, furloughs, cold stacking of vessels, and general cost reductions.”
These forecasts are provoked by revisions in exploration spending from exploration and production operators and delayed licensing rounds by governments in response to low oil prices. Under the new market conditions, Rystad expects that exploration spending will decline by more than 20% from its 2019 levels, with at least a 12% drop seen by offshore exploration drilling alone.
Within exploration activities, the company predicts that the hardest-hit area will be the acquisition of new geological and geophysical studies in recently acquired blocks and work on yet-to-be-approved exploration wells. When it comes to ongoing offshore projects, logistical challenges caused by travel restrictions and quarantine rules are impacting crew changes for offshore vessels and could result in completion delays that could severely damage the balance sheets of small and medium-sized companies.