It seems to be too easy for industry participants to forget the naturally cyclical nature of oil and gas. Too many of us are still living in a kind of boom-time dream world. Psychologists say that we fill the gaps of our perception with a mental model of how we ”think” the world works. When reality changes， we struggle to change our perceptions. Back in the 70s， in the fast moving world of IT， when makers of 14” hard disk drives couldn’t see the impact of new 8” drive technologies， entire companies disappeared before perceptions changed.
Is this about to happen to some oil service companies?
Trend 1： Oil Service Companies Will Refocus On Their Core Skill-Sets
The term ”Service Company” is used here to mean all those contractors that provide services to oil companies. At 65， I’m old enough to have seen how the oil industry’s 20-25 year boom-bust cycles work. I recall my first floater back in the 70s， when the crew themselves stripped down and repaired rig equipment wherever we had a moment’s downtime. The rig was old and not very beautiful， but we all knew that so long as we drilled well and didn’t break down， the rig （therefore us） could stay in work. The company didn’t employ subsea engineers- the mechanic helped the drill crew service the subsea BOP. The company had no money for outside contractors. If an engine needed new pistons， we overhauled it ourselves.
Here is the modern 2016 version： An oilfield workshop friend tells me he conducts good business sending his workers to visit fully crewed up working rigs to carry out small stuff that the crew should be doing- such as opening， cleaning and dressing choke manifold valves. While these 3rd party workers are fixing rig equipment， the driller and roughnecks sit around playing on Facebook on their smartphones. This is a sign of a boom time mentality in an era when the spare cash to throw away on oil boom behaviors is about to come to an abrupt halt.
Ech kind of oil service company has a base set of skills. For example， the people employed by production testing contractors have particular skills to operate， repair and maintain high pressure equipment such as vessels， pipes and valves. Lack of money dictates that the more agile contractors within this sector will stop sending items with minor issues to 3rd party workshops; they will instead start fixing routine problems in-house. The days of contractors outsourcing to third parties what should be their core skills is about to stop.
Trend 2： OEM Overcharging
In an oil boom， OEMs （Original Equipment Manufacturers） can overcharge the oil service contractors with impunity. Send a choke manifold valve， or travelling blocks to an OEM workshop and suffer a repair bill 90% of new the price. This business model works in an era of sky high day rates. That era is on its way out. I recall that we once took some new jackups to work in ’82 for $42，000/day. When that contract expired in ’85， we went back to work for a very painful $12，000/day.
When the oil companies get their chance to take advantage of the service companies， there will be no more oil service contractors paying OEM workshops $18，000 to repair a $20，000 valve.
Trend 3： Safety Fascism
I can recall a time when too much attention was given to getting the job done without sufficient regard for job safety. A new safety and quality mindset which swept the industry in the 80s was a welcomed fresh breeze. But we now have lurched too far towards ”politically correct over-zealous safety fascism，” where a new class of dull untalented safety drones who can’t perform effective work themselves have been empowered to disrupt the work of the productive with a plethora of totalitarian often illogical safety and quality rules.
For example， new rigs these days come with well equipped machine shops， where the mechanic can quickly weld and machine， out of raw stock， new components （e.g. a shaft or a cover plate.） But too many rig workshops lie largely underutilized as the mechanic fears being named and accused in a storm of emails of ”using home made components” in his repairs.
An office drone， out to make a name for himself， spots the mechanics or assistant driller doing some essential in-house repairs， such as redressing high pressure valves. Because he has never learned how to clean and dress a valve himself， he makes a name for himself by stopping the job and sending out a flood of emails declaring that this class of work should be outsourced to some ”certified” third party workshop – at great and unnecessary expense to the owner. The ”certified workshop” is likely to send some minimum wage coolies （dressed in smart looking coveralls） who know less about servicing high pressure valves than the driller and roughnecks do， anyway.
Trend 4： Sensibly Priced Repair Services
In a money strapped market environment， a new class of non-OEM， API monogrammed workshops， will arise （or adapt themselves） to repair the equipment of the oil service contractors at sensible prices. Meanwhile， directors and shareholders of the big OEM manufacturers will resist cutting margins， meaning that the pricing mindset of the 1970s 14” hard disk drive makers may well continue well into the downturn， making room for smaller more agile service shops to spring up.
Emerging Oilfield Trends
Offshore contractors will select crewmen with the skills and motivation to maintain equipment in-house.
Contractors will learn how to better preserve their expensive assets so that they don’t rot away in just a few years （as many do now）.
New workshops， will engineer simple solutions to expensive over-automated OEM systems， to provide owner-friendly user-friendly modifications and retrofits.
石油圈
