The Petroleum Equipment and Services Association (PESA) is the national trade association for the oilfield services and equipment sector. PESA’s goal is to elevate critical issues and amplify the voices of stakeholders sector-wide, highlighting the innovation, job creation and energy security provided by the strong value chain of oil and natural gas development.
It’s undeniable, 2018 has been an exciting year for our sector. Despite a recent leveling, rig counts have consistently exceeded 2017 numbers, and crude prices have held near the $70 mark. Technological innovation has also been on the rise, with PESA members spearheading efforts to increase productivity and efficiency across the supply chain. By most accounts, the downturn is truly behind us, and that has significant implications for our industry in the coming year.
Broad trends provide optimistic prospects for 2019. Strong domestic production growth combined with market volatility abroad has pushed American oil and gas markets toward net exportation of natural gas, crude oil and petroleum products, an exciting economic prospect for the future. We are closer than ever to delivering energy security, with the U.S. Energy Information Administration (EIA) predicting that U.S. crude production will exceed that of Russia and Saudi Arabia in 2019.
Still, the services and equipment sector will undoubtedly face challenges in the coming year. Retaining talent, especially in high impact, high turnover regions like the Permian Basin, will be critical. PESA will continue to offer opportunities for intra-sector collaboration and development opportunities for our member company employees to generate lasting solutions for maintaining the greatest oil field assets, the men and women who compose our workforce.
To maximize potential for long-run growth, pipeline infrastructure must improve, without which underground resources are worthless. This is especially imperative in the Permian, where low pipeline takeaway capacity is already slated to suppress production through 2019, possibly forcing prices to unsustainable heights. Such an issue provides an opening for our sector to step in and provide needed expertise, and PESA member companies are fully engaged in creating solutions to this challenge.
Our sector’s success is also intrinsically linked to decisions made in statehouses, capitols and economic forums worldwide. Policy outlooks for the coming year are mixed, bringing both opportunities and challenges for our sector.
On a global scale, trade policy will remain a wild card. Despite cross-industry pushback, the toll of the Sino-U.S. trade dispute has grown to encompass $53 billion, with the potential to increase nearly fourfold. China has also imposed a 10 percent tariff on liquified natural gas, indicating a new willingness to target domestic upstream development. PESA has and will continue to spearhead efforts to firmly advocate for a thoughtfully considered approach to trade, and these efforts will continue into 2019.
Tensions in the Middle East also complicate market outlooks. Supplies have become increasingly volatile with sanctions on Iran and rife sector mismanagement only increasing the importance of America’s push toward global energy dominance.
Despite international challenges, the domestic policy environment is largely positive for the oilfield services and equipment sector. Regulations continue to be re-examined and refined, and this trend shows no signs of slowing. Both Houses of Congress have advanced measures in our sector’s interest. Economic reforms, like the Tax Cuts and Jobs Act of 2017, have contributed to an atmosphere conducive to growth. The question of how this will continue will be answered after the 2018 Midterm Elections, but regardless of outcomes, much sustainable change has already been made.
The current position of our industry and sector begs many critical questions. Are upward trends the new normal? Is the tapering of last year’s rapid growth a sign of decline or an indication of steadying markets? And most importantly, where do we go from here? After a crippling downturn, we’ve rebounded to a far better place than anyone could have expected.
Predictions show that we have reason to keep looking up, though we should shift our mindsets from survival to sustainability, from growth only to steadiness. In short, 2019 is the year to adjust to our new normal. It is the time to grow, to strategize, and to prepare for the tremendous opportunities that lie ahead, this year and beyond.
For more information about PESA, please visit pesa.org.