Services sector sees up-cycles in energy security push

Services sector sees up-cycles in energy security push

New York, 3 May (Argus) — The combination of crude prices above $100/bl and a scramble for alternative oil and gas supplies in the wake of Russia's invasion of Ukraine is unleashing a drilling boom that leading oilfield services companies hope will underpin both short-cycle and long-cycle investment — but with cost inflation rising for oil companies.

Projects that cost less to start up and pay off in a relatively short space of time will be the preferred choice, according to US firm Halliburton, the biggest provider of hydraulic fracturing services. That reflects growing calls for lower emissions, as well as regulatory pressures and an investor focus on returns.

Short-cycle projects — such as US shale oil — are flexible and can respond more easily to changes in oil prices, says Halliburton chief executive Jeff Miller. In contrast, projects that require big upfront costs and have longer time horizons are unable to adjust to price signals when they come on line, resulting in oversupply. "The pivot to short-cycle barrels creates the opposite effect, a perpetual threat of undersupply that is supportive to the commodity price," Miller argues.

Along with Baker Hughes and Schlumberger, Halliburton expresses confidence in the prospect of an accelerating multi-year