Thought Leadership

Ramping up for supply chain growth - what has 2023 brought us so far?

How have the first 6 months of the year played out for the supply chain market? Record-high global energy demand has proved a boon for the oilfield supply chain so far this year, leading to rising demand for goods and services. A tight market for oilfield and offshore services as well as high demand for metals and materials has helped suppliers expand margins and further control their cost base.

Read our special insight from Audun Martinsen, Head of Supply Chain Research at Rystad Energy.

Global upstream oil and gas expenditure is expected to reach around $570 billion this year, driving growth in all segments of supply chain.

Audun Martinsen, Head of Supply Chain Research

Upstream oil and gas investments are on track to grow $140 billion on 2022 levels as buyers hunt for readily accessible energy. This upsurge is just the first wave of investments aimed at securing reliable, affordable and sustainable energy by countries across the globe. The energy transition and its focus on low-carbon power will further bolster energy developments, prompting supply chains in national and regional markets to expand to meet rising demand.

At the start of 2022, Rystad Energy expected global upstream investments to clock in at $470 billion by the end of the year and to remain at a similar level through 2023. However, Russia’s invasion of Ukraine in late February 2022 upended global energy markets, sparking sanctions against Russian energy exports, sending energy prices and inflation skyrocketing, and creating turmoil in commodity markets and supply chains. We now expect global upstream oil and gas expenditure this year to reach around $570 billion, some $100 billion higher than forecast 16 months ago.

North America and Middle East will boost growth for oilfield services

Most growth in oilfield services will be in North America’s onshore market and in the Middle East. The value of oilfield services and their utilization in these two markets is reaching record levels and is expected to stay tight for the foreseeable future. As such, Rystad Energy has further bolstered our research to track these markets wider and deeper. We have expanded our product suite by adding an Artificial Lift module to our North America Oilfield Service product. Clients can now explore trends within various lift methods in core shale patches and identify how operators and suppliers are targeting this market. In addition, we have revamped our drilling and completions coverage by expanding our data dashboard and adding more content. In the coming months, we will provide Middle East OFS insights on a regular basis so that users can understand the rapidly growing developments in the Persian Gulf where sub-surface activity is projected to grow by 50% in the next few years.

Offshore growth will be driven by Latin America, the Middle East and the North Sea

Globally, the offshore market is experiencing an abundance of awards with even more activity expected in 2024, driven by Latin America, the Middle East and the North Sea where more vessels, rigs, construction, and subsea infrastructure is required. Offshore wind is making up an increasingly larger share of total offshore investments and, together with carbon capture, utilization and storage (CCUS), will make up almost half of all offshore investments by 2030. Due to the significant overlap in procurement within the offshore oil & gas and wind space, we have expanded our offshore products so that all now include offshore wind demand. For instance, we have expanded our Offshore Wind and Vessel Solutions, providing day-to-day monitoring of offshore vessels, with projected demand and supply, so that clients can understand some of dual opportunities in this space.

Supply chain resilience at the core of low-carbon energy security

The US Inflation Reduction Act and the European Union’s recently announced Critical Raw Materials Act will strengthen growth in investments in renewable energy and clean tech sectors. Solar, wind, carbon capture, hydrogen, and batteries are all markets that will benefit from supportive policies to accelerate low-carbon deployment and the creation of local supply chains.

Control of the supply chain is at the center of low-carbon energy security. Ensuring a strong, local, partly self-sufficient supply chain within materials and manufactured goods is a critical element in the energy transition. Solar PV equipment and batteries, for instance, rely heavily on relatively few countries that control mining and processing of raw materials such as polysilicon and lithium.

Rystad Energy expects these low carbon markets to grow faster than oil & gas going forward, putting a significant strain on the value chain for materials and metals. In addition, high demand from these sectors for steel, copper, lithium, polysilicon, silver and other materials will change global material flows. Rystad Energy’s established supply chain offering provides a full overview of low carbon technologies, including mapping out demand for all materials. The latest addition to this is our Steel Solution which allows clients to assess steel demand across all energy sectors, the type of steel products needed and capacity. By projecting prices, it also gives a unique insight into a market that sits at the epicenter of the energy transition.

Insights that will help you navigate the future of energy

With the decarbonization of the global energy system and the refocus on energy security, we will see increased emphasis on the creation of reliable and flexible supply chains. Rystad Energy is proud to offer a bottom-up consistent dataset on the supply chain that allows our users to understand the way in which each service segments overlaps and the unique role it plays in each aspect of the global energy sector.