The oilfield service (OFS) market is projected to lose a cumulative $340 billion in purchases value over the next eight years, a Rystad Energy analysis shows, as peak oil demand will arrive earlier and at a lower level than previously thought, leading to reduced E&P investments.

The Covid-19 pandemic’s effect and the accelerating energy transition last month impelled Rystad Energy to revise its peak oil demand forecast. We now see it coming in 2028, two years earlier than previously expected, at 102 million barrels per day, down from earlier projections of 106 million barrels per day.

OFS purchases are expected to drop to $473 billion this year from $625 billion in 2019 and remain flat in 2021 before starting a slow recovery. Based on our updated peak oil demand forecast we now see OFS purchases returning to pre-pandemic levels only after 2024 in nominal terms, reaching $642 billion in 2025. In real terms, excluding the impact of price inflation, annual purchases are not expected to revisit pre-pandemic levels this decade.

The $340 billion of lost purchases value is spread across the coming eight years and is calculated as the cumulative difference between the current and the previous outlook for peak oil demand, which corresponds to a 6% drop.

We now expect investments to increase by 13% in 2022 (versus 17% previously) and 16% in 2023 (18% previously). Most of this downward revision is driven by shale investments, which previously were expected to grow by 45% in 2022 and now are pegged at about 30% growth. Shale operators have been hit hard of late, and they also harbor ambitions to generate better cash flow by reducing their investment ratio. Growth in the offshore segment is revised down from 12% in 2022 to only 9%.