Basic oilfield services (OFS) are those services that help energy corporations with services throughout the value chains (from exploration to production, to transportation and to marketing). The basic oilfield services provided by oilfield services companies include geological mapping, onsite laboratory testing and analysis, site preparation and environmental remediation. Of course, oilfield services don’t stop at the preliminary stage. They also provide a wide range of services that deal with the full life cycle of a petroleum project, from site assessment to post-site processing to regulatory consultation and well design and operation.
The recent increase in the price of oil has been met with a number of expressions of disappointment from company executives and analysts. In Houston, for instance, one of the largest oil refineries warned recently that the current drop in the oil prices will not be sustained and that a return to previous levels of profitability is unlikely within the next two years. Meanwhile, the American Petroleum Institute (API) said in a recent study that there is a high probability that the current decline in oil prices will be accompanied by an increase in U.S. fuel demand. These statements seem to indicate that the consequences of the recent price increase may turn out to be more drastic than the API estimated.
In response to the uncertainty of oil prices, numerous oilfield services companies have laid off large numbers of employees, cut back on some projects, or moved them to higher risk, more volatile regions of the world. Frack jobs, as these jobs are called, have increased dramatically over the past few years. The most common areas where frackers live and work include the Perimeter Oil Fields in the northern Texas panhandle and the Gulf of Mexico off the coast of Florida. Frackers are also found in the North Sea and the offshore Western Canada. Because these areas are characterized by deep water and steep cliffs, weather conditions can pose significant challenges for those who work there.
To compensate for uncertainty in supply and demand, oilfield services companies have adopted a number of techniques to increase their ability to deliver services. Among the enhancements that companies have applied successfully is improved communication between crews operating in offshore locations, improved GPS systems to accurately locate operators in a remote location, and increased use of mechanized equipment such as boom lifts. All of these efforts to improve productivity and efficiency have significantly reduced the amount of time that operators spend standing by and performing duties and decreased the amount of physical stress on the operators and the vessel.
Many oilfield services firms offer petroleum and other energy products through pipeline construction, horizontal well drilling, and onshore processing. Additionally, they provide services related to the transportation, storage, and marketing of gas, diesel, and heating oil. These companies derive most of their revenue from selling gas, crude oil, and gas liquids through the pipes of the petroleum infrastructure. Onshore processing involves the conversion of natural gas to synthetic gas, typically by means of a pressurized oil tank. In addition, many of these firms also sell gasoline and diesel through pipelines located onshore. They also make money through sales of various petroleum products, including gasoline and diesel, as well as through lease sales with landowners.
Fracking is another important aspect of oilfield service companies. It is the process of injecting chemical additives into wells to open the fissures in the earth’s crust and unlock the trapped natural gas or oil. During this process, engineers and technicians will recommend whether to continue to drill or to abandon the well and exit. This is an important component of exploration, because if no gas is found, no further drilling will be required to bring it up, and consequently, no further exploration will be necessary.
Offshoring is another practice used by many oilfield services companies. This practice refers to the practice of contracting with companies in countries around the world where labor and operating costs are lower than in the United States or Europe. Some major companies do this regularly, while smaller ones tend to outsource on only a few occasions. One major reason why they do not undertake these tasks is that they believe they can get the same or better results in the United States or Europe that they would in places like China, India, or Indonesia. However, these places have proven to be excellent sources of supply over the past several years. As such, companies have been forced to change their practices so that they can remain competitive.
Another way that oilfield services companies are changing their tactics is by tapping the source rock itself. This includes fracking, which is essentially the injection of large amounts of water at high pressure into areas containing natural gas or oil. Most people are familiar with this practice, and it has resulted in some major environmental and price changes. For example, California made a decision to restrict the amount of fracking that could take place, as the practice was believed to be the cause of the recent earthquake in San Francisco. Moreover, in countries where fracking is allowed, such as the UK, France, and Norway, the practice can result in serious environmental concerns, such as the contamination of drinking water. In the United States, however, the Obama administration has taken steps to lift the ban, which will allow companies to increase the amount of fracking they do in order to extract more oil and gas.