The increase in the global oil and gas production in North America and the Middle East accompanied by the maturing onshore oilfields shifted the focus of operators towards offshore for new E&P activities. However, due to the recent crude oil price slump, offshore drilling companies will see weaker revenues over the next few quarters. This downfall is a result of the spending cuts and increase in demand for better pricing and terms of the contract negotiations and renewals. Offshore drilling companies are likely to face a dip in the demand and pricing for services. These companies are therefore trying to capitalize on scale, improve their operational efficiency and their cost bases.

Global offshore drilling market is expected to grow from USD 78.6 Billion in 2014 to USD 89.8 Billion by 2020, at a CAGR of 4.54% during 2015-2020. Asia-Pacific accounted for the largest market share in 2014 and is projected to grow at a CAGR of 4.49% during 2015-2020.

Offshore drilling market has been classified on the basis of applications such as shallow water, deepwater and ultra-deepwater based operations.

Nearly half of the offshore drilling market is covered by shallow water applications, but with the advent of advanced technology, the operators are entering into deepwater and ultra-deepwater zones. Moreover, due to decreasing production in shallow water basins, the large potential of untapped subsea hydrocarbon reserves is driving increased focus in deep water drilling. There have been increasing deep water oil discoveries in India, Africa, Australia, the U.S., Russia, and Norway. Oil discoveries in Africa especially in Ghana, Congo, Mozambique, and Angola are creating lucrative business opportunities where offshore drilling market players are trying to focus to enhance their revenue.

Offshore drilling market has also been classified on the basis of service type into offshore contract drilling, directional drilling, logging-while-drilling and measurement while drilling. More than half of the offshore drilling market is captured by offshore contract drilling services. The market is also witnessing an increase in directional drilling. However due to continuous decline of oil price since mid-2014, the market has witnessed a drastic setback leading to retirement/cold stacking of many of the rigs and delay in the delivery of new rigs. Several operators have either cancelled or postponed their contracts leading to lower day rates.

Asia-Pacific is the leading market in the offshore drilling owing to the offshore activities taking place in South China Sea. China, Thailand, India, Australia and Indonesia are mainly driving growth of the offshore drilling market in the region. Also, Liberalization of Mexican oil & gas industry is another key driver fueling the demand for offshore drilling market in South America. Mexico is one of the largest non-OPEC oil producers in the world. With the liberalization, state run monopoly has ended, paving way for foreign E&P companies.

The recent downturn in the crude oil prices has resulted in the decline of the exploration & production (E&P) activities all over the world. As offshore drilling is highly capital intensive industry, it was affected more as compared to onshore drilling industry. Many contracts were cancelled, postponed, or reworked by companies for rigs. Rigs still in operation are operating on very low dayrates compared to the rates in 2013-14.The current expenditure in E&P has fallen since 2014 but the current capacity reduction is expected to resolve the current demand and supply imbalance of oil and gas. Thus, the price of oil and gas is expected to rise in the future amounting to more capital expenditure on oil and gas E&P activities. As a result, the expected increase in the demand for energy in the future is expected to push the need for optimum exploration & production, thus boosting the demand for the offshore drilling across the globe.