The U.S. shale drilling boom is likely to ease next year as demand on the industry’s service sector is unsustainable, Halliburton’s business development head said on Tuesday.
The number of rigs drilling for oil in the United States rose to 763 last week, the highest in more than two years, showing that despite oil trading below $50 a barrel, shale oil explorers are still ramping up activity.
Halliburton’s Mark Richard, senior vice president for global business development and marketing, sees that count rising above 1,000 by the end of the year, but not beyond that.
“I think it might level off then. If our customers put too much out there, it’s costing too much and putting too much demand on service companies to provide equipment and people,” he told Reuters at an industry event in Istanbul.
Oil services companies cut back dramatically when demand for their products fell oil prices started falling in 2014 and it has taken them longer to readjust their output.
Richard said he sees 800-900 rigs as a more sustainable level in the medium term.
The increase in shale activity has been a boon for companies like Halliburton which supply equipment to the sector and Richard said he had been able to raise prices in the U.S. because of rising demand, but declined to give details.
However, appetite for oil and gas equipment is still weak outside of the Americas, Richard said.
“We’ve hit the bottom in the first half of this year. Our customers are getting excited about things but we don’t yet see a lot of activity increasing.”
Richard denied Halliburton was under additional pressure following the acquisition of rival Baker Hughes, which it failed to buy last year after regulatory opposition, by GE Oil & Gas last week.
GE-Baker Hughes (BHGE.N) will leapfrog Halliburton to become the world’s second-biggest oil services company after Schlumberger (SLB.N).
“We’re number 1 or 2 in every product line we work in today. That hasn’t changed because GE bought Baker,” he said