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ISSN : 1598-7248 (Print)
ISSN : 2234-6473 (Online)
Industrial Engineering & Management Systems Vol.18 No.3 pp.563-576
DOI : https://doi.org/10.7232/iems.2019.18.3.563

Investigating the Competitiveness of the Russian Oilfield Services Market

Alexander N. Semin*, Vadim V. Ponkratov, Alexander A. Sokolov, Olga V. Lenkova, Andrey S. Pozdnyaev
Ural State Mining University, Yekaterinburg, Russia
Financial University under the Government of the Russian Federation, Moscow, Russia
MIREA - Russian Technological University, Moscow, Russia
Tyumen Industrial University, Tyumen, Russia
Bauman Moscow State Technical University, Moscow, Russia
Corresponding Author, E-mail: alexandrossemin@yandex.ru
June 10, 2019 June 18, 2019 June 21, 2019

ABSTRACT


Amidst the worldwide transformation of energy markets, competition in the global oil services sector has intensified, exposing the Russian oilfield services market to many challenges and risks. This study determines the ranking of the Russian oil services market at the global level. We employ expert assessments to identify relevant factors and indicators for evaluating competitive advantages in the oilfield industry. Using additive design and Saaty’s hierarchy analysis method, we determine the hierarchical structure of the factors influencing the development of oil services on the overall level of competitiveness of the oil services market. Using the integral analysis method, we develop a universal model for assessing competitiveness in the oilfield industry. Application of the model reveals that Russia ranked eighth among its main global competitors in 2017, and ranked ninth in terms of development growth rates for the period from 2007 to 2017. Practical implementation of the proposed measures can help monitor and address the major detrimental factors (i.e., decline in investments, high taxation, primitive technology, and high proportion of foreign service providers) affecting the development of Russia’s oilfield services market, the elimination of which may raise Russia’s status as an energy leader.



초록


    1. INTRODUCTION

    By 2023, global oil demand is expected to increase by 6.9 million barrels to 104.7 million barrels per day (Market report series, 2018). As a result, improving efficiency in the oilfield services market has become a global priority. Having a competitive advantage is a key determinant of a country’s performance in competitive markets. A competitive strategy creates and sustains such competitive advantage and helps maintain the country’s attractiveness as an investment target. Competitive advantage lies in the various distinct activities an oilfield services company performs to generate and deliver value. Each activity can contribute to a country's relative cost production level and create a basis for differentiation. The level and direction of oil and natural gas prices and the level of proved reserves and production of crude oil are key indicators of performance and competitiveness for the industry in the global oil market (Deloitte CIS Research Center, 2018;U.S. Energy Information Administration, 2019;Plenkina and Osinovskaya, 2018). When the oil price collapsed by more than 50% between 2014 and 2016, oil-related investments (particularly in the upstream part of the business, focused on exploration and production) plunged as well. Numerous projects were cancelled outright, while others were delayed indefinitely.

    Oil investments are complex decisions shaped by many factors, some of which either reinforce or counterbalance each other. The Russian Federation is one of the world leaders in oil production, accounting for more than 6.3% of the proven world reserves and 12% of world crude oil production (BP France, 2018). The volume of Russian oil production increased by 12% from 2007 to 2017 (BP France, 2018), reflecting a positive development trend in the oil-related services market in Russia. As of 2018, the value of the Russian oilfield services market was estimated at USD 25 billion to USD 30 billion (12.8% of the world total) (BP France, 2018). There are about 300 companies operating in the sector, producing up to 11.257 thousand barrels of oil per day (BP France, 2018;Romashkina, 2018). However, with transformations in the global oil market, the competition has intensified, exposing Russian oilfield services providers to many challenges and risks. As such, it is important to identify areas for developing competitive advantage, as well as weak links in the development of the Russian oilfield services industry in relation to its main competitor countries. The dynamics in the oil market changes under the influence of a set of fundamental factors and in the process, a new economic reality of the oil-related service is born. These fundamental factors include the following. First is the formation of a new technological paradigm for oilfield services. This encompasses the development of multi-stage processing (and the use of related multi-stage technologies) of raw materials, among others. Second is the extraction of unconventional oil grades and of hard-to-recover oil reserves. The third factor concerns the development of offshore oil production, the application of technologies for rapid processing of large arrays of geological data, and the increasing imbalance between demand and supply in the oil market. The fourth factor is the determination of the market price for oil as influenced by supply and demand. Finally, the fifth factor is the increase in the number of participants in the oil market and the increased competition between them, affected by a decrease in the share of oil in the global energy balance structure and a high level of volatility in oil prices, among others (Gupta, 2016;Zhang et al., 2014;El Fayoumi, 2018;Plenkina et al., 2018;Ghani et al., 2019).

    In recent years, the demand and supply dynamics in the oil and gas markets has changed greatly. The Organization of Petroleum Exporting Countries (OPEC) has lost its dominant role in the oil market. Today, the oil market situation is determined not only by the prices of raw materials but also by the volume of investments in future projects. Developing countries (previously known as third world countries) are currently actively developing their own production of hydrocarbons and master-deep processing techniques. For example, Brazil’s volume of oil production grew by 50% over the period from 2007 to 2017, increasing the country’s share in the world production from 2.4% to 3.3% (Enerdata, 2016). Colombia increased its oil production by up to 44.8 million tons in 2017 (60% more than in 2007), while Kazakhstan, China, and India increased their oil production by 29.3%, 3%, and 11%, respectively (BP France, 2018). Despite the 11% decrease in crude oil production in Nigeria, the country increased its refinery capacity by 2.3 times (Enerdata, 2016). Based on OPEC estimates, the country’s oil production potential is assessed at 0.3 million barrels per day (BP France, 2018). According to forecasts, new oil refineries will be built in Saudi Arabia, the United Arab Emirates, Iraq, Iran, Bahrain, and Oman by 2020 (Stratas Advisors, 2016). While Asian countries are targeted to be their main export market, there are also plans to increase the supply of crude oil to Europe by up to 40 million tons (Stratas Advisors, 2016). The removal of the ban on American oil export, which has been in force for forty years (Senate and House of Representatives of the United States of America in Congress, 1975;Sharif and Butt, 2017), presents a promising increase in exports of American crude in the global market. This further intensifies the currently strong competition of crude oil suppliers in the global market. Additionally, in modern conditions, innovative projects are carried out across a wide range of oilfield services areas, covering the technologies of prospecting; exploration; and the development of traditional, hard-to-recover, and unconventional oil reserves (Ibrahimov, 2018;Lei et al., 2018;Ahmadi et al., 2018;Galvão and Henriques, 2018;Novikova et al., 2016). The growth of hard-to-recover oil reserves resulted in the reorientation of African and Latin American oil to Europe and the Asia-Pacific region. Thus, the share of African and Latin American producers reached more than 20% of global supply in 2017 (BP France, 2018). Under conditions of increasing competition among producers in the global oil market, 2015 oil prices slumped to the level of 2005 prices (USD 52 to USD 54 per barrel), and today, oil prices are characterized by high volatility (Oil, 2019). This creates a threat of uncertainties for Russia’s oilfield services sector and of a decrease in investments in the industry.

    This study determines the competitive position of the Russian oil services market at the global level to identify the main factors for increasing its efficiency. The primary objective is to determine the hierarchical structure of the factors affecting competitiveness in the oilfield services industry and to develop an integrated model for its assessment among major oil-producing countries worldwide. Current literature details the factors that affect competitiveness in the oil market. Special attention is paid to the formation of innovative clusters of oil industry enterprises to increase the competitiveness of mining companies (Isaksen and Karlsen, 2012;Valdaliso et al., 2016;Mazur et al., 2016). However, this study assesses the potential for competitiveness of Russia's oilfield services industry only within the regional economy, not at the global level. Moreover, in the Russian oil service market, there is a practical monopolization of the industry, and as such, it deserves a separate detailed study. Other studies focus on technological factors as providing competitive advantage in the oilfield services industry (Joshua et al., 2017;Owusu and Vaaland, 2016;Ebneyamini and Bandarian, 2018). These studies examine the influence of only one factor. However, to determine the competitive position of the Russian oilfield services market, it is necessary to consider the cumulative effect of all factors that determine the development of the industry.

    This study contributes to the literature as follows. It provides an analysis of the competitive advantages of the Russian oilfield services market in the context of its main global competitors and justifies the factors and indicators for assessing competitiveness in the oil services market. Second, this study develops a model for assessing competitiveness in the oil service market that is used to substantiate the ranking of Russia among the main competing countries and to support the arguments for the measures determined to improve Russia’s competitive advantage.

    The rest of this paper is organized as follows. Section 2 discusses the methodology followed in this study, providing a systematic analysis of the factors affecting competitiveness in the oilfield services market, as well as the method for calculating the integral index of competitiveness. Section 3 presents the results of the competitiveness rating of the countries studied. Lastly, Section 4 provides the practical significance of the results obtained in this study.

    2. METHODS AND MATERIALS

    2.1 Methodology

    In this study we built a model of “integrated index of competitiveness” (IС, as applied to Russia and other top global exporting countries) with the following objectives. First is to assess the current state of competitiveness of the Russian oilfield services industry in the global oil production market. Second is to determine the Russian oilfield services industry’s development prospects. Third is to analyze, as well as compare, the behavior of the Russian oilfield services industry with its competitors.

    To develop a representative group of indicators for assessing the oilfield service market’s competitiveness in the countries under study, we consulted a group of 44 people. The group consisted of four employees from each of the organizations (ministries and departments involved in energy market research in the respective countries) listed below. We also consulted with the Deloitte Research Center, which has contributed to the assessment of the experts’ competence:

    1. The Ministry of Energy of the Russian Federation

    2. Ministry of Oil (State of Kuwait)

    3. The United States Department of Energy

    4. Ministry of Mines and Energy (Brazil)

    5. Petróleos de Venezuela, S.A. (PDVSA) (Venezuela)

    6. Ministry of Energy (Iran)

    7. State Organization for Marketing of Oil (SOMO) (Iran)

    8. Ministry of Energy and Resources Development (Canada)

    9. Ministry of Energy, Industry, and Mineral Resources (Saudi Arabia)

    10. Ministry of Energy & Industry (United Arab Emirates)

    To assess the competence of experts, a coefficient of competence was calculated using the following formula (Rousseau et al., 2018):

    K i = i = 1 m e i j m
    (1)

    where Ki is the coefficient of competence of the i-th expert; eij is the expert estimate equivalent to “0” if an expert considers another expert incompetent and does not deem it expedient to include that expert in the expert group, and equivalent to “1” if an expert expressed the need to include another expert in the group; m is the number of experts.

    When evaluating their expert colleagues, each expert gave a binary estimate of the expediency to include the other experts in the expert group. Estimate “0” stood for incompetence of the evaluated expert and another expert’s reluctance to include the evaluated expert in the expert group, while “1” stood for high competence and the need to include that expert in the expert group. The coefficient of competence calculated by formula (1) is measured in the range {0, 1}. The higher the coefficient is, the more advisable it is that an expert takes part in the survey. The threshold value of the coefficient of competence that is sufficient for an expert to be included in the working group is 0.5 (Rousseau et al., 2018). The competency ratio was calculated for each department separately since experts from different departments are not familiar with other departments and have different specific activities. The calculated coefficients of competence of experts by department are at the level of 0.75 and 1. The value of the coefficients exceeds 0.5, indicating high competence of all experts.

    To assess the representativeness of indicators, the experts were asked to evaluate the following for each indicator:

    1. Whether this indicator assesses the competitiveness of the oilfield service market (Yes/No answers) and

    2. Whether the proposed list of indicators sufficiently describes competitive advantages of the oilfield service market in international oil trade.

    When answering the second question about the sufficiency of the sample of indicators, the experts rated the list from 0 to 5. The higher the score given by an expert, the higher is the representativeness of the list of competitiveness indicators.

    Due to the above specifics of assessing the oilfield service market’s competitiveness, we used T. Saaty’s analytic hierarchy method (Saaty and Vargas, 2012). This method involves an expert or a decision maker decomposing a problem and determining relative significance of objects, in particular, the competitiveness factors for purposes of this study. This procedure allows identification of the relative significance of the studied alternatives or factors of lower order for all the hierarchized criteria. The relative significance of factors or alternatives is expressed numerically and is presented in the form of priority vectors that, in turn, serve as weights during additive integral convolution of each indicator of the oilfield service market’s competitiveness factors. The analytic hierarchy process was used to build the IC broken down by competitor countries, as well as to analyze its dynamic development.

    Saaty’s process requires a comparison of elements of a lower level (descendants) in terms of their importance in influencing the elements of a higher level (parent vertices). Competitive advantages considered by means of a pairwise comparison matrix are ranked based on the matrix eigenvector corresponding to the maximum eigenvalue. The eigenvector (W) of positive square matrix of pairwise comparison of competitiveness parameters [E] is calculated based on the following equation (Saaty and Vargas, 2012):

    E W = λ max W ,
    (2)

    where λmax is the maximum eigenvalue of the matrix [E].

    Normalized eigenvector WN reflects weighting fac-tors of competitiveness parameters at the same hierar-chical level in each group. The homogeneity of expert judgments was assessed by using a homogeneity index (HI) and homogeneity ratio (HR) according to the following formulas (Saaty and Vargas, 2012):

    H I = ( λ max n ) / ( n 1 ) ,
    (3)

    H R = H I М ( H I ) ,
    (4)

    where n is the matrix dimension.

    M(HI) is the mean value (expectation) of the HI of a randomly compiled pairwise comparison matrix based on the experimental data.

    Expert judgments are considered as acceptable if HR ≤ 0.1 (Saaty and Vargas, 2012).

    When evaluating the matrices by a group of experts, a resulting matrix is computed by finding the geometric mean of the respective elements of the calculated matrices.

    Coefficient of concordance is another indicator of the consistency level of expert opinions. This characterizes the degree of unambiguity of expert estimates when ranking the factors and indicators in terms of their importance for assessing the oilfield service market’s competitiveness. The coefficient of concordance was calculated using the following formula (Ponto, 2015):

    W = 12 × s [ m 2   × ( n 3 n ) m × t e ]
    (5)

    where m is the number of experts

    • n is the number of factors (indicators),

    • S is the quadratic sum of rank differences (deviation from the mean), and

    • te is the sum of the same rank values.

    The coefficient of concordance can vary in the range of 1 > W > 0. At W = 0, there is no consistency of expert opinions, while at W = 1, there is absolute consistency. Consistency is considered as high at W ≥ 0.5 (Ponto, 2015).

    The analyzed indicators of the oilfield service market’s competitiveness factors have different expression dimensions; therefore, to calculate the IC, they were standardized according to the following formula (Anysz et al., 2016):

    x i j = a i j a ¯ l , i = 1 , ... , n , j = 1 , ... , k
    (6)

    where xij is the standardized indicator value;

    • aij is the value of the i-th indicator for the k-th country;

    • al is the mean value of the i-th indicator, calculated over the sample of countries under study;

    • n is the number of indicators; and

    • k is the number of observations (of the countries under study).

    2.2 Data

    According to the results of experts’ evaluations based on Section 2.1, the set of indicators for assessing the oilfield service market’s competitiveness were determined to be as follows:

    1. Economic factors (EFs) in the development of oilfield services: investment in oilfield services, spot crude prices (SC), gross taxes (CT) on crude oil production, production costs (PC), administrative/ transportation (AT) costs, break-even oil prices (BP), crude oil export volume, and oil consumption volume;

    2. Factors relating to modern technological development (TD) of oilfield services: refinery throughput (RT), refining capacity (RC), and active rigs (AR);

    3. Environmental factors (FEs): total proved reserves (TR) and CO2 emissions from fuel combustion (EM).

    All experts gave an affirmative answer to the first question (i.e., whether the indicator assesses the competitiveness of the oilfield service market). The average percentage of the sample’s sufficiency was calculated as the ratio of the sum of expert scores to the maximum possible score. Considering that the estimates varied within the range of 0 to 5 and that the maximum total score for 44 experts is 220, the resulting coefficient of sufficiency of the indicator sample is 87%. Drawing a parallel with multidimensional factor analysis, an optimal number of indicators (factors) was selected. The factorization percentage (an adequacy ratio that indicates what percentage of the system under study the derived indicator system describes) is a quality criterion for factor analysis. In factor analysis, a sufficient level of factorization is 80% (Menke, 2018). As such, the indicator sample in this expert assessment is considered sufficient to describe the oilfield service market’s competitiveness in the countries under study. The values of indicators over the period from 2007 to 2017 were used based on data from various sources (BP France, 2018;Knoema, 2019;Ro, 2014;Snyder, 2017;Business Insider, 2014;Mandel, 2017;Chatsko, 2017;Salameh, 2017;WSJ News Graphics, 2016;Global Energy & CO2 Status Report, 2019).

    The main countries competing with Russia in the global oil service market are the countries with the highest level of crude oil production, namely, the United States, Canada, Brazil, Venezuela, Iran, Iraq, Kuwait, Saudi Arabia, and the United Arab Emirates. These countries are also major oil exporters. Therefore, the analysis of the oilfield services market’s competitiveness was conducted in the context of these countries. Currently, Russia ranks sixth in terms of proven oil reserves in the world (at 106.2 thousand million barrels), yielding the leading positions to Venezuela, Saudi Arabia, Canada, Iran, and Iraq (Table 1). However, it should be noted that Russian reserves are characterized by a lack of dynamics in the growth rates of proven reserves over the period from 2007 to 2017 as compared to competing nations such as Venezuela (+ 205%), America (+ 64%), Iraq (+ 29%), and Iran (+ 14%) (Table 2). In terms of the level of crude oil production as of 2017, the Russian Federation occupied the third place in the world (11.257 thousand barrels of oil per day) (Table 1). However, at the same time, the average growth rate was 1% for the period from 2007 to 2017, which is indicative of the oilfield service market’s development. However, this figure is inferior to the growth rate of oil production in the USA (7%) and Saudi Arabia (2%), being Russia’s main competitors. Russia’s competitive advantage is the level of oil consumption, based on which the country ranks third in the world (representing 3.3% of the world’s consumption), yielding the lead to the United States (20.2%) and Saudi Arabia (4%).

    The oil production-to-consumption ratio (P/C) in Russia is 3.5 points, which is 2.8 points higher than the value in the United States and 0.5 higher than the value in Saudi Arabia. However, at the same time, it has yielded its competitive position to Kuwait (P/C = 6.7), Iraq (5.7), Venezuela (4.2), and the United Arab Emirates (3.9) (BP France, 2018). The 16% increase in the level of oil consumption in Russia during the period under study is detrimental to the competitive advantage of the Russian oilrelated services in the global energy market. This is also typical of the other competing nations, with the exception of the United States and Venezuela where consumption decreased by 4% and 21.1%, respectively (BP France, 2018).

    The fall in oil production in the existing fields in Russia forces manufacturers to look for sources of oil substitutes. In the period from 2014 to 2017, due to the growth of investments and the lack of sanction restrictions, more than a dozen of new fields were put into operation (e.g., Messoyakha group of fields, Novoportovskoye, Pyakyakhinskoe, Suzunskoye, Yarudeyskoye, and Shpilman fields, among others). All these projects provided additional volume of oil produced (exceeding 25 million tons by 2017), and two thirds of this volume was produced by PJSC Rosneft and PJSC Gazprom Neft (Mitrova et al., 2018). The intensive use of traditional oil fields in Russia is not encouraged for several reasons. These include the high cost of tertiary methods for increasing oil recovery in the face of falling global oil prices, of the tax system’s orientation towards taxation of high-output fields, and the absence of tax breaks for oilrelated services that could potentially increase the profitability of traditional oil fields (Ponkratov and Pozdnyaev, 2016). The introduction of sanctions seriously undermined the development of offshore projects, mainly those in the Arctic region, most of which catered to the participation of foreign partners, and were frozen under the pressure of sanctions (Mitrova et al., 2018). Furthermore, this factor led to the freezing of almost all projects in Russia to produce shale oil.

    In terms of exports as an indicator of competitiveness, in 2017, the Russian oil-related services ranked second in the world (accounting for 9.9% of global exports), outranked only by Saudi Arabia (11.1%) (Table 1) (BP France, 2018). However, considering the implementation of an active strategy to increase US oil exports (from 2007 to 2017 the increase was 343% for the US and 7% for Russian oil exports) (Table 2) (BP France, 2018;Global Energy & CO2 Status Report, 2019), it can be predicted that Russia’s oilfield services may yield its position in the short term. Iraq is also a strong competitor for Russia under the current conditions. Even though its share in world oil exports is 5%, its growth rate has increased by 124% over the past 20 years. Brazil’s potential in the global energy export market is also increasing, with a 1.7% share and a growth rate of 105% in crude oil exports (Table 2) (BP France, 2018;Knoema, 2019;Business Insider, 2014;Salameh, 2017); WSJ News Graphics, 2016).

    According to official expert assessments, 6.5 million deaths are associated with air pollution yearly. It is expected that premature mortality from air pollution will rise from the current 3 million to 4.5 million by 2040. In the World Energy Outlook (WEO) report (World Energy Outlook 2016, 2016), the direct link between the energy sector, air pollution, and health is emphasized. In this regard, when assessing the competitiveness of oilfield services under current conditions, special attention should be paid to the level of hydrocarbon emissions into the atmosphere during the extraction and processing of crude oil and petroleum products. As of 2017, Russia ranked second among the main competing nations in the oilfield services market in terms of CO2 emissions from hydrocarbon combustion (5.2% of the world level, Table 1) (Global Energy & CO2 Status Report, 2019). Although the level of emissions in the United States is three times higher than in Russia, over the past 11 years the dynamics of pollution in Russia have been positive; the increase amounted to 7% in the period from 2007 to 2017, while in the United States it decreased by 13% (Global Energy & CO2 Status Report, 2019). Saudi Arabia is characterized by a high pollution growth rate. Despite emissions in Russia being three times higher, the increase in CO2 emissions in Saudi Arabia was 70% in the period covered (Table 2) (Global Energy & CO2 Status Report, 2019).

    Brazil, Kuwait, and the United Arab Emirates also have fairly high increases in CO2 emissions (into the atmosphere during oil extraction and the refining process) in the process of increasing its oil production at 30% and -46%, respectively (Table 2) (Global Energy & CO2 Status Report, 2019). Regarding technological efficiency in the development of oilfield services, Russia occupies third place in the world in terms of the number of drilling rigs (8.7% of world volume), oil RT (6.97%), and refining capacities (6.7%), and has only one competitor, the United States, but with a significant gap in terms of indicators. The throughput and RC of Russian oil refineries is 65% lower than it is in the United States, while the number of active drilling rigs in Russia is one-third that of the United States (Table 1) (BP France, 2018). It is noteworthy that China has a high level of technological capability in the oilfield services market, ranking second in the world (after the United States) in terms of the specified indicators. However, since China has a high level of oil consumption and a relatively small amount of proven natural reserves, it is not considered a competitor of the Russian oil-related services in this study. In the face of declining world oil prices (down to USD 54.19 per barrel in 2017), reducing the break-even price of oil production by USD 32 to USD 72 per barrel appears to be a significant competitive advantage for the Russian oil-related services (Table 3).

    Along with Russia, the following countries are also characterized by a decline in the break-even price of oil production as follows: Canada (-USD 5) Brazil (-USD 40), Venezuela (-USD 10), Iran (-USD 48.7), Iraq (-USD 40.2), Saudi Arabia (-USD 21.9), and the United Arab Emirates (-USD 19) (Table 3) (Knoema, 2019;Business Insider, 2014;Salameh, 2017;WSJ News Graphics 2016). However, at the same time, the break-even price of oil production in Russia significantly exceeded the level of most competing nations, except Kuwait, Saudi Arabia, and Venezuela. This is due to the high level of taxation for this industry in Russia (USD 8.44 per barrel), while the level of capital expenditures is below the average of USD 5.1 per barrel and the lowest level of the cost of oil production being USD 2.98 per barrel (Table 3) (Knoema, 2019;Ro, 2014;Snyder, 2017;Business Insider, 2014;Mandel, 2017;Chatsko, 2017;Salameh, 2017;WSJ News Graphics, 2016). Most of the profits of Russian oilfield service companies end up being used to pay taxes and cannot be directed, for example, as investments in tertiary methods to increase oil recovery from the traditional fields.

    Under current conditions, the problem of fixed asset depreciation, particularly concerning the drilling equipment fleet, is the primary negative factor affecting the oilfield services’ competitiveness in Russia. The average age of 60% of drilling equipment is estimated at more than 20 years (with a standard service life of 25 years). Foreign manufacturers supply or provide most of the drilling rigs, spare parts, and maintenance (Mitrova et al., 2018). In general, while analyzing the structure of the Russian oilfield services market, foreign servicing companies’ monopolization of fundamental market segments can be observed. Thus, in light of oil production intensification, about 90% of the market falls on the non-resident companies. In the geophysics market, where software for the interpretation of seismic data is critical, the nonresidents account for about 50%. The horizontal drilling market also strongly depends on foreign equipment, and 25% of the market share is served by Eurasia Drilling Company (Mitrova et al., 2018). As a whole, non-resident companies account for 24% of the Russian oilfield services market. The expansion of cooperation with Asian companies, specifically the use of Chinese technologies and equipment, is the Russian oilfield services market’s response to the introduction of technological sanctions by the United States and the European Union in 2014 to 2017. Meanwhile, the Russian oilfield services companies are only beginning to develop their own technological base and explore import substitution opportunities under the current conditions. The technological primitiveness of the Russian oilfield services companies relative to the main competing countries can be addressed by updating the technological landscape and by scaling innovative projects for oil extraction and geological subsoil exploration. As of 2017, Russia ranked fourth in terms of investment in oilfield services (amounting to more than 2 billion rubles) among the countries studied, but in terms of development, growth rates decreased by 9% in the period from 2007 to 2017, compared to other competing countries, whose growth rates increased by 318% on average. A similar situation was observed in Venezuela, where investments in the oilfield services market decreased by 51% (Biscardini et al., 2018;Gong, 2018). Thus, it is worth noting that despite Russia’s leadership in terms of oil production in the global energy market, the oilfield services market is subject to fierce competition under current conditions. To determine the level of competitiveness of the Russian oilfield services and the prospects for its development, an integrated assessment of its competitive advantages was carried out in the framework of this study.

    Given the specifics and differences in dimensions of the oilfield service market’s competitiveness indicators, the analysis was supplemented with quantitative estimates of the competitiveness quality of countries, territories, and regions. These estimates were based on comparative expert assessments of countries participating in the oilfield service market, using the complete procedure by Saaty. To implement this approach, a pairwise comparison matrix was constructed for each of the countries under study and for each competitiveness factor of a higher level. These values represent weighting factors of the relative significance of indicators when building the integrated index of the oilfield service market’s competitiveness.

    Each expert filled in a pairwise comparison matrix for each of the types of competitiveness factors: economic, technological, and the external environment. A total of 176 matrices were formed. We present the average values of these matrices in Tables 4 to 7. Based on the results of calculating the pairwise comparison matrix (Table 4), the most significant economic indicator, according to experts, is the indicator of investment growth rates (I). Its priority rating is 30%. Significant priority is also given to the indicators SC (at -22%), CT (at -15%), and PC (at -14%). The economic group’s other indicators with their corresponding coefficients of significance are as follows: AT (at 8%), BP (at 5%), export of crude oil (EO, at 4%), and consumption (OC, at 2%). From the TD factor (Table 5), the priority of indicators was distributed approximately evenly as follows: RT (at 37%), RC (at 32%), and AR by country (at 31%). Among environmental indicators (Table 6), TR has the greatest impact on the competitiveness of oilfield services at 57%, while the significance of EM is at 43%. In assessing the factors of competitiveness of oilfield services (Table 7), the most significant is the EF at 59%. For the modern TD factor the significance is 25%, and for the FE the significance is 16%.

    The indicators of I, SC, BP, EO, RT, RC, AR by country, and TR are considered stimulants in assessing the oilfield service market’s competitiveness (since it can be inferred that their increase improves the oilfield service market’s competitiveness). Therefore, when calculating the integrated index, we used positive values of their weighting factors. An increase in CT, PC, AT, consumption (OC), and EM leads to a decrease in the competitive advantage of the oilfield service market; therefore, when calculating the IC, we used negative values of their weighting factors. The higher the IC value, the higher is the competitive position of the country in the rankings. To assess the performance and forecast the competitiveness of oilfield services, as well as to identify prospects of the Russian Federation, we carried out a dynamic assessment of the competitiveness indicators of the oilfield service. For this purpose, we used the growth rates of the respective indicators for the period from 2007 to 2017. This allowed identification of prospective competitiveness assuming maintenance of current momentum over the study period. To calculate the integrated performance indicator (T(IС)), non-standardized growth rate values were taken, since all of them are index values and have the same dimension.

    3. RESULTS

    To form a model of the integrated index based on 44 experts’ estimates, pairwise comparison matrices were obtained for each indicator group of economic, environmental, and TD factors (Tables 4-7). For all the pairwise comparison matrices of indicators and factors of the oilfield service market’s competitiveness, the calculated HR was in the range of 0 to 0.03, which is less than the limit value of 0.1. This indicator of significance substantiates the consistency of opinions. The calculated concordance coefficients for the factors and indicators are at a level not lower than 0.2, which indicates the consistency of expert opinions in determining the weight of factors and indicators for assessing the oilfield service market’s competitiveness, as well as the representativeness of the experts’ assessment results.

    Based on the hierarchy method, the significance of indicators for the formation of an integrated model of the oilfield service market’s competitiveness, ranked by the degree of their influence (weight factor) on the integral indicator (Table 8), is determined as follows.

    The ranking of competitiveness indicators supports the conclusion that under current conditions of the global oilfield services market, competitive advantages are predetermined primarily by EFs (weight factor for the hierarchy level is 0.59). The top predictive indicators of EFs (with their corresponding weight factors) include the volume of investments (0.3), the price of oil on the world energy market (0.22), and the taxation level of oil production (0.15). The next significant factor influencing the competitiveness of oilfield services is the TD factor (0.25). Oil RT and RC have significant weights (0.37 and 0.32, respectively). Last in significance is the FE (0.16), with the natural indicator, proven oil reserves, being the most significant (0.57). From the results, it can be argued that the proven reserves of oil are characterized largely by homeostasis, that is, by the absence of an intensive dynamics of development relative to the studied parameters. Besides, when considering the significant excess of proven oil reserves over its production, this indicator can be taken as a necessary condition for the development of the oil service market.

    From the calculations, a model of the integral index of the oilfield services market’s competitiveness is obtained using additive convolution based on the coefficients of the significance of the indicator of each competitiveness factor as of 2017:

    I K = 0.18 × I + 0.13 × S C 0.09 × C T 0.08 × P C 0.05 × A T + 0.03 × B P + 0.02 × E O 0.01 × O C + 0.09 × R T + 0.08 × R C + 0.08 × A R + 0.09 × T R 0.07 × E M
    (7)

    A model of integrated competitiveness index has been developed based on the growth rates of each competitiveness factor from 2007 to 2017 (T(IC)) to assess the competitiveness of the oilfield services market (considering the intensity of its development), as well as to identify the prospects of the Russian Federation.

    T ( I K ) = 0.18 × T ( l ) + 0.13 × T ( S C ) 0.09 × T ( C T ) 0.08 × T ( P C ) 0.05 × T ( A T ) + 0.03 + T ( B P ) + 0.02 × T ( E O ) 0.01 × T ( O C ) + 0.09 × T ( R T ) + 0.08 × T ( R C ) + 0.08 × T ( A R ) + 0.09 × T ( T R ) 0.07 × T ( E M )
    (8)

    The rating of countries on the integral index value of the oilfield services market’s competitiveness as of 2017 and the intensity of its development for the period from 2007 to 2017 is presented in Figure 1 below.

    The results of the study indicate that the oilfield services market in Russia as of 2017 ranked eighth (with an integral indicator value of 0.12) among the countries studied. This value is significantly less than that of the United States, ranking first with a significant margin at 1.91 (Figure 1). Canada and Saudi Arabia are ranked second and third with integral indicator values of 0.33 and 0.31, respectively. Currently, the oil service companies in Russia are also competitively inferior to such countries as Iran (0.25) and Brazil (0.24), United Arab Emirates (0.18), and Kuwait (0.15). Iraq (0.11) and Venezuela (0.01) are in the last place of the ranking. Russia is ahead of these two countries. With regard to the ranking based on the intensity of the oil service market’s development, the Russian Federation takes the second last place among the competing countries (0.38), with the top competitors being Kuwait (3.70), the United Arab Emirates (0.99), Iraq (0.83), Iran (0.81), and Saudi Arabia (0.78). The United States, the country with the most competitive oilfield services market, ranks sixth (0.62). Brazil (0.54) and Venezuela (0.52) are also ahead of Russia in terms of oil service development. Canada occupies the last place (0.3).

    4. DISCUSSION

    The models developed for integral assessment of competitiveness can be used to determine the competitiveness rating of leading competitor countries in the global energy market. In current literature, ample research is devoted to the economic efficiency of oilservice companies (Orazalin and Mahmood, 2018), ways to increase their productivity based on spatial models, and strategic planning (Bowker et al., 1992). However, these studies only considered competitive advantages relating to EFs, whereas our models took into consideration the cumulative effects of economic, technological, and FEs of the oilfield service companies’ operations. Moreover, these models appear to be universal, as they have accounted for the developmental trends and priorities of the global energy market. Thus, these models can be used to determine the rating of any sample of countries with a functioning oilfield services market. These scientific results serve as essential additions to the works of scientists who examined the global spatial dynamics of the oil market (Kryukov and Tokarev, 2018;Mussabekov et al., 2018;Al-Khalifah, 2018;Tambunan, 2018).

    Our integrated assessment model is based on the hierarchical factors of competitiveness. It enables determining the detrimental and complementary indicators of the development of non-service-related industries of the countries studied. This approach allows for a comparison of a country’s competitive position (versus other competitor countries) under the current conditions of the global energy market’s development. This study reveals that the determining factors of competitiveness are EFs, primarily the level of investment in the industry, which in turn determines the factor of technological support for the oilfield services market.

    The hierarchical structure of competitiveness factors and the integrated assessment model allowed us to identify the main weak links in the development of the Russian oilfield services market relative to key competitor countries in the global energy market. This in turn makes it possible to justify the priorities for improving its competitiveness in the near future. The relatively lower level of competitiveness of the Russian oilfield services market (based on the results of the study) is due to the insufficient investment level (which in turn negatively affects the growth rate of production) and inadequate geological exploration in the oil industry. The lack of investment, along with sanctions that limit access to necessary equipment caused Russian oilfield services companies to fall behind their foreign counterparts on the use of innovative technologies. Russian oilfield services companies are pushed into the field of low-margin activities, and their contracts are concluded on unfavorable terms, impeding their development. A low level of manufacturability predetermines low margins, which in turn discourages investments that could potentially improve the technological level of Russian companies. This leads to a further increase in the technological gap and a decrease in their profitability. As a result, some enterprises leave the market; others form partnerships with oil-producing companies, becoming subcontractors for foreign companies.

    Despite the significance of the results, there was no evaluation made on the estimated level of competitiveness of the countries studied. Reliably forecasting trends requires the forecast of indicators such as the level of oil prices and the TD of oilfield services. Moreover, the political influence of the United States and the European Union resulting in the sanctions against Russia, together with the high level of oil price volatility in the global energy market, make it difficult to reliable forecast the competitiveness of the oilfield services market.

    5. CONCLUSION

    The following conclusions are drawn from the results of this study. The outlined system of indicators for assessing the competitiveness of the oilfield services market under current conditions is based on a consolidated consideration of the economic, technological, and FEs affecting the oilfield services industry. We determined that the most critical factor in analyzing the competitive advantage of a country is the EF (with weighting factor at 0.59), consisting of the significant indicators of investment in the industry, the oil price level in the global energy market, and the industry’s taxation level. Our integrated models for assessing the oilfield services market’s competitiveness (considering its current state and pace of development for the period from 2007 to 2017) determined that in 2017, the Russian oilfield services market ranked eighth among its main competitors, and ranked ninth in terms of development rates. The main detrimental factors hindering the competitiveness of the Russian oil services market include the decline in investment growth, a high level of industry taxation, technological backwardness, and a high proportion of foreign providers in the industry.

    The presented approach used in this study may be considered universal considering that the models used accounted for development trends and priorities in the global energy market such that it can be used to determine the ranking of any sample of countries.

    Conflict of Interest:

    The authors declare that they have no conflict of interest.

    Figure

    IEMS-18-3-563_F1.gif

    Ratings of the oil service markets based on the values of the integral competitiveness index.

    Table

    The market share of the main global competitors in oilfield services’ structural indicators as of 2017 (in %)

    Dynamic characteristics of the oilfield services market’s development for the major global competitors over 2007- 2017 (in %)

    Cost performance of oil production as of 2017

    Pairwise comparison matrix of the EF

    Pairwise comparison matrix of the TD factor

    Pairwise comparison matrix of the FE

    Pairwise comparison matrix of the oilfield service market’s competitiveness factors

    Estimated weights of competitiveness parameters at appropriate hierarchy levels

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