With the mining boom slowing, exploration drillers face an uncertain future.
Melbourne, Australia (PRWEB) June 18, 2013
In the five years through 2012-13, the Oil and Mineral Exploration Drilling industry has followed a volatile growth path. The industry provides services for mining companies engaged in greenfield oil and mineral exploration. This is the riskiest area of the Mining division, where companies are engaged in looking for new and economically viable deposits of resources. According to IBISWorld industry analyst Caroline Finch, “expenditure on greenfield exploration fluctuates significantly year on year in line with small miners' ability to access capital. When commodity prices fall, or sentiment around the Mining division declines, demand for greenfield exploration services can dry up suddenly”. In 2008-09 and 2012-13, drops in demand have resulted in contractions in industry revenue.
In the past 10 years, the Oil and Mineral Exploration Drilling industry has benefited from a prolonged boom in capital expenditure in the Mining division. The first phase of the boom took the form of increasing commodity prices as growth accelerated in developing countries such as China and India. Mining companies ramped up greenfield exploration spending in absolute terms to develop new projects to meet demand for commodities. The influx of funding for exploration was highlighted in 2007-08, when industry revenue shot up by 90.6%. The height of expenditure on industry services was in 2010-11, when revenue peaked. Over the five years through 2012-13, the industry has declined at a compound annual rate of 4.9%. This decline is expected to continue in 2012-13, with industry revenue forecast to decrease 21.2% to $697.2 million.
The outlook for the next five years is downbeat. “A number of structural challenges are expected to become more pressing as the boom in investment in the Mining division winds down,” says Finch. Over the past 10 years, the rate of new resource discoveries in Australia has slowed. If the pipeline of new projects continues to decline, the industry's scope will be limited. Over the next five years, industry services are likely to be employed in the assessment of the economic viability of known greenfield locations rather than in the search for new locations. Industry participation is forecast to contract due to these pressures.
In 2012-13, industry concentration is at a low to medium level. The industry’s four largest players Boart Longyear Limited, Ausdrill Limited, Layne Christensen Australia Pty Ltd and Barholdco Pty Limited.
For more information, visit IBISWorld’s Oil and Mineral Exploration Drilling report in Australia industry page.
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IBISWorld Industry Report Key Topics
This industry includes firms primarily engaged in test drilling, boring and core sampling for exploratory purposes in mining, oil and gas operations. Exploration drilling companies are contracted by mining companies to carry out exploratory drilling for greenfield (new) projects. However, many companies also supply drilling services for brownfield (established) projects, which is beyond the scope of this report.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Basis of Competition
Barriers to Entry
Technology & Systems
Regulation & Policy
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