* Middle East, cost cuts help in first half of 2015
* Second half will be tougher due to weak oil price
* Customers' cost cuts could accelerate consolidation
By Karolin Schaps and Abhiram Nandakumar
LONDON/BANGALORE, Aug 27 (Reuters) - Oil and gas servicecompanies have fared better than expected in the first half ofthe year despite a weak market, thanks to deep-pocketed MiddleEastern customers and stringent cost cuts.
However, they warn the second half of the year will likelybe much harder as oil companies cut spending even further aftera near 30 percent fall in oil prices since the start of July.Prices have more than halved since peaks hit in summer lastyear.
Norway's Seadrill, which expects to make $500million of cash savings this year, and Britain's Hunting beat analysts' expectations, as did rivals such as Technip, Subsea 7 or Wood Group.
Many oil services companies - which do everything fromsurveying to drilling wells - relied on business in the MiddleEast to counter balance a drop in activity in costly areas suchas the North Sea or the Gulf of Mexico.
Oil operations in the Middle East are managed by cash-richgovernments which in turn rely on income from the sector. Oilproduction costs in the region are some of the lowest in theworld.
"The Middle East, which fortunately is where wegeographically are located, is probably one of the leastaffected areas," said James Moffat, chief executive ofDubai-based oil and gas equipment maker Lamprell.
Amec Foster Wheeler, created last year by Amec's $3billion takeover of Foster Wheeler, saw revenue in its divisionincluding the Middle East grow 6 percent in the first half.
Wood Group made $40 million worth of cost cuts in thefirst half, especially through contractor rate reductions, whilePetrofac saved $80 million over the same period.
But with oil companies already drastically cutting back oninvestments - around $200 billion worth of projects are on holdor scrapped - and likely to cut further due to a persistentcrude oil glut and weak prices, the overall outlook is bleak.
The FTSE All Share Oil Equipment and Services index has fallen 19 percent in the last three months.
"While everyone is doing their best to cope, it still makesfor uncomfortable viewing," analysts at Investec bank said. "A'lower-for-longer' scenario is beginning to be baked into marketexpectations."
Echoing peers, Scotland-based Weir Group said itexpects its second-half margins to be slightly below first-halflevels, reflecting the full impact of pricing pressure.
Customers' cost cuts could also accelerate consolidation inthe services sector as companies scramble to offer a broaderrange of products to offset lower demand for traditionalofferings.
Schlumberger Ltd, the world's largest oilfieldservices firm, said on Wednesday it had made a $14.8 billion bidfor equipment maker Cameron International.
In November last year, Halliburton and Baker Hughes,Schlumberger's rivals, agreed to a $35 billion tie-up.
Some are also eyeing opportunities in Iran, which reached adeal in July to curb its nuclear programme in exchange for theeventual removal of sanctions.
"We have a good understanding with Iran about what theywould like to do first. The day the sanctions are lifted that'swhen we can start," said Samir Brikho, chief executive of AmecFoster Wheeler, which has worked in Iran. (Reporting by Karolin Schaps; editing by Susan Thomas)
