The global market for oil field specialty chemicals reached nearly $16 billion in 2010 with the US and Canada accounting for 52%, which an IHS Chemical market study attributed to increasing oil and natural gas drilling activity in shale plays.
The IHS Chemical 2012 Oil Field Chemicals Report (formerly from SRI Consulting), forecast that world demand for oil field chemicals will rise at an average rate of 3.5% during the next 5 years with sales expected to increase to almost $19 billion by 2015.
Regarding 2010 demand, Latin America was second at nearly $1.8 billion of sales with much of that demand coming from Brazil.
Despite global economic uncertainty, the oil field chemical market grew during the past 4 years, the report said.
“Due to favorable oil and gas prices and advances in technology, there has been a significant increase in hydraulic fracturing particularly in North America,” said Ray Will, principal analyst at IHS Chemical and coauthor of the report. Other authors were Peter Allison and Vivien Yang.
“Naturally, this increase in drilling and production has resulted in higher volumes of drilling, stimulation, and cementing chemicals,” Will said. “In turn, increased supplies of natural gas have caused price declines, making gas more competitive both for electricity production, and as a raw material for chemicals production here in the US.”
Researchers said health, safety, and environmental issues influence the use of field chemicals. The area where environmental regulations have had their greatest impact is offshore, with North America and western Europe leading the way with a formal regulatory framework, IHS said.
Recently, government officials have acknowledged public concerns over fracing, and new regulations are emerging. This includes calls for companies to publicly disclose the chemicals used in frac fluids.
“In part, the requirement for disclosure will tend to favor more environmentally friendly chemicals,” Will said “As environmental regulations become more stringent, chemical manufacturers have an opportunity to develop more environmentally friendly products.”
Regional demand trends
While rise in demand for oil field chemicals has been significant in Latin America, the report noted, political instability has limited activity in Venezuela.
Africa also has experienced significant growth across the continent for oil field chemicals, which is expected to continue for the next 5 years. Political instability is a threat to activity, particularly in Libya and Sudan, IHS said.
Iraq is believed to have the greatest growth potential for the oil field chemicals sector during the next 4 years because it seeks to rejuvenate oil fields and explore for new reserves.
“Many of Iraq’s new fields present significant technological challenges such as drilling in deepwater or working in high-temperature, high-pressure, and corrosive conditions,” said Will. “These wells will require larger volumes of more expensive chemicals than most conventional wells, so the volumes of chemicals used, and the value of those chemicals, will go up.”
Since most of Europe’s oil field production is the North Sea, aging wells have been accompanied by corrosion and scale. In addition, European environmental concerns have led to restrictions or outright bans on many chemicals formerly used. Alternative products or techniques generally are more expensive.
The Asia-Pacific market is expected to show strong growth in the drilling, cementing, and stimulation markets, while production chemicals will grow more slowly due to much of the new development coming from shale gas fields.
One of the most significant challenges Will sees for these oil field chemical providers going forward is quality and consistency of product.
“A major supplier of oil field chemicals must provide the international oil companies with products and services of high-quality on a consistent basis, and increasingly, it must do so on a worldwide basis,” he said.
Typically, service companies have 400 to 600 products, many of which have evolved over time as specialized formulations for a particular application or customer, he said.