U.S. demand for oil and gas drilling products and services is forecast to increase to $71 billion in 2019, reflecting average annual gains of 3 percent. While the low oil price environment that began in late 2014 will lead to sharp declines in drilling products and services demand in 2015, a recovery in drilling activity due to improving oil prices should allow demand to exceed 2014 levels within the next few years. Advances will be further supported by increasing adoption of higher value products and services, especially those used in horizontal drilling. However, greater growth will be limited by efficiency gains that will allow wells to be drilled more quickly, restraining growth in spending on contract drilling and other services tied to the number of days needed to drill a well.
Oil prices are expected to recover in coming years from their severe declines, which will be the primary force supporting overall gains in drilling activity through 2019. Additionally, higher domestic natural gas prices and an emerging liquefied natural gas (LNG) export industry will support drilling for natural gas.
Growth in both drilling activity and demand for drilling products and services will be broad-based across U.S. states and regions, with the Gulf of Mexico, states such as Ohio and Oklahoma with promising underdeveloped unconventional plays, and natural gas producing states seeing the fastest increases.
Drilling fluids and tubular goods will see the fastest advances, driven both by overall growth in wells and footage drilled annually and by increasing market penetration for premium products in both segments. High performance water-based drilling fluids will continue to increase their share of the market in unconventional drilling where oil-based fluids have been traditionally chosen. Similarly, increased development of deeper and more challenging drilling environments—including deepwater and tight oil and shale gas formations—will drive adoption of higher value casing and drill pipe.
There will be additional growth opportunities in some segments of other drilling product and service markets. These are expected to include higher value rig components and downhole equipment necessary for more effective horizontal drilling, such as top drives, mud pumps and rotary steerable systems, which will also experience healthy increases through 2019.