Demand for products and services related to producing shale gas and tight oil in the U.S. is forecast to rise 3.5 percent annually to $98 billion in 2017. While shale gas was the primary focus, attention has shifted to liquid hydrocarbon development in recent years. Liquid hydrocarbon production will remain the focus until natural gas prices increase enough to make shale gas production economical again.
A combination of improved technologies—especially horizontal drilling and high-volume hydraulic fracturing—and high oil and gas prices helped make the development of shale gas and tight oil economically feasible and played a significant role in the industry’s rapid expansion between 2007 and 2012. Much of this demand was in nontraditional oil and gas areas, resulting in insufficient infrastructure and product and service shortages. In new plays, lease retention efforts increased drilling rates while a shift to liquids-rich plays—after natural gas prices plummeted—only exacerbated shortages. The prices of products—such as guar gum gelling agents, proppants and completion services—rose. Process optimization efforts and maximized production are the focus of operators. With drilling and completion at an already high level, growth in the number of wells drilled and completed will no longer be the driving force that it was during the last decade. Overall, the level of activity should remain strong because of sustained high oil prices and a recovery in natural gas prices. However, drilling and completion expenditures will slow, and production and workover services and related equipment and fluids will accelerate. Emerging plays—such as the Tuscaloosa, Utica, and Wolfcamp—will provide strong upward momentum.
Because of sustained high levels of activity, growth for all products will be favorable. The fastest gains are expected for products that help in optimization efforts or are used in maximizing the production from existing wells. In addition, operators continue to focus on the environment, which will spur growth in certain products—such as closed-loop drilling systems and water-based drilling muds. In 2012, the Permian Basin was the largest market for shale products and services, with sales of $17 billion. Through 2017, the Permian Basin will remain the largest play, but sales in the Eagle Ford Shale are expected to advance at the fastest pace of any of the major plays. Moving forward, the greatest opportunity for sales gains will be in developing areas—such as the Wolfcamp, Niobrara and Utica plays.