Growth in unconventional and offshore fields will help increase global demand.
by Mike Richardson, The Freedonia Group, Inc.
March 28, 2013

World demand for oilfield chemicals is expected to increase 8.9 percent per year to $28 billion in 2016 as high oil prices and increasing demand for energy spur new development. This growth is especially strong in unconventional and offshore fields. Nearly all types of chemicals will post healthy advances, but the best opportunities will be in drilling fluids and stimulation chemicals.

Horizontal drilling and hydraulic fracturing used to develop shale plays in the U.S. and Canada have been a driving force in the sales of fracturing fluids and high-tech drilling fluids. While shale drilling is more of a regional phenomenon, the development of offshore fields is increasing in other areas. This will drive demand for all types of chemicals, because costs for offshore wells are much higher than onshore. These and other factors will drive demand—especially in Brazil, Africa, and Russia, China, India, and several other Asian countries. Also, while slowing, growth will remain strong in North America.

U.S. demand for oilfield chemicals is projected to increase 8.3 percent per year to nearly $12.5 billion in 2016. Strong growth is expected through the forecast period because of increases in drilling activity, particularly in shale and other tight formations, but activity in traditional oil producing regions will support gains.

The U.S. is the largest market for oilfield chemicals by a wide margin. It has a majority of the world’s producing oil and gas wells and generally accounts for 40 percent or more of the world’s drilling activity, despite being responsible for only about 13 percent of global production. With that said, the U.S.’s reliance on imported oil and, to a lesser extent, natural gas often obscures that the U.S. was the world leader in natural gas production and the third largest crude oil producer in 2011.

Rig activity and drilling levels in the U.S. are expected to be strong through 2016, which will sustain demand for drilling fluids and other oilfield chemicals. Value gains for drilling fluids have been boosted by a shift in product mix toward more expensive fluids that are necessary in shale gas development and other challenging production environments.

Well completion numbers are expected to increase, and stimulation techniques such as hydraulic fracturing and acidizing will continue to grow, although not at the pace seen recently. Enhanced oil recovery will be an attractive option because prices remain at levels to justify the extra costs. Despite dramatic changes in rig counts and oil prices, U.S. oil and gas production levels are consistent. This allows for stable market conditions for production-related chemicals.