Sam Fletcher
OGJ Senior Writer
HOUSTON, Apr. 22 -- Coiled tubing is living up to earlier predictions as one of the fastest-growing oil field technologies, with the global fleet of coiled tubing units having more than doubled over the last 10 years, officials at Raymond James & Associates Inc. reported Monday.
Demand for coiled tubing units has ballooned at an annual growth rate of 8% while the size of the US land drilling rig fleet has shrunk by 10% during the same 10-year period, said J. Marshall Adkins, a Raymond James analyst.
The Canadian coiled tubing market has expanded even more rapidly, more than doubling since 1997 with an annual growth rate of 25%. That's because Canada historically is "the leading incubator of new oil field technologies," Adkins said in a report to investors.
"The combination of western Canadian entrepreneurial spirit with a wide range of reservoir types has created the perfect 'proving ground' for new oil field technologies. Once 'proven' in Canada, these emerging technologies often drift southward and overseas as they become more accepted mainstream technologies," he said.
"If we assume that Canadian success is a precursor to global success, then look for coiled tubing growth of the past 10 years to continue over the next 10 years," said Adkins.
The phenomenal growth of the coiled tubing business "is founded on sound engineering and economic principles," Adkins said. "Coiled tubing is gaining market share because it allows operators to reduce costs and reduce formation damage for many types of completion, workover, and drilling applications."
Conventional applications such as well cleanouts and acidizing accounted for 77% of all coiled tubing revenues in 2001, according to industry figures. However, Adkins said, "Drilling and fracturing applications now make up nearly 15% of coiled tubing revenues. Ten years ago, these applications were negligible revenue contributors."
Dodging downturns
Like others, Adkins noted that coiled tubing services managed to avoid the cyclical downturns of other oil field service markets.
At a coiled tubing roundtable and exhibition in Houston more than a year ago, Willem van Adrichem, business development manager for coiled tubing with Schlumberger Ltd.'s well intervention services, said that, while drilling drops off during periods of low prices for oil and gas, demand increases for less-expensive well servicing operations via coiled tubing to help increase production and cash flow from existing wells (OGJ Online, March 7, 2001).
Van Adrichem predicted at that time that use of coiled tubing in well servicing, workovers, and even drilling operations would increase 20-25% that year, "back to 1997-98 levels." While the use of coiled tubing in drilling operations had not yet increased to the point that some earlier had expected, he said, it was still on the rise.
Coiled tubing is a continuous string of small diameter pipe, usually steel, that is flexible enough to be coiled onto a large reel, yet strong enough to withstand extreme pressure loadings. It usually ranges from 3/4 to 4 1/2-in. in diameter.
Because it's nonjointed, coiled tubing is capable of being run at faster speeds into or out of a well. It also provides workers with the ability to circulate fluid through the tubing while it is being inserted into or withdrawn from a well. That in turns permits work on a pressurized well without having to kill the well or risk damage to the reservoir.
Coiled tubing services now amounts to about a $1 billion annual market, said Raymond James officials. The manufacture of coiled tubing units is a $300 million annual market, while the market for coiled tubing pipe suppliers runs about $90 million each year.
"Moving forward, we expect this to continue to be one of the higher growth technologies in the oil field," Adkins said.
The three major pumping services commanded more than 60% of the coiled tubing service market in 2001. Industry figures give Schlumberger Ltd. 29% of that market, to 21% for BJ Services Co., Houston, and 11% for Halliburton Co., Dallas. A fourth firm, Superior Energy Services Inc., Harvey, La., had 7% of last year's revenues but is the largest provider of coiled tubing services in the Gulf of Mexico, Adkins said.
Varco International Inc. and Stewart & Stevenson Services Inc., both in Houston, have the dominant positions in sales of coiled tubing units. Precision Tube Technology Inc., owned by Maverick Tube Corp. of St. Louis; and Quality Tubing Inc., owned by Varco, roughly split the coiled tubing pipe market, said Adkins.
Contact Sam Fletcher at [email protected]
