Freedonia: US demand growth for oil field chemicals to exceed 4%/year

Demand for oil field chemicals in the US will reach $10.7 billion in 2013, according to a new study by the Freedonia Group Inc., Cleveland, Ohio.

By OGJ editors
HOUSTON, Sept. 24
-- Demand for oil field chemicals in the US will reach $10.7 billion in 2013, according to a new study by the Freedonia Group Inc., Cleveland, Ohio. Although industry’s growth trajectory during 2009-13 will be uneven, this increase represents an average 4.4%/year growth.

The end of the forecast period will see a pronounced slump in demand short term, followed by a strong recovery. Oil and gas pricing, says the study, will be mainly responsible for the decline and rebound.

Prices
After hitting all-time highs midyear, prices dropped precipitously in second-half 2008, as the global economic downturn began to affect demand. Numbers of active drilling rigs—which had reached levels not seen for decades—declined dramatically as a result, dipping to fewer than 900 earlier this year from a high of more than 2,000 in mid-2008.

Such declines hit oil field chemicals hard, says the Freedonia Group study, particularly the natural gas segment. Oil prices had begun to rebound by mid-2009, however, and this upward trend will likely continue as the world’s economies recover, it says.

The rig count is projected to increase to nearly 1,600 in 2013, aided not only by higher oil and gas prices, but also by development of high-profile new fields such as the Marcellus shale in the eastern US.

Early in the forecast period, says the study, drilling fluids will suffer sharp overall market-value declines before rallying later. Despite poor current conditions, the overall level of oilfield activity—and, as a result, demand for oil field chemicals and their raw materials—will recover. Well-completion numbers will grow over 2009-13, boosting demand for completion chemicals.

EOR’s role
Such stimulation techniques as hydraulic fracturing and acidizing will continue to grow, as “more wells are fractured or otherwise subjected to stimulation methods upon initial completion.” Enhanced oil recovery techniques will remain attractive options, says the study, as prices return closer to levels seen in recent years, boosting demand for gases and other products used in these operations.

Although some components of the upstream oil and gas industry are undeniably volatile, others are comparatively stable, the study finds. Despite “dramatic changes in rig counts and oil prices,” US oil and gas production levels are “quite consistent.” Changes in production from one year to the next are typically modest, allowing for stable market conditions for such materials as production-related chemicals, it says.

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