The global market for oilfield specialty chemicals at the service company level rose to $25bn in 2014, up from nearly $16bn in 2010, but significant declines in oil price have dampened the demand outlook to 2020, according to a new global market study from IHS.
The growth was driven in large part by the rapid expansion of shale oil and gas drilling and production in North America.
Shale gas and other hydrocarbons, trapped within massive shale formations, has become an important source of natural gas and oil in the US since the start of the 21st century and interest has spread to potential gas shales across the rest of the world, gasworld understands.
According to the report from IHS, however, oil price declines are expected to slow oil field activity on a short-term basis, driving reduced demands for drilling, stimulation and completion chemicals.
This concurs with the recent news that oil prices may yet fall further; a report from the International Energy Agency (IEA) earlier this month suggests world oil demand growth may have peaked in first quarter (2015) and will continue to ease throughout 2015/16, with the market in significant over-supply and unable to absorb the strong volumes that continue to be published. This will potentially see prices fall further over the next year.
Oilfield chemicals typically fall under three categories: drilling fluids, cementing and stimulation, and oil production.
Stimulation chemicals encourage the flow of crude oil to the well – two commonly used stimulation techniques are acidising and fracturing – while oil production chemicals are used at all stages from oil production at the wellbore to delivery of crude to the refinery.
The ultimate goal of well stimulation is to economically achieve maximum productivity at the lowest unit cost, and there is thought to be significant room for improvement in terms of productivity and cost reduction by using nitrogen and carbon dioxide to overcome many of the challenges associated with traditional water-based hydraulic fracturing fluids. These include reducing the high volumes of increasingly expensive water, chemicals, and even proppant.
The IHS Chemical 2015 Specialty Chemicals Update Report – Oil Field Chemicals projects sales of oilfield chemicals will grow annually at a rate of approximately 4% to more than $30bn in 2019, based on volume growth and price changes in effect at the end of 2014. Growth in the last five years has been unprecedented, it notes. However, this is expected to slow in the year ahead, as Stefan Schlag, Director of Inorganic Chemicals and Mineral and Mining Products at HIS Chemical, explained, “During the past five years, we saw unprecedented market growth for oil field chemicals, which has been driven by the rapid development and production of shale oil and gas resources in North America.”
“We expect demand for these chemicals to continue to grow, but at a much slower rate than in the previous period.”
“IHS doesn’t expect lower oil prices to have a major impact on sales of chemicals to the production segment, but we expect lower prices will likely have more of an impact on sales of chemicals for drilling, stimulation and completion activities,” he added. “The primary reason for this is that actual oil production volumes are expected to continue to increase – in line with expected continued growth of world crude oil demand. However, lower crude oil prices have slowed exploration drilling and the drilling of new boreholes, especially for more complex unconventional and deepwater oil projects. These projects typically have higher production costs, and are in many cases, not economic at current oil prices.”
Linde Gas recently authored a feature for gasworld on the use of ‘energised solutions’ involving nitrogen and carbon dioxide in oilfield applications, noting that when injected into gas and oil wells the solutions are able to enhance hydrocarbon production rates and yield improved long-term economic recovery over the life of the well.
Fracturing treatments energised with carbon dioxide or nitrogen are increasingly being recognised for maximising long term well productivity and minimising environmental damage with smaller well-site footprints as they do not require large water retention ponds.
Linde Gas was the first company to supply carbon dioxide directly to the wellhead for hydraulic fracturing and has significant experience in this business, and explained that recent studies indicate – from an economic perspective – that hydraulic fracturing with solutions energised by carbon dioxide or nitrogen can achieve significantly more hydrocarbon recovery than non-energised approaches.