Oil Field Chemicals

Probably the most significant change in the oil field chemicals market over the last four years has been the rapid exploitation of shale gas and oil reserves in North America. Recent advances in both horizontal drilling and hydraulic fracturing have meant that reserves that were previously uneconomic to develop have been rapidly exploited. A number of factors contributed to the rapid exploitation of these reserves—e.g., rig and equipment availability, availability of water for fracturing, and mineral rights licensing/exploitation in the United States.

There has been a real and significant increase in the activity level across all the oil field chemical sectors—drilling fluids, cementing and stimulation (including fracturing), and oil production chemicals. Increases in well stimulation have been significantly impacted by the growth in shale oil and gas developments in North America. The increase in shale gas and oil activity has also resulted in higher volumes of drilling and cementing chemicals.

The following pie chart shows world consumption of oil field chemicals:

This market estimate includes sales to operators of both oil and gas fields, but excludes downstream services for pipelines and refineries. It includes estimates for the countries of the former USSR and China that are based on more fragmentary information. Although the market has grown over the previous four years, the global economic crisis that began in late 2008 has had a significant impact. Within the overall growth there has been significant variation both regionally and by product segment coupled with raw material price inflation and exchange rate effects. Consumption of oil field chemicals is expected to grow globally at a 3.5% average annual rate over 2010–2015.

A major supplier of oil field chemical services must provide the international oil companies with products and services of high quality on a consistent basis. Increasingly, it must do so on a worldwide basis. Services include providing high-tech testing equipment, highly effective formulations tailored to specific conditions, and rapid response when required to address any problems encountered by the field operator. Oil and gas producers will continue to look for outsourcing opportunities to reduce costs and will therefore continue to depend on technology and products provided by the service sector. The leading international oil field service companies have high-end products and service and more credibility with customers, particularly with the major oil companies and large independents that seek the highest level of technical expertise for increasingly complex development projects. Competitive factors in the field of integrated oil field service provision include global presence; product and service quality; availability and reliability; health, safety and environmental standards; technical proficiency; and price.

The traditional product sectors that use chemicals are as follows:

• Drilling fluids. Chemical systems are used to lubricate the drill bit, to control formation pressure and to remove formation cuttings. The fluids may be water based or oil based, depending on the geological characteristics of the reservoir and the phase of drilling. Workover and completion fluids are used when operating in producing formations.
• Cementing and stimulation. Chemicals are used to cement steel pipes or casing to the sides of the borehole and to encourage the flow of crude oil to the well (stimulation). Two commonly used stimulation techniques are acidizing and fracturing. Oil and natural gas stimulation differ greatly in that natural gas wells require stimulation roughly twice as often as oil wells.
• Oil production chemicals. Products are used at all stages, from oil production at the well bore to the delivery of crude to the refinery. Products include corrosion and scale inhibitors, biocides and demulsifiers. Treatment of oil produced by enhanced recovery techniques is also considered part of this category.

The usage of most production chemicals is directly related to the volume of associated water produced and is thus linked to the age of the field.

About half of the worldwide market continues to be accounted for by the highly mature fields in North America. A very high percentage of the chemical use in this region is associated with gas fields. Increased production of tar sands in North America has resulted in increases in the volume of chemicals used.

Most of Western Europe's oil field production is in the North Sea, where the aging of wells has been accompanied by problems of corrosion and scale. In addition, European environmental concerns have led to restrictions or outright bans on many chemicals formerly employed.

In the Middle East, the country with the greatest growth potential over the next four years is Iraq, although political factors will continue to have a major impact. Based on the significant investment taking place in this country to both rejuvenate old fields and explore for new reserves, Iraq will become an increasingly important market for oil field chemicals.

The Asia Pacific market will show strong growth in the drilling, cementing and stimulation markets. Production chemicals will have a slower growth rate because much new development has involved gas fields. China remains a relatively closed market except for technologically difficult offshore fields.

Within the conventional energy sources, the following factors will play an important role in the near future:

• Political turmoil in North Africa, particularly in Libya; in western Asia, particularly in Syria, Iraq and Iran; and in Latin America, particularly in Venezuela, will contribute to petroleum price uncertainty and potential supply disruptions.
• New reserves of oil and natural gas, such as the recent major deepwater oil discoveries offshore Brazil, are being developed. Alternative sources include shale gas deposits in China and oil sand reserves in Canada and Venezuela. It costs more to produce oil from these new sources than from typical established sources.
• The importance of meeting lower CO2 emissions requirements as described under the Kyoto Protocol as well as agreements under discussion will lead to lower CO2 emission goals that favor nonfossil fuel energy sources, such as nuclear and hydroelectric power, and the alternative of natural gas over coal for electricity production.

This report includes an overview of the global oil and natural gas industry, the global oil field chemical business and detailed discussion of the oil field chemical markets in the Western Hemisphere, Europe, the CIS, Africa and the Middle East, as well as available information on China and Southeast Asia/Oceania. Detailed information is presented on oil and natural gas production and rig activity statistics by region. Environmental regulations and their impact on the oil field chemicals business are discussed for North America and Western Europe.