Oilfield Chemicals

Energy prices remain high amidst supply concerns

In 2006 US energy prices reached their highest levels in two decades, driven by global and regional tightness in crude oil and natural gas supplies. Rising demand from industrializing nations has been driving robust global crude oil consumption, at a time when many key producing areas are struggling to expand oil output. This tenuous market situation has eroded spare production capacity and sharply increased crude prices, a development not aided by continuing concerns over the political stability of several important oil exporting nations. Similar supply concerns are found in the US natural gas market, as stagnant production and import infrastructure limitations have restrained supplies, pushing prices high enough to force a significant portion of industrial consumers out of the market. Despite a slight easing of domestic oil and natural gas prices through the first half of 2007, continuing market tightness is expected to leave prices elevated through the forecast period.

Challenges increasing for domestic producers

Motivated by favorable economics, energy companies are striving to expand their production of US energy resources, many of which are heavily depleted after over a century of production. Domestic crude oil output has been falling for decades due to depleting reservoirs, environmental restrictions and a lack of investment, a situation gaining increasing government notice due to the US economy's increasing dependence on imported petroleum. The natural gas situation is more critical; with limited import capacity, the country is heavily reliant on maintaining production from an increasingly mature resource base. Although improved technologies have boosted initial well flows, they have also substantially accelerated depletion rates, forcing producers to drill ever more wells just to keep natural gas output at existing levels. In both the oil and gas sectors, high prices and limited prospects are driving producers toward higher-cost projects in difficult operating environments, such as the deepwater fields of the Gulf of Mexico and unconventional coalbed methane fields. Further complicating these challenges are the sharp increases in upstream capital costs observed in recent years, which have negatively impacted project economics throughout the US.

Oilfield chemicals thriving on industry challenges

Overcoming these significant difficulties will require continued high levels of oilfield activity. The subsequent rise in rig counts, the increased utilization of well stimulation and enhanced oil recovery methods and the continued push into deepwater drilling and production will provide a wide range of opportunities for the suppliers of both formulated oilfield chemicals and their raw materials. By 2011, over $1 billion in new annual chemical demand will be created by a strong expansion in oilfield activity. Much of these gains will be from the drilling fluids and stimulation chemicals needed to support high levels of rig activity and widespread well stimulation efforts; such increases will also drive gains for the raw materials such as barite, surfactants and polymers needed to formulate these products.

Study coverage

This new Freedonia industry study, Oilfield Chemicals, is priced at $4500. The upstream environment of the domestic oil and gas industry is discussed in detail, complete with projections assessing future oilfield activity and the impacts of emerging trends. The study provides historical demand data (1996, 2001, 2006) and forecasts for the years 2011 and 2016 by formulated product and raw material. It also profiles 34 major oilfield chemical suppliers and evaluates market share data.