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Vending to Shale Patch to Reach $50B in 2015, Study Says

The market for products and services to support companies plying shale gas basins in the United States will grow to about $50 billion annually in 2015 as development continues in the Marcellus, Haynesville, Fayetteville and other shale plays, according to a recent study.

"While shale gas drilling will slow from the rapid buildup of the 2005-2010 period, the industry will still bring more than 8,000 new producing wells online through 2015," said an analysis by Cleveland-based The Freedonia Group Inc., a publisher of industry research reports. "Increasing demand for drilling and completion products and services for new shale gas wells will be accompanied by growing markets for workover, restimulation and well site reclamation services in areas where production is maturing."

Freedonia analyst Mike Richardson worked on the study. He said the research used the pricing assumptions included in the Energy Information Administration's (EIA) Annual Energy Outlook reference case scenario for the forecast period and EIA historical data for the historical period.

"There are a number of potential threats to growth in shale gas development," Richardson told NGI's Shale Daily. "New environmental regulations could curtail drilling activity in one or more parts of the country. Natural gas demand could be sluggish if the economic recovery is slower and/or weaker than what is currently anticipated. And although it hasn't seemed to have much of an impact so far on shale gas developed, a protracted period of low natural gas prices could diminish the enthusiasm for further development."

Because natural gas prices have sunk since 2008, shale patch producers are squeezing profit from improved well economics, according to the study. Drilling multiple wells from the same pad is one example of this, as is the use of advanced hydraulic fracturing materials intended to improve drilling efficiencies and increase per-well output, it said.

Of the $50-some billion market in 2105, nearly $7 billion will be for drilling equipment and consumables, in particular tubular goods, which is the largest item in this category. "Shale operators will continue to consume more tubular goods overall and on a per-well basis," the study said. "Growth in demand for chemicals and materials will slightly outpace that seen for drilling equipment and consumables, reflecting the intensive material demands of the wells that will be drilled in the newer shale plays. Stimulation products, especially proppants, will be the dominant source of chemicals and materials demand."

The services market is predicted to grow to more than $38 billion by 2015. Contract drilling and pressure pumping services will lead the growth, according to the study. Together, these account for more than 60% of the services market, the researchers said.

"Other segments, such as completion and production services and waste management and remediation services, will be promoted by a range of factors," the study said. "This will include increased workover and restimulation activity as well as new state and federal laws requiring additional environmental services at well sites."

Historically, shale plays in the southern part of the United States dominated demand for products and services in 2010. Through 2015 these plays are expected to retain half of the total market, "even as the Midwestern region registers faster annual gains based on activity in the Marcellus, Woodford and a number of other emerging shale plays. Through 2020, the Marcellus Shale will be the fastest growing market for products and services of the major plays."

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