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Fracking Market Still Strong, but Won't Match 2011

The global market for hydraulic fracturing (fracking) services continues to grow at a double-digit pace but not nearly as much as in 2011 since natural gas prices have begun to discourage exploration, according to a survey by Spears & Associates Inc.

The Tulsa-based consulting firm said the worldwide market for fracking is expected to jump 19% 2011/2012 to a record $37 billion, but that is just one-third the pace of expansion from 2010 to 2011, when demand grew 63%.

"Fracturing has grown at a rate much faster than drilling because frack intensity -- the number of stages fracked per new well -- is rising," said Vice President Richard Spears, who directs the oilfield consultants. He shared the data on Thursday in a joint conference call with Credit Suisse Holdings USA Inc. Spears' firm advises about 400 oil and gas producers, hedge funds, equipment providers and manufacturers.

Gas has long dominated the oilfield services market in North America, but that changed last year. "Natural gas drilling has not grown, it's shrunk," Spears said. "All of the growth is on the oil side."

The comments by Spears, a former Halliburton Co. engineer, echoed some by Schlumberger Ltd. CEO Paul Kibsgaard, who on Friday said services in the North American onshore are moving away from gas drilling to liquids and oil (see related story).

U.S. oil production reached a nine-year high in October, according to the Energy Information Administration. In North Dakota, where Bakken Shale production is booming, oil production averaged about 510,000 b/d in November, which was an increase of 22,000 b/d from October and more than 150,000 b/d compared with a year before (see Shale Daily, Jan. 12).

Horizontal drilling in the United States, which is used with fracking to produce tight and unconventional reserves, is predicted to be used on almost 19,000 wells this year, which would break 2011's record of 16,000, according to Spears. Nearly three-quarters (73%) of the new horizontal wells will be looking for oil reserves, which is up from 12% in 2009.

The number of new horizontal wells in 2012 that target natural gas is expected to drop to 5,000 from 6,000 three years ago.

Halliburton, Schlumberger, Baker Hughes Inc.'s BJ Services unit and FTS International Inc., formerly known as Frac Tech Services LLC, provided more than half of North America's fracking services in 2011, Spears said. Halliburton led the service providers and provided almost 20% of total capacity, followed by Schlumberger (13%), BJ Services (12%) and FTS (11%).

North America's fracking capacity likely will expand by almost one-third (28%) this year to about 18 million hp; it was up 42% in 2011 from 2010. In the past five years capacity has more than tripled, Spears said.

By region, the Midcontinent led the North American fracking market in 2011 with $5 billion in sales, according to data. Canada was the next largest with $4 billion in orders, followed by South Texas and East Texas/North Louisiana, which each totaled about $3.5 billion. The Rocky Mountains region, which includes the Bakken Shale, had close to $3 billion in fracking capacity sales, while the eastern United States, home to the Marcellus Shale, generated close to $2 billion.

The international market for fracking services also is growing and could grow to $10 billion in five years, according to Spears. The biggest international growth areas are predicted to be Latin America, particularly Argentina, "which sounds, looks and smells very much like West Texas," home to the Permian Basin and several tight formations. Latin America last year accounted for about $1.7 billion of frack revenue.

Another area of growth is predicted to be refracking wells that previously had been drilled using conventional methods. However, the refracking market is "not material yet," said Spears. "It will take a slowdown in industry for completion engineers to have enough breathing room" before they look at older wells.

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