Driven mostly by North America, the world market for oilfield specialty chemicals climbed to almost $16 billion in 2010, with the United States and Canada accounting for more than half (52%), according to a global market study by IHS Chemical.
The IHS Chemical 2012 Oil Field Chemicals Report, formerly done by SRI Consulting, covers historical developments and future projections for supply, demand, capacity and trade in the global oilfield chemicals markets.
From 2010-2015, world demand for oilfield chemicals is expected to grow on average by 3.5% during the next five years, with sales expected to increase to almost $19 billion by 2015, according to the IHS Inc. unit.
"Due to favorable oil and gas prices and advances in technology, there has been a significant increase in hydraulic fracturing [fracking], particularly in North America," said principal analyst Ray Will, who co-wrote the report with Peter Allison and Vivien Yang. "This has made natural gas production possible in previously uneconomic reserves in shale deposits bringing record quantities of gas to market in the U.S.
"Naturally, this increase in drilling and production has resulted in higher volumes of drilling, stimulation and cementing chemicals. In turn, increased supplies of natural gas have caused price declines, making gas more competitive both for electricity production, and as a raw material for chemicals production here in the U.S."
Latin America, and in particular Brazil, is the next closest consumer of oilfield chemicals and was responsible for 11% of demand, or nearly $1.8 billion in sales in 2010, according to the report. The Russian/Commonwealth of Independent States and African regions each followed with 8%, while the Middle East, Asia Pacific and European regions each followed with 7%.
Health, safety and environment issues have had "a major impact on the current and future use of oilfield chemicals," with the biggest impact felt in North America and Western Europe, noted the authors.
Will said chemical disclosure requirements that have been or will be put in place by regulators "will tend to favor more environmentally friendly chemicals. As environmental regulations become more stringent, chemical manufacturers have an opportunity to develop more environmentally friendly products."
One of the most significant challenges will be for oilfield chemical provides to provide "quality and consistent product," said Will.
"A major supplier of oilfield chemicals must provide the international oil companies with products and services of high-quality on a consistent basis, and increasingly, it must do so on a worldwide basis. This business is all about customer service, so it is personnel-intensive, and its products are personalized to meet specific customer needs...While the service companies would prefer to simplify their product lines, doing so is difficult, because their customers are resistant to accepting substitutes for products that work well."
In addition, the services element of the business requires these companies to provide reliable chemical formulations, as well as high-tech testing equipment. Services also may include "rapid response teams to address any problems encountered by the field operator," said Will. "This makes it harder for smaller companies to compete in the oilfield chemicals space, due to the scope and size needed to meet customer requirements globally."