North America’s hydraulic fracturing (fracking) services market should remain strong through 2016 on robust drilling and completion activity, with demand in the United States and Canada set for double-digit growth this year, PacWest Consulting Partners said in a new analysis.

Fracking services demand this year in the U.S. land market is seen increasing by 10%, with an 11% increase forecast for Canada. Ongoing efficiencies in the drilling and completion value chain may continue to erode realized frack demand, but at a slower rate than in 2012 and 2013.

Recovery-driven cost increases also are expected this year, the first the market will have seen since late 2011, according to the firm’s PumpingIQ and WellIQ reports.

“Multi-well pad drilling, smart scheduling, 24-hour operations and other practices have softened frack demand growth since 2012 and will continue to do so into 2014,” said PacWest Partner Chris Robart, lead author of PumpingIQ. “In particular, the Permian Basin should see greater efficiency impacts as more companies shift to horizontal well and multi-well pads.”

Frack capacity utilization is set to hit 81% this year but potential market improvements may being stung by “aggressive” capacity additions, analysts warned. According to PacWest, the smaller “Tier 2 and 3” pumpers have been quick to react to the improving outlook for fracking services and should account for nearly two-thirds of the 1.1 million hydraulic horsepower (HHP) net additions expected during 2014.

However, even with the HHP increases, there should be moderate fracking price increases this year based on the recent success by the service companies to achieve better cost recovery. “This was made necessary by weather and supply chain challenges in late 1Q2014 that drove up supply costs for many frack consumables,” the analysis said.

Icy weather idled crews and equipment across the United States during the first quarter, but demand for specialized rigs remained strong, according to some of the North American-focused onshore providers, including Patterson-UTI Energy Inc. (see Shale Daily, April 24). The outlook for the Lower 48 states is “increasingly positive” in all regions, with land operations, market activity and pricing strengthening on higher-than-expected cash flows and incremental rig demand, Nabors Industries Ltd. management said in April (see Shale Daily, April 23).

Costs for key materials are forecast to continue to increase through 2015, which would result in even higher cost recovery/prices, according to PacWest.

The Canadian market for fracking services is expected to develop in a similar way as the U.S. market as increases in frack demand bring the Canadian market into balance. “This will be driven by activity growth in Duvernay and Montney plays, which together PacWest forecasts will push frack demand to 1.84 million HHP in 2014,” 11% higher year/year. “Development in other Canadian unconventionals also should accelerate demand.”

Globally, frack capacity is forecast to increase by 65%, or 16.2 million HHP, between 2013 and 2018 (year-end capacity), with markets outside North America accounting for 55% of the growth. China continues to lead international additions and surpassed Canada as the second-largest frack market in the world during 2013, PacWest said.