American Oil and Gas Reporter - September 2015 - 93

Market For Oil Field Chemicals
May Reach $30 Billion By 2019

LONDON-Driven in large part by the
rapid expansion of shale oil and gas
drilling and production in North America,
the world market for oil field specialty
chemicals reached $25 billion in 2014,
up from around $16 billion in 2010, although declines in oil prices have dampened the demand outlook for 2015-19,
according to a market study from IHS.
The IHS Chemical 2015 Specialty
Chemicals Update Report-Oil Field
Chemicals covers historical developments
and future projections for supply, demand,
capacity, and trade in the global oil field
chemicals markets for 2015 to 2019, and
projects sales of oil field chemicals will
grow annually at about 4 percent to more
than $30 billion in 2019, based on volume
growth and price changes in effect at the
end of 2014.
"We saw unprecedented market growth
for oil field chemicals during the past
five years, which was driven by the rapid
development and production of shale oil
and gas resources in North America,"
confirms Stefan Schlag, director of inorganic chemicals, and mineral and mining
products at IHS Chemical and lead author
of the report. "We expect demand for
these chemicals to continue to grow, but
at a much slower rate than in the previous
period."
Oil field chemicals typically fall under
three categories, IHS notes: drilling fluids,
cementing and stimulation, and oil production. Oil production chemicals include
corrosion and scale inhibitors, biocides
and demulsifiers.
Says Schlag, "IHS doesn't expect
lower oil prices to have a major impact
on sales of chemicals to the production
segment. We expect lower prices likely
will have more of an impact on sales of
chemicals for drilling, stimulation and
completion activities. The primary reason
for this is that oil production volumes
are expected to continue to increase, in
line with expected continued growth of
world crude oil demand. However, lower
crude oil prices have slowed exploration,
especially for more complex unconventional and deepwater oil projects."
Despite the year-end slowdown in
drilling activity driven by the oil price
slide, Schlag says hydraulic fracturing
continued globally in 2014, but primarily
in North America. He reports total chemical consumption related to fracturing in
2014 was valued at nearly $8.6 billion,
with the United States and Canada ac-

counting for the lion's share of demand
at $8.0 billion, or approximately 94
percent of total world consumption of
stimulation chemicals.
Latin America was a distant second
in demand for oil field chemicals, accounting for slightly less than 9 percent
of global demand or $2.2 billion of sales,
Schlag continues. The Middle East followed with 8 percent of global oil field
chemical demand or $2.0 billion in sales.
The CIS had 6.5 percent of global demand
for these chemicals, or $1.6 billion in
sales.
Schlag says, "It may seem counterintuitive, but markets for oil production
chemicals show almost no correlation
with regional, raw oil production volumes.
In fact, rather than production volumes,
it is the complexity of the oil production
process itself (conventional, deep water
or unconventional) that has a large impact
on the demand for oil field chemicals."

Market Control
The global oil field chemicals industry
is dominated by three service companies:
Schlumberger, Halliburton and Baker
Hughes, IHS reveals, noting these companies are becoming larger through acquisitions, which will allow them to offer
a wider range of oil field services such
as exploration, drilling, design and engineering.
Despite the expected near-term market
volatility for specialty chemicals, IHS
says the oil field services sector saw significant merger and acquisition activity
at the end of 2014, when Halliburton announced the largest deal: a $35 billion
acquisition of Baker Hughes in November.
Prior to that acquisition announcement,
IHS says Schlumberger led the oil field
services sector-including oil field chemical
sales-with total 2014 sales exceeding
$48 billion, or more than 46 percent of
the oil field services market. Halliburton
was second at slightly more than $32
billion in sales in 2014, IHS adds, or
nearly 31 percent of market share. Baker
Hughes was third at nearly $24 billion in
2014 sales, or almost 23 percent of the
market.
Based on 2014 market share figures,
a combined Halliburton and Baker Hughes
would dominate the oil field services
market with slightly less than 54 percent
of global market share, IHS observes. r
SEPTEMBER 2015 93
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