International hydraulic fracturing capacity is expected to increase 207% by 2017 to 13.5 million hydraulic horsepower (MMhhp) as activity ramps up, especially in China.

The updated forecast, delivered by PacWest Consulting Partners during a webcast May 22, is slightly lower than the 15.1 MMhhp the firm predicted in December 2012 for the same five-year time period. Alexander Robart, a principal at the firm, called the international shift in the overall balance of frac capacity worldwide a dramatic one.

By year-end 2013, global hydraulic fracturing capacity will total 24.3 MMhhp, PacWest forecasts. That is 2.2 MMhhp more than year-end 2012. The growth is split evenly between North America, China, and the rest of the world.

The firm said pressure pumping companies are getting ready to capture potential growth outside of North America, which led to forecast international capacity additions of 25% per year.

“China continues to add frac capacity quite aggressively this year, maybe even higher than our current 2013 numbers show,” Robart said. The country’s capacity could increase to about 4 MMhhp in 2016, up from less than 1 MMhhp in 2011.

China is working to access its technically recoverable shale gas resources, estimated by the U.S. Energy Information Administration to be approximately 1,275 Tcf. Its Ministry of Land Resources is aiming to produce about 230 Bcf each year by 2015 and reach 2,100 Bcf per year by 2020.

Russia is also expected to add hydraulic fracturing capacity in 2013 and 2014, Robart said, as activity increases in the Bazhenov shale oil play in Western Siberia. In addition, Australia could experience a capacity hike as exploration activity ramps up, although the country currently has limited frac capacity and major constraints. And, “we continue to be pretty bullish on Middle East/North Africa, and that’s particularly Saudi and Oman.”

But demand has been slow to materialize in Argentina, he added.

“Argentina frac capacity has revved up pretty meaningfully over the last two years. The demand has actually been slower to materialize than expected so utilization on the equipment that is sitting in Argentina is quite low,” Robart said. “Argentina has been one of the most, if not the most, highly anticipated unconventional markets in recent years with really high expectations for both activity and demand growth.”

Currently, frac capacity in Argentina stands at about 298,250 hhp, and no additions are expected for the rest of the year, according to PacWest.

“The country is blessed with world-class unconventional geology particularly in Neuquen. But there is a whole multitude of challenges that are holding back potential and activity,” Robart said. These include government policies that strangle the economy, foreign currency issues that limit capital available for investment, and poor logistics and infrastructure.

However, “several frac players have made meaningful investments in the region over the last 1-2 years, particularly Schlumberger, only to see activity fall significantly short of expectations,” according to the presentation.

But Robart gave state-owned YPF credit for managing to increase activity in Neuquen. The firm’s base case forecasted 140 Neuquen wells for 2013, up 52% from 92 wells in 2012. Any future increases would depend on the company’s ability to raise more capital.

The company is pursuing a massive five-year unconventional development plan that aims for 1,500 shale oil, 500 shale gas, and 450 tight gas wells. But it will have to overcome obstacles – including unpredictable government policies and recovery from a fire at the La Plata refinery that led to a need to import oil, insufficient amount of shale-capable drilling rigs, and a scarcity of coiled tubing units among others – to meet its goals, according to PacWest.

“Looking at the base case, we have a frac demand in 2017 of just 400,000 hp and a capacity of just over 700,000 hp [in Argentina], so utilization rate is pretty low long term. So it’s a bit of a challenging market. In our upside case, things do improve meaningfully to 60% to 70% utilization rates,” Robart said.

“Things are not nearly as optimistic as they once were. Argentina is still a market to watch and we’ll continue to watch it closely, but there are a lot of challenges that are really holding back activity and potential.”

Contact the author, Velda Addison, vaddison@hartenergy.com.