The world market for oilfield chemicals at the service-company level hit $25 billion in 2014, up from nearly $16 billion in 2010. However, a significant decline in oil prices is affecting the demand outlook for chemicals for the 2015 to 2019 period, according to an IHS report.
The increase from 2010 to 2014 was driven by the expansion of shale oil and gas production in North America, the IHS report indicated.
But for 2015 to 2019, IHS predicts the pace of oilfield chemical sales will slow down. During the four-year period, sales are expected to grow 4% to more than $30 billion. The forecast is based on volume growth and price changes in effect at the end of 2014, IHS said.
Stefan Schlag, the lead author of the report, said, “IHS doesn’t expect lower oil prices to have a major impact on sales of chemicals to the production segment, but we expect lower prices will likely have more of an impact on sales of chemicals for drilling, stimulation and completion activities. The primary reason for this is that actual oil production volumes are expected to continue to increase, [which is] in line with the expected continued growth of world crude oil demand.”
He added, “However, lower crude oil prices have slowed exploration drilling and the drilling of new boreholes, especially for more complex unconventional and deepwater oil projects. These projects typically have higher production costs, and are in many cases not economic at current oil prices.”
Despite the year-end slowdown in E&P activity driven by the oil price slide, hydraulic fracturing continued globally in 2014, but mostly in North America. In 2014, total chemical consumption related to fracking was valued at nearly $8.6 billion, with the U.S. and Canada accounting for $8 billion, or about 94% of chemicals used.
The worldwide oilfield chemicals industry is dominated by three oil field services companies—Schlumberger, Halliburton and Baker Hughes. The three companies are growing through acquisitions, IHS said, which will allow them to offer a broader range of oil field services such as exploration, drilling, design and engineering.
The oilfield services sector saw significant merger and acquisition activity at the end of 2014. Halliburton announced a $35 billion acquisition of Baker Hughes in November. The deal is expected to close in the second half of 2015, pending U.S. government approval.
Prior to announcing the acquisition, Schlumberger led the oilfield services sector in oilfield chemicals sales. In 2014, sales surpassed $48 billion, or more than 46% of the oilfield services market.
Halliburton followed at slightly more than $32 billion in sales in 2014, or nearly 31% of market share. Baker Hughes was in the third position at nearly $24 billion in 2014 sales, or almost 23% of the market.
Based on 2014 market share figures, a combined Halliburton-Baker Hughes would dominate the oilfield services market with about 54% of global market share.