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Crude oil production drop slows growth in oilfield process chemicals market – study

rigequipment_4Demand for more effective chemicals will increase during forecast period as companies meet the challenges of more extreme conditions, such as deep offshore deposits

The market for oilfield process chemicals, which support the exploration and processing of crude oil and natural gas in the field,  is slowing as oil and gas companies refocus toward increasing operating efficiency and drill less, according to a new study from BCC Research.

Six applications compose the oilfield process chemicals market: drilling, production, stimulation, workover and completion, cementing, and enhanced oil recovery.

The global market for oilfield process chemicals should reach $26.9 billion and $29.6 billion in 2016 and 2021, respectively, demonstrating a five-year compound annual growth rate (CAGR) of 2 per cent.

Drilling chemicals as a segment should reach $9.8 billion and $10.8 billion in 2016 and 2021, respectively, reflecting a five-year CAGR of 2 per cent.

Enhanced oil recovery chemicals as a segment should grow from $945 million in 2016 to $1.2 billion by 2021, at a five-year CAGR of 4.3 per cent.

The demand for more effective chemicals will increase during the forecast period as companies meet the challenges of more extreme conditions, such as deep offshore deposits, that will alter the performance characteristics and effectiveness of chemicals required to work effectively in these environments.

A key factor for the glut, is the exploitation of new reserves, especially shale oil, which has glutted the market for oil.

While market conditions favor the gas industry, gas production still should exceed consumption in the near to mid-term.

“Investments in the EOR segment fluctuate with the price of oil. Because it’s an expensive technology, to be profitable, the oil price must be high. The recent decline in oil and gas prices has slowed the growth of EOR in the near term, but in the longer term, its economic outlook is favorable,” says BCC Research analyst Andrew McWilliams.

With production companies deferring such projects until prices increase and project economics improve, the impact of declining oil and gas prices on process chemical consumption has been magnified.

“Regarding E&P projects, the unit price of fossil fuels has dropped sharply since 2014. Because prices are expected to remain low in the near to mid-term, many producers are cutting back their investments here, placing downward pressure on the amount of oilfield process chemicals consumed,” said Williams.

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