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The world market for oil field chemicals, expressed in sales dollars at the service company level, reached almost $8 billion in 2004. Sales are expected to total over $9 billion in 2009, based on volume growth and price changes in effect as of early 2005.
The following pie charts provide a breakdown of the global oil field chemicals market by category and by region.
This market estimate includes sales to operators of both oil and gas fields, but excludes downstream services for pipelines and refineries. It includes an estimate for the countries of the former USSR, based on fragmentary information, but excludes China. Consumption of these chemicals is expected to grow at a 3.7% average annual rate during 2004–2009. Growth will not be uniform during this time. Instead it will be highly positive on a dollar basis in 2005 in all regions, except Western Europe. This will reflect both increased drilling, stimulation and production of oil and gas, as well as increased prices for most of the chemicals sold. The increase in chemical prices reflects both the increasing cost of the crude oil and natural gas from which most of these chemicals are derived, as well as a tight supply/demand balance for many of the products. The projected growth rates also assume a gradual moderation and some decline in crude oil prices from the $52–56 per barrel oil prices of April 2005 to levels in the low to mid-40s during most of the forecast period. This projection takes into account prices in effect during the first quarter of 2005 and projected volume growth, but does not take any future price increases or currency exchange fluctuations into account. Growth should be faster in Africa, the Middle East and the former countries of the USSR.
About half of the worldwide market continues to be accounted for by the highly mature fields in North America. The region has a very high percentage of its chemical use associated with gas fields, especially in the Gulf of Mexico. Tar sands in Canada may consume large volumes of chemicals in the future, although their impact in the next few years will be minor. Growth in Latin America, especially Venezuela, and Africa has been limited by political instability. Problems with inadequate infrastructure, especially in Africa and some parts of the Middle East, have also slowed development. Many of the new fields present technological challenges, such as drilling in very deep water or involving high temperatures and pressure and corrosive conditions. These wells require larger volumes of more expensive chemicals than most conventional wells. Thus, oil field chemical consumption will increase not only in volume but also in value, as more expensive chemicals will be required in some cases.
The profitability of oil field service companies tends to closely track crude oil and gas prices. Since these commodities reached record highs in late 2004 and early 2005, this industry recorded stellar financial results in 2004. Results of the first quarter of 2005 are even more impressive. However, the oil field chemical market has historically been highly competitive, with continuous price pressures from the operators and price cutting by smaller, often local, suppliers in areas such as Latin America, Africa and the Middle East. Thus, profitability has generally been lower in most of these regions than in North America. To improve their competitive position, therefore, the larger corporations have opted for acquisition and the formation of integrated service organizations. This consolidation has also been driven by the desire of certain operating companies to have single-source suppliers and also to award management contracts for the full range of services and chemicals required in exploration, drilling and cementing.
The global oil field chemical industry is, in fact, dominated by large corporations that are also active in the wider range of oil field services such as exploration, drilling, design, and engineering. Halliburton Company is the largest cementing and stimulation service company, and is also a major participant in drilling fluids. M-I SWACO, another major drilling fluids company, is jointly owned by Schlumberger and Smith Industries, both leading players in the oil field services sector; Schlumberger is also a major player in cementing/stimulation services. Baker Hughes is active in drilling chemicals through Baker Hughes Drilling Fluids and in production chemicals through Baker Petrolite.
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