The increase in global energy demands has given rise to oil and natural gas exploration activities in recent times. An essential component in such kind of oil and natural gas exploration is the need for drilling fluids. Drilling fluids are critical in drilling activities to provide hydrostatic pressure to prevent formation fluids from entering into the wellbore, carry out drill cuttings, and keep the drill bit cool. Additionally, drilling fluids enable the collection of data about rock formations. The recent procurement market intelligence report from SpendEdge attributes the growth of the global drilling fluid market to the recovery of oil and gas prices. Major oil and gas producers, such as OPEC nations and Russia, implemented production cuts to stabilize the volatility in pricing, which had affected the growth of the industry in general, post the fall in oil prices in 2014.
Increasing drilling activities in challenging environments
As drilling for oil and gas is growing in challenging environments such as shale reserves and deepwater, an increase in demand can be observed for drilling fluid solutions that can deliver optimal drilling performance in such situations. For instance, in the case of directional drilling, fluids with improved lubricity is required in order to combat high friction. The demand for drilling fluids capable of withstanding high temperatures found in deeper wells is well on rise causing suppliers to invest heavily in R&D activity.
Consolidation among oilfield services company
The dip in the oil prices in early 2014 caused many oil and gas companies to be involved in M&A activities. It not only helped their case for survival but also helping them complement and complete their portfolios of oilfield services. For instance, the acquisition of Baker Hughes by GE enabled the latter to add oilfield services to its existing oil and gas portfolio. Such M&A deals allow the companies to procure different services from a single supplier, reducing their management complexities.
Rise in exploration activities of shale oil and gas reserves
The North Dakota oil boom has motivated numerous countries to explore the commercial viability of their shale reserves. For instance, in August 2017, a regional player was granted the rights for exploration and development of a shale gas block in China’s Guizhou province. Apart from that, many countries such as Norway, Argentina, UK, and South Africa are already planning or executing shale gas exploration. The increase in shale gas exploration activities is driving the demand for special drilling fluids that can enable operations in these challenging formations.
Demand for environment-friendly drilling fluids
The contents of drilling fluids contain petroleum products and heavy metals that can harm the environment in case of spillage. Mining companies and gas drillers can be severely penalized by regulatory bodies in case there is a discharge of such harmful substances from their operations into their surroundings. As a result, the industry is demanding drilling fluids that have minimal environmental effects. For example, Schlumberger has developed the ENVIROTHERM NT drilling fluid system in response to demand for a chromium-free drilling fluid system.
Recovery of oilfield services
Along with the recovery in oil prices after its steep fall in 2014, the spend on upstream activities has gradually increased thereby increasing the demand for oilfield services. Consequently, the service costs for oilfield activities have been continuously on the rise. This increase is evident in locations with low production costs as opposed to locations with high production costs. Such increase can have a substantial effect on profit margins of oil and gas producers as drilling fluids account for 4%-16% of the total drilling costs.
Read more about the drilling fluids market along with pricing insights, procurement best practices, key suppliers, and category management in SpendEdge’s upcoming report on the global drilling fluids market.