North American and European Oilfield Chemicals Market - Executive Summary. Shale Gas Industry Thrives on Advanced Oilfield Chemical Solutions

Analysis of the North American and European Oilfield

Chemicals Market Shale Gas Industry Thrives on Advanced Oilfield Chemical Solutions

M932-39

November 2013

2 M932-39

Research Team

Anna Jarosik Industry Analyst Chemicals, Materials and Food (CMF)

(48) 22 481 62 36

[email protected]

Lead Analyst Research Manager

Leonidas Dokos Global Programme Manager Chemicals, Materials and Food (CMF)

(44) 186 539 86 85

[email protected]

Contributing Analyst

Michael Mbogoro Research ConsultantChemicals, Materials and Food (CMF)

(44) 186 539 86 61

[email protected]

Strategic Review Committee Leader

Brian Balmer Industry Principal, Performance Materials Chemicals, Materials and Food (CMF)

(44) 186 539 86 34

[email protected]

3 M932-39

Contents

Section Slide Numbers

Executive Summary 4

Market Overview 10

Total Market of Oilfield Chemicals in Shale Gas -

• External Challenges: Drivers and Restraints 47

• Forecasts and Trends 60

• Market Share and Competitive Analysis 84

Market Segments -

• Drilling Chemicals Segment Breakdown 98

• Stimulation Chemicals Segment Breakdown 107

• Cementing Chemicals Segment Breakdown 116

• Hydraulic Fracturing Chemicals Segment Breakdown 125

• Wastewater Treatment Chemicals Segment Breakdown 133

The Last Word (Conclusions and Implications) 142

Appendix 145

4 M932-39

Executive Summary

5 M932-39

Executive Summary

• Shale gas is an unconventional natural gas (NG). Technological advancements, especially in hydraulic fracturing, make shale gas extraction a commercially viable. As demonstrated by the United States (US), countries with technically recoverable reserves are now considering the increase of their gas allocations in energy matrices due to the nascent accessibility of this feedstock.

• In general, the hydraulic fracturing technology has high stakes; associated costs, risks, and benefits need to be properly analyzed in a framework that can enable elected officials and policy makers to make educated decisions that balance the needs of a nation’s

economy and the environment.

• Due to the nascent stage of the technology, especially in European countries, there is a lack of empirical evidence to support many of the assumptions surrounding shale gas; this uncertainty, coupled with environmental concerns, has created serious debate by various stakeholders and governments.

• Key challenges are related to pricing regulations, cost and profitability, environmental and health concerns, and the management of water resources.

• Key drivers are energy security and economic benefits (should shale gas be developed in an environmentally responsible manner).

• The development of shale gas reserves in Europe could reverse the dwindling natural gas reserves, reduce dependence on imports, and restore the region’s status as an exporter.

Source: Frost & Sullivan

6 M932-39

Executive Summary (continued)

Source: Frost & Sullivan

• This research service analyses the impact of shale gas on the oilfield chemicals market. Moreover, it analyses the situation, developments, trends, and future opportunities in North America and Europe.

• The total market revenue in North America and Europe is expected to grow from $5,371.6 million in 2012 to $8,621.3 million in 2019, at a compound annual growth rate (CAGR) of 7% between 2012 and 2019.

• In 2012, hydraulic fracturing chemicals were the largest and the most dominant chemical group consumed in shale gas extraction and production. This group was far ahead of other chemicals, accounting for 37% of revenue generated by the total market of oilfield chemicals in shale gas production in North America and Europe.

• The market share of hydraulic fracturing chemicals segment is expected to increase to 37.7% by 2019.

• In 2012, the US was that largest consumer of a shale gas oilfield chemicals. Revenue generated by the region accounted for 75.5% of the total market of oilfield chemicals in shale gas revenue.

7 M932-39

Executive Summary—Market Engineering Measurements

Base Year

Market Growth

Rate

5.6%

Compound

Annual Growth

Rate

7.0%

(CAGR: 2012–2019)

Customer Price

Sensitivity

6

(scale: 1 [low] to 10 [High])

Market

Concentration

<72.0%

Degree of

Technical

Change

8

(scale: 1 [low] to 10 [High])

Total Market of Oilfield Chemicals in Shale Gas: North America and Europe, 2012

For a tabular version click here. Stable Increasing Decreasing

(% of market share held by top 5 companies)

Market Stage

Growth

Market Revenue

$5,371.6 M

(2012)

Market Volume

6,689.5

(2012) (‘000 Metric Tonne)

Average Price

per Tonne

$803.0

Market Size for

Last Year of

Study Period

$8,621.3 M

(2019)

Market Overview

Note: All figures are rounded. The base year is 2012. Source: Frost & Sullivan

8 M932-39

Executive Summary—Market Engineering Measurements

(continued)

Competitor Overview

Industry Advancement

*Companies with more than $60.0 M revenue.

Number of

Companies that

Exited*

0

(2012)

Number of

Companies that

Entered*

2

(2012)

Number of

Competitors

>40 at supply level

<20 at service level

(active market competitors in 2012)

e

Average

Product

Development

Time

3–6 years

Marketing

Spend as a

percent of

Market Revenue

10-15%

Average R&D

Spend by

Product

$1.4 M

Stable Increasing Decreasing

Note: All figures are rounded. The base year is 2012. Source: Frost & Sullivan

9 M932-39

Executive Summary—CEO’s Perspective

2 Shale gas is being acclaimed as a game changer in energy markets, such as North America, that have recoverable reserves.

3 An increase in natural gas production is expected to make it the preferred feedstock for chemicals and materials in the future.

4 The largest challenge to shale gas and oilfield chemicals is environmental sustainability.

1 The shale gas industry offers emerging growth opportunity, but it is initially abundant in supply and low in demand.

Source: Frost & Sullivan