Drilling Fluids & Chemicals Market in the US

Report Overview

A Recovery in Drilling Activity Will Spur Demand for Drilling Fluids

US demand for drilling fluids is forecast to increase 11% per year to 1.45 billion gallons in 2021, while demand for drilling fluid additives is forecast to increase 13% per year to $930 million in 2021. Growth will be driven by the recovery in drilling activity following the steep downturn in 2015 and 2016, which resulted from oil benchmark price collapse. Although the rebound in drilling activity and recovery in demand for drilling fluids and additives of drilling fluids will be strong, it is not expected to reach peak levels through 2021. Oil and gas prices are forecast to remain well below the high water marks seen in the past 10 years, limiting further advances.

Key Findings in the Drilling Fluids & Chemicals Study:

Horizontal Drilling Increased the Demand for Drilling Fluids

Prior to the collapse in drilling activity in 2014, drilling fluid demand grew on a per well basis. From 2006 to 2014, the practice of drilling horizontal and unconventional wells spread throughout the US, becoming the most common well type. These wells require more drilling fluids than vertical wells due to the addition of lateral lengths in the wellbore. Additionally, lateral lengths continue to increase as operators test the limits of the technology to retrieve more resources from a single well. Going forward, it is expected that the proportion of horizontal wells and the average total depth will continue to increase.

Drilling Activity Will Shift Toward Economical Regional Markets

As a result of the constraints brought on by the current benchmark price environment, operators are dealing with economical restrictions that significantly limit the potential profitability of certain plays. Operators are faced with breakeven costs that only allow them to pursue resources in the most economical drilling opportunities. Operators seek out plays that have geological advantages or other cost savings opportunities like pre-existing infrastructure. Plays such as the Permian Basin in Texas and the STACK and the SCOOP in Oklahoma, valued for their stacked resources and high IP rates, will garner much of the drilling activity in the years to come given the current price environment.

Technology Is Advancing Drilling Fluids to Water-Based Formulas with Higher Value Additives

As a result of technological progression, drillers have come to favor certain formulations of drilling fluids. Water-based fluids are favored for their lower cost and better environmental profile. Additionally, as horizontal and unconventional drilling continue to increase well complexity and create challenging drilling conditions, drillers will favor higher value additives which are multifunctional and able to work in these environments. Unlike the shift to water-based fluids, which are lower in cost than oil-based or synthetic-based fluids, the constraints of the lower benchmark price market is not expected to prevent a shift to higher value additives in drilling fluids.

Study Coverage

This industry study presents historical demand data (2006, 2011, and 2016) and forecasts for 2021 by product (drilling fluids: water-based, oil-based, synthetic-based; drilling fluid additives: barite, bentonite, shale inhibitors, polymer viscosifiers, lost circulation materials), and location (Texas, Oklahoma, Ohio & Pennsylvania, Gulf of Mexico, Louisiana, New Mexico, North Dakota, Colorado). The study also evaluates company market share and competitive analysis on drilling fluid suppliers including Baker Hughes, Canadian Energy Services, Halliburton, National Oilwell Varco, Newpark Resources, and Schlumberger.

US demand for drilling fluids and chemicals will rise 11% per year through 2021. Unconventional drilling will grow more rapidly than conventional drilling, and the portion of conventional wells drilled will shrink further. Due to high oil drilling prices, formations such as the Bakken and Eagle will fall from favor to investors, while plays in Oklahoma and the Permian Basin will grow. Increasingly, technological advancements will allow water-based fluids to bu used in challenging drilling conditions where synthetic- or oil-based fluids have historically been used.

This study analyzes the US market for drilling fluids and drilling fluid additives. Demand for drilling fluids is examined by product type and location in gallons, with selected data provided in US dollars at the end user’s level. Demand for drilling fluid additives is examined by product type and location in US dollars at the end user’s level, with selected data provided in pounds.

Historical data for 2006, 2011, and 2016 and forecasts for 2021 are presented, with value figures presented in current dollars (which are not adjusted to account for inflation).

Drilling fluids can be segmented into three major product segments:

• water-based drilling fluids
• oil-based drilling fluids
• synthetic-based drilling fluids

Drilling fluid additive products include:

• barite
• polymer viscosifiers
• lost circulation materials

• bentonite
• shale inhibitors
• other additives, including lubricants, fluid loss control agents, and others

Polymer viscosifier products include:

• xanthan gum
• guar gum
• polyacrylamide
• other natural and synthetic polymer viscosifiers

Shale inhibitor products include:

• potassium chloride
• choline chloride
• other shale inhibitors

Location segments for drilling fluids and drilling fluid additives include:

• Texas
• Oklahoma
• Ohio & Pennsylvania
• Colorado
• Gulf of Mexico
• North Dakota
• Louisiana
• New Mexico
• All other US states