Booming Crude Oil Production is Set to Drive Global Demand for Oilfield Drilling Fluids

Drilling fluid additives are quite preferred in the oil and gas industry and are emerging in parallel with the industry. Amidst the continuation of plunging oil prices, there is a favourable cognizance of improvement in the demand for oil. According to the monthly oil market report June 2015, of OPEC, the global oil demand is seen growing for the year 2015. The demand for oil in 2015 is forecast to grow by 1.18mb/day (million barrels per day), as compared to 0.96mb/day in 2014.

The production of crude oil in OPEC countries has fairly been constant in the last few years. Albeit, the drop in crude oil prices by 30% in 2014, OPEC have not decreased their output. Other oil producing countries such as the U.S., Canada, Russia, Iraq, Egypt, and Libya have witnessed rapid gains in production volumes. Especially the U.S. has witnessed a huge incremental volume demand driven by advancements in drilling technologies. Increasing extraction of shale energy is immensely contributing to increasing supply of the U.S. output. This increase in production volumes from across the countries in various regions is set to improve output volume and resulting in demand for various oil field drilling fluids.

The global oil production and exploration activities in the past decade have increased due to the rapid growth of global economy that is highly based on oil & gas sector to meet its energy demands. This has resulted in growing demand for oil field drilling fluids used in exploration process. Booming crude oil production to cater the growing oil demand from emerging economies is the major driver for oil field drilling fluids. The above graph shows the production of oil in Saudi Arabia from October 2014 to September 2015. Saudi Arabia possesses 18% of the world’s proven petroleum reserves and ranks as the largest exporter of petroleum. The oil and gas sector accounts for about 50% of GDP, and about 85% of export earnings. According to the U.S. Energy Information Administration, Saudi Arabia has 266 billion barrels of proven reserves, out of which 70% of the reserves are considered to be of light gravity. Despite some recent endeavours with modern horizontal drilling and hydraulic fracturing techniques, most of the Saudi’s reserves are in large conventional formations. Saudi Aramco, the national oil company has no royalties to pay, has access to a lot of reserves, handles their own transportation, processing and refining. This clearly means that profits are augmented across the value chain, which makes them produce more oil even when other countries are backing out.

Apart from this, increasing demand in developing regions provide impetus to the market growth. The demand for oil among consumers in the developed region is yet to reach pre- recession levels. Multiple factors such as fuel efficient cars with better mileage and consumer restraint on spending on gas are the major factors. The year 2013 has witnessed considerable gains in the U.S. consumer spend while Europe is yet to reach its historic highs. However, there is strong demand from emerging economies such as China, India, Brazil, Indonesia and others. This is primarily due to increasing income levels and disposable incomes.

There is an increase in automotive ownerships in these countries increasing per capita number of cars. This is propelling strong demand for energy in these geographies. Imports of crude oil are increasing continuously in these regions. This strong demand is the key factor for keeping the oil production at high volumes albeit economies are slowing. This is set to drive oil production along with usage of various oil field drilling fluids, hence showing an upsurge in the market.

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