The oil & gas exploration and production (E&P) activities are complicated processes, and require sophisticated technology and equipment. The oil & gas industry is a highly volatile and cyclical market. The fall in commodity prices had a ripple effect on the oil & gas value chain. Over several decades the oil & gas industry has looked to active drilling rig count creating demand for oilfield services, globally. The decline in oil prices and drilling activity has decreased the OCTG demand from USD 22 billion, in 2014 to USD 14 billion, in 2016. With the recovering crude prices, the OCTG demand is has witnessed a growth, driven by the increasing shale production and a subsequent hike in horizontal and unconventional drilling activity.
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Increase in Drilling activities is Driving the OCTG Demand
Although factors, such as high initial investment and lack of skilled labour have always been hinderance the development of all verticals of the oil & gas industry, the push of increasing energy demand is making oil and gas exploration and production more attractive to investment. The ever-increasing demand for energy and resulting increased energy production is one of the biggest drivers for the increasing demand of the oil country tubular goods.
The collapse in oil prices in 2014 severely undercut company revenues and forced sharp cutbacks in spending. With commodities staging a recovery following a multi-year price rout, activity in the oil & gas sector has begun to strengthen. With oil & gas prices recovering, the oil & gas operator companies have increased investment for the development of the oil & gas projects, which were earlier delayed or stalled. The suppliers of OCTG are expected to benefit from the same, with increased activities on recovery. The intense competition among petroleum producers is also serving as a drive to increasing drilling activity, globally. The current trend of the petroleum industry is pushing up the demand for OCTG worldwide.
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North America – the Largest OCTG Market
There has been a drastic decrease in the rig count globally since 2014, and this fall has reflected in the demand for oilfield services, in the last few years. North America still has the most number of rigs globally, followed by the Middle East. Latin America takes the third spot. With pad?based horizontal drilling in the United States becoming more in demand, the onshore rig count in North America has become less meaningful. Rig efficiency is rising in the United States, the number of wells a rig can drill each year is rising at a significant rate. The OCTG market in North America is expected to be driven in future, majorly by new well drilling and an expanding producing well base. OCTG consumption per rig per month has more than doubled since January 2012, driven by increased lateral lengths and greater drilling complexity. Horizontal drilling in the United States drives the demand for premium grades and connections, providing better margins on OCTG.
The OCTG industry has benefitted from the resurgence in the oil & gas exploration and production sector in the United States, along with the decrease in the steel prices. The emergence of the hydraulic fracturing technology and horizontal drilling methods in the last few years have significantly boosted the growth of the OCTG market. The offshore oil & gas caters to a large part of the nation demand, mostly from the regions, such as Alaska, Texas, Louisiana, and California. In the recent years, the rise in the shale resources production has contributed to the growth of the OCTG market in the United States.
Key Developments in the Market
- March 2018: Sumitomo Corporation of Americas (“SCOA”), a subsidiary of Sumitomo Corporation, announced their plan to acquire all shares of US based oil country tubular goods (OCTG) distributor Champions Cinco Pipe & Supply LLC from Mitsui & Co. (USA), Inc. This acquisition is likely to enhance SCOA’s position within the OCTG industry and add valuable support to its current partners and customers.
The major players include – National-Oilwell Varco, Inc., ILJIN STEEL CO., Nippon Steel & Sumitomo Metal Corporation, TPCO Enterprise, Inc., Tenaris SA, TMK Ipsco Enterprises Inc., among others.
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- Current and future oil country tubular goods market outlook in the developed and emerging markets
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National-Oilwell Varco, Inc., ILJIN STEEL CO., Nippon Steel & Sumitomo Metal Corporation, TPCO Enterprise, Inc., Tenaris SA, TMK Ipsco Enterprises Inc., U. S. Steel Tubular Products, Inc., Vallourec SA, ArcelorMittal SA,
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