DAILY NEWS Mar 7, 2014 12:16 PM - 0 comments

Demand for shale gas and tight oil products and services to reach $98 billion in US

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Cleveland, OH - Demand for products and services related to the development of shale gas and tight oil resources in the US is forecast to rise 3.5% annually to $98 billion in 2017.

According to analyst Lee Steinbock, “Growth in tight oil applications will continue to be strong, supported by high oil prices and the development of newer liquids-rich plays.”

In addition, the outlook for dry gas plays is expected to improve as natural gas prices increase, especially after 2017.

Overall, the focus of activity will shift toward maximizing output from maturing plays (e.g., Bakken and Marcellus), although drilling and completions will continue to be supported by growth in newer formations such as Eagle Ford, Niobrara and Utica.

These and other trends are presented in Shale Gas & Tight Oil: Products & Services, a new study from The Freedonia Group Inc., a Cleveland-based industry market research firm.

A combination of improved technologies, especially horizontal drilling and high volume hydraulic fracturing, and high oil and gas prices, helped make the development of shale gas and tight oil economically feasible and played a significant role in the industry’s rapid expansion between 2007 and 2012. The discovery that longer laterals and more fracturing stages with greater proppant loads improved output led to increased demand for many products.

Much of this demand growth was in areas that are not traditional oil and gas hotbeds, resulting in insufficient infrastructure and product and service shortages.

In new plays, lease retention efforts drove up drilling rates, while a shift to liquids-rich plays -- after natural gas prices plummeted -- only further exacerbated shortages and drove up prices of products like guar gum gelling agents, proppants and the cost of completion services.

Due to sustained high levels of activity, growth for all products will be favourable. The fastest gains are expected for products which help in optimization efforts or are used in maximizing the performance of existing wells. In addition, operators continue to focus on improving their environmental image, which will spur growth in products like closed-loop drilling systems and water-based drilling muds.

Products such as guar gum gelling agents and services like pressure pumping that saw price spikes due to availability shortages will register slow (or no) growth in market value as competition increases and prices return to more sustainable levels.

Shale Gas & Tight Oil (published 02/2014, 397 pages) is available for US$5200. For details, visit www.freedoniagroup.com.

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