Production & Process Chemicals

During hydrocarbon production, there is several different chemical or blends of chemicals used to help to achieve the most efficient and effective production, both from a technical and commercial standpoint. The critical reasons as to why chemicals are used during oil and gas production process are 1) avoid/prevent waxing; 2) Deposition of scale, hydrates and asphaltenes 3) Prevent or deal with corrosion issues and 4) Prevent or deal with bacteria issues.

IMPORTANCE

LEVERAGE STRATEGIC ROUTINE BOTTLENECK

BUYER POWER

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WEAK

BUYER POWER

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BALANCED

BUYER POWER

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STRONG

Category Description Image

Category Description

During hydrocarbon production, there is several different chemical or blends of chemicals used to help to achieve the most efficient and effective production, both from a technical and commercial standpoint. The critical reasons as to why chemicals are used during oil and gas production process are 1) avoid/prevent waxing; 2) Deposition of scale, hydrates and asphaltenes 3) Prevent or deal with corrosion issues and 4) Prevent or deal with bacteria issues.

Generally, the formulation of production chemicals consists of 1-3 major components with some other additives. Very often, the final blend and composition will depend on field condition, and sometimes can even vary within the same field, depending on several variables and operating / reservoir conditions.

All those chemicals and blends generally called production chemicals and could be divided into major groups, based on function and/or outcomes required.  

  • Asphaltene dispersants / control agents used to minimize the risk ( almost impossible to eliminate this risk 100%) of precipitation of asphaltenes at various stages of production and transportation of crude oil. Deposition of asphaltenes may result in blockage of pipelines and downhole production equipment and damage to reservoirs.
  • Corrosion Inhibitors obstruct corrosion risk to downhole equipment and surface/plant piping system, from   hydrogen sulfide, carbon dioxide and oxygen
  • Defoamers / Anti foam agents are used to prevent or break the foaming process caused by gases being out of crude oil.
  • Demulsifiers / Emulsion Breakers are used to treat the issues of water-in-oil emulsions.
  • Paraffin Inhibitors obstruct the risk of and build-up and deposition of wax in the downhole equipment and surface/plant piping system.
  • Wetting Agents - are Surfactant substances that help to ease the surface tension of water and the ratio of oil and water. This, in turn, allows improves the spreading abilities of a liquid.
  • Biocides are used for various purposes, such as prevention/dealing of bacteria and micro-organisms that in turn, can cause broader issues.
  • Scale inhibitors  are used to control or prevent deposition scale in the  downhole equipment and surface/plant piping system
  • Hydrate Inhibitors are used to prevent/control the formation of hydrates during the production of natural gas, that in turn may cause plugs and blockage.  Those chemicals include methanal, glycol, ethanol and kinetic inhibitors.
  • Oxygen Scavengers obstruct corrosion risk to downhole equipment and surface/plant piping system, as a result of dissolved oxygen.

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Supply & Demand Dynamics

In terms of demand, production chemicals exhibit significantly different dynamics to workover & completion fluids and other segments. During a downturn, the focus is shifted to the existing production and making it most efficient, while the demand for drilling fluids slides down.

Mid to long term, the demand for production chemical is stable and should always be correlated with production levels worldwide. 

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Key Players

Largest suppliers and producers of production chemicals, outside of traditional OFS / Mud services companies, are

  • Champion X ( Nalco)
  • Clariant
  • Solvay
  • BASF
  • Dow / Dupont

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Cost & Price Analysis

As with many other commodity items, prices are primarily driven by the price of commodities, which are over long term exhibit an increase. As of Q3 2020, prices for production chemicals are mostly flat and may exhibit a significant decrease in certain products areas.

Most of the chemicals or components used in production chemicals are commodity materials, with the majority being used by industries outside of oil and gas. Producers of chemicals tend to dictate the pricing after they've served their main markets such as food, processing, and chemical industries. Certain commodity products are driven by market supply and demand dynamics that are outside of the oil and gas industry and sometimes work in completely opposite cycles.

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Total Cost of Ownership

  • Production chemicals is a substantial segment and represent around 30% of the entire market of oil and gas chemicals, second to drilling & completion fluids.
  • Many components in production chemicals are commodities
  • Largest markets for production chemicals are USA, CIS and the Middle East, representing around 60%-70% of the entire market.
  • The market of production chemicals is slightly different from the market of drilling, workover and completion fluids. The later is served primarily by oil field services companies, who may produce some of the chemicals, but mostly buy the products from other chemicals manufacturers. Whereas the latter, production chemicals segment, is also served by large manufacturers of chemicals who serve many other industries, who may also sell directly to oil companies directly.
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