Los Angeles, CA (PRWEB) September 03, 2014
Well stimulation services have a buyer power score of 2.8 out of 5. According to IBISWorld procurement analyst Hayden Shipp, “the well stimulation market has relatively low buyer power due to its rising concentration, lack of substitutes, increasing prices and heightened regulatory environment.” Market share concentration is high and rising, with the top four suppliers generating over half of the market's revenue. The market shares of these major players and other large oilfield service companies have grown at the expense of smaller well stimulation service providers, which are increasingly becoming acquisition targets.
“Additionally, stimulation services have no economically viable substitutes,” says Shipp. In terms of reservoir contact, the return on investment for stimulating a well through hydraulic fracturing is far superior to drilling new wells; a fractured well has the reservoir contact of hundreds or thousands of wellbores. Buyers wishing to improve the ultimate recoveries of their wells have little choice but to contract well stimulation firms because developing the expertise to stimulate wells in-house is prohibitively costly.
The price and demand for services have grown moderately since 2011, largely as a result of strong increases in domestic oil and gas production. During this period, boosted well stimulation activity also contributed to temporary shortages of silica sand, a proppant, and guar paste, a fracturing fluid ingredient; the increased cost of these inputs has added to price growth. Well stimulation prices are expected to keep rising during the three years to 2017, though at a slightly reduced rate due to less robust growth in hydrocarbon production. Also, an increasingly stringent regulatory environment elevates this market's risk. The federal government has heightened its oversight regarding well stimulation during the past three years and is expected to boost regulations and enforcement in the near future. States increasingly fill the federal government's regulatory holes, and various state laws require chemical disclosure, tests for water and air quality, and well inspections. A supplier's thorough monitoring of its environmental impact is therefore a key measure of service quality. The four largest vendors in the market are Halliburton, Schlumberger, Baker Hughes and Weatherford.
For more information, visit IBISWorld’s Well Stimulation Services procurement category market research report page.
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IBISWorld Procurement Report Key Topics
This report is intended to help buyers of well stimulation services for oil and gas wells. Stimulation services boost production for new wells and restore original productivity for old wells. In this report, well stimulation generally refers to hydraulic fracturing (“fracking”), through which massive amounts of fluids are pumped into a well at pressures that cause the reservoir formation to fracture. The resulting fractures are held open by proppants, which are typically sand, providing conduits for hydrocarbons to flow into the well from distances in excess of 100 feet. Well stimulation operations also include matrix acidization, which improves the permeability of the well’s reservoir formation by attacking impediments in the well without fracturing it.
Recent Price Trend
Product Life Cycle
Total Cost of Ownership
Supply Chain & Vendors
Supply Chain Dynamics
Supply Chain Risk
Market Share Concentration
Buying Lead Time
Key RFP Elements
Buyer Power Factors
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