Prices of directional drilling services are rising due to strong oil and natural gas production activity
Los Angeles, CA (PRWEB) January 26, 2015
Directional drilling services have a buyer power score of 2.5 out of 5, indicative of a market with relatively low buyer power. On one hand, a low level of vendor financial risk, which results in a negligible risk of supplier bankruptcy, favors buyer power, says IBISWorld research analyst Agiimaa Kruchkin. However, “a limited availability of substitutes, a significant level of specialization and high recent price volatility limit buyer negotiation power.”
Demand for directional drilling services has been robust due to the benefits of these services. Namely, directional drilling allows buyers greater access to resources scattered throughout the well bore. Furthermore, this method has improved drilling efficiency, which also reduces costs. “By comparison, in-house directional drilling is an expensive alternative and vertical drilling is limited in its capacity to reach reservoirs,” says Kruchkin, “thereby maintaining demand for directional drilling and aiding buyer power.” Significant price volatility has also challenged buyers during the period. Sudden swings in service prices undermine buyers' ability to accurately budget for services. As a result, buyers can bundle services for greater cost savings.
In the three years to 2014, service rates for directional drilling have trended upward, hampering buyer power. External demand drivers like industrial production index and the value of construction have facilitated this growth to the benefit of suppliers. At the same time, tepid annualized growth in the oil and natural gas price index has offset the increase in service prices to an extent. Furthermore, because a large number of small and medium-size vendors characterize this market, price-based competition is prominent and provides some relief to buyers. Current suppliers include Baker Hughes Inc., Halliburton Company, Schlumberger Ltd. and Weatherford International Ltd. For more information, visit IBISWorld’s Directional Drilling Services procurement category market research report page.
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IBISWorld Procurement Report Key Topics
This report is intended to assist buyers of directional drilling services. Directional drilling involves drilling at an angle to take measurements, hit targets and stimulate reservoirs. These evaluation services aid in reservoir engineering, well placement and mining resource mapping. Directional drilling services benefit buyers because they reach targets that cannot be reached otherwise, while improving well productivity in a fractured reservoir and minimizing the well's environmental impact. This report does not cover oil well fishing services or horizontal drilling services.
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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