Oil Field ChemicalsOil Field Chemicals

A Boom Industry?

Ray Will, Director, IHS Chemical20-21June, 2012Houston, Texas USA

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Chemical Economics Handbook (CEH)Water Soluble PolymersCellulose EthersFerric ChlorideCalcium ChlorideLime/Limestone

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• The IHS U.S. Well Database is the largest and mostcomprehensive, with 3.5 million+ current and historic wellrecords, back to 1859.

• As many as 1,000 data elements and narrative commentsto inform E&P evaluations.

IHS Well Database

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to inform E&P evaluations.

• Data experts work directly in the field with more than 2,000contacts to bring well data before state reports are filedand data that some states never obtain.

• Includes Hydraulic Fracturing data: propping agent type &quantity

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Private Consulting

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• Market research

• Process evaluations

• Benchmarking studies

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• Benchmarking studies

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• Business interruption cause and cost analysis

• Many others

What are Oil Field Chemicals?

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1) Drilling Fluids: Chemical formulations to lubricate thedrill bit, control formation pressure and remove formationcuttings. May be water or oil based. Workover andcompletion fluids are used when operating in producing

Oil Field Chemicals—Categories & Functions

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completion fluids are used when operating in producingformations.

2) Cementing: Chemical additives used to cement steelpipes or casing to the sides of the borehole.

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3) Stimulation: Commonly used stimulation techniques are1) acidizing and 2) fracturing. Oil and natural gasstimulation differs-- natural gas wells require stimulationroughly twice as often as oil wells.

Oil Field Chemicals—Categories & Functions

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roughly twice as often as oil wells.

4) Production: Products are used at all stages, from oilproduction at the well bore to the delivery of crude to therefinery. Treatment of oil produced by enhanced recoverytechniques is also considered part of this category.

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1) Drilling Fluids— Components

Minerals Includes, but not limited to:

pH Control YES Lime, calcium chloride,potassium chloride, sodiumchloride, sodium carbonate &bicarbonate

Base Oils No

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Dispersants No

Emulsifiers No

Filtrate Reducers YES Lignite

Flocculants YESSalt/brine, hydrated lime,gypsum, soda ash

Foaming Agents No

Lost CirculationMaterials

YESVarious fiber, flake & granularmaterials

1) Drilling Fluids— Components(cont.)

Minerals Includes, but not limitedto:

Lubricants/Pipe-Freeing Agents

YES Graphite

Shale ControlInhibitors

YES

Calcium sulfate,potassium chloride,sodium silicate, lime, air

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InhibitorsYES

sodium silicate, lime, airblown asphalt

Synthetic fluids No

Viscosifiers YES Bentonite, attapulgiteclays

Weighting Agents YESBarite, hematite, ilmenite,calcium carbonate,calcium chloride

2) Cementing— Components

Minerals Includes, but not limitedto:

Accelerators YESCalcium chloride, sodiumchloride, sodium sulfate,sodium silicate

Dispersants YES Sodium chloride

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Fluid-Loss Additives No

Lost CirculationMaterials

YESGilsonite, perlite, mica,bentonite, silicates

Retarders YES Borax

Weighting Materials YES

Hematite, barite, sand,ilmenite, bentonite,attapulgite, pozzolan,gilsonite, silicates

3) Stimulation— Components

Minerals Includes, but not limitedto:

Acids No

Breakers No

Corrosion Inhibitors No

Silica flour, calcium

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Fluid Loss Additives YESSilica flour, calciumcarbonate

Gelling Agents No

Iron ControlAdditives

No

3) Stimulation— Components (cont.)

Minerals Includes, but not limitedto:

Sand, sintered bauxite,

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Proppants YESSand, sintered bauxite,resin-coated sand, alumina(and others)

Surfactants No

Viscosifiers No

4) Oil Production— Components

Minerals Includes, but not limitedto:

Corrosion Control No

Demulsification No

Drag Reduction No

Foam Control No

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Foam Control No

Gas Well WaterRemoval

No

Hydrate Control No

Hydrogen SulfideControl

YES Zinc & iron oxides

MicrobiologicalControl

No

4) Oil Production— Components(cont.)

Minerals Includes, but not limitedto:

Scale Control No

Water Clarifiers YES Ferric chloride

Water InjectionYES Sodium sulfite

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Water InjectionChemicals

YES Sodium sulfite

Wax &AsphalteneControl

No

The Market for Oil Field Chemicals

•Most of the growth is inFracturing and Stimulation

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•The largest geographic regionis the U.S.

Hydraulic Fracturing & Acidizing are theFastest Growing Segments

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The Market for Oil Field Chemicals

Global Oil Field Chemicals Segments--2010

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Drilling Fluid35%

Cementing9%

Acidizing10%

Fracturing18%

Oil Production28%

$15.7Billion

The Market for Oil Field Chemicals

North America52%Africa

Middle East7%

Asia Pacific7%

Global Oil Field Chemicals Markets--2010

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52%

LatinAmerica

11%

Europe7%

CIS8%

Africa8%

$15.7Billion

The Market for Oil Field Chemicals

15000

20000

25000

U.S. Dry Natural Gas ProductionBillions ofCubic Feet

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Hydraulic fracturing hasincreased U.S. naturalgas production to recordlevels.

Crude Oil and Natural Gas Prices HaveDiverged

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1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

Crude Oil, US Refiners’ Acquisition Price (Left scale, US$/barrel)

Natural Gas, Henry Hub (Right scale, US$/million Btu)

•• Fundamentals have supported oil pricesFundamentals have supported oil pricesin the nearin the near--termterm

•• “Iran risk premium” has pushed up oil“Iran risk premium” has pushed up oiland gasoline pricesand gasoline prices

Oil Prices – The Current Opportunity

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and gasoline pricesand gasoline prices

•• NonNon--conventional sources will limit oilconventional sources will limit oilprice increases in mediumprice increases in medium--termterm

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•• Current gas storage isCurrent gas storage isfilledfilled

North American Drilling Activity HasRefocused on Oil Instead of Natural Gas

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filledfilled

•• And oil prices remain highAnd oil prices remain high

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Opportunities for Hydraulic Fracturing

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•• Oil Field Chemicals willOil Field Chemicals willbenefit from Hydraulicbenefit from HydraulicFracturing growthFracturing growthoutside of the U.S.outside of the U.S.

•• PromisingPromising

Conclusion: Oil Field Chemicals Are a GrowthOpportunity in the Changing Energy Picture

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•• PromisingPromisingdevelopments indevelopments inAlgeria, Canada, China,Algeria, Canada, China,PolandPoland

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Ray WillIHS Chemicalray.will@ihs.com

Thank You

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ray.will@ihs.com

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