US Demand for Drilling Products and Services to Reach $44.4 Billion in 2014

US demand for drilling products and services is forecast to expand 8.1 percent annually to $44.4 billion in 2014, accelerating from the pace of the 2004-2009 period.  Advances will be promoted by an expected recovery in domestic oil and gas drilling activity as oil prices stabilize at a relatively high level and the US aims to reduce its reliance on foreign sources of energy.  Shale gas, in particular, will provide significant opportunities for growth as it becomes an increasingly important domestic source of natural gas.  These and other trends, including market share and product segmentation, are presented in Drilling Products & Services, a new study from The Freedonia Group, Inc., a Cleveland-based industry market research firm.

The Gulf of Mexico accounted for more than $5 billion in drilling product and service revenues in 2009. The April 2010 Deepwater Horizon disaster in the Gulf of Mexico -- which quickly prompted the establishment of new offshore safety requirements and is expected to bring about significant legislative activity -- may restrict short-term demand for offshore drilling products and services.  However, the drilling products and services market is forecast to benefit over the longer term based on the implementation of more stringent safety standards, which will likely promote demand for new equipment. 

Through 2014, drilling equipment demand is projected to slow from the pace of the 2004-2009 period, restricted by the cyclical drilling rigs segment as spending on new rigs declines in the wake of a purchasing boom which took place between 2006 and 2009.  Despite the glut of new rigs on the market, however, expanding drilling activity and the large pool of aged rigs approaching retirement will ensure a sizable ongoing market for new drilling rigs through 2014. 

Drilling services are projected to account for more than 80 percent of overall demand gains in the US drilling market through 2014.  Market expansion will be driven by the high cost of drilling marginal wells.  A major driver for such costs is the increasing reliance on technology when drilling to optimize production from poorer hydrocarbon resources.  Techniques such as horizontal and directional drilling, measurement-while-drilling to ensure accurate drill string placement, and drilling deeper wells in more difficult conditions all tend to raise the cost of drilling wells. 

The Freedonia Group is a leading international business research company, founded in 1985, that publishes more than 100 industry research studies annually. This industry analysis provides an unbiased outlook and a reliable assessment of an industry and includes product segmentation and demand forecasts, industry trends, demand history, threats and opportunities, competitive strategies, market share determinations and company profiles.