bentonite supply and demand in drilling · nafta asia europe cis africa and middle east south and...

Suzanne Shaw

Senior Analyst

Roskill Information Services

Bentonite supply and demand in drilling

Summary

Overview of global bentonite supply and demand

Bentonite supply and demand in drilling mud

The role of bentonite in drilling mud

Trends in the oilfield drilling industry

Trends in energy demand

Future supply and demand of bentonite

Overview of global

bentonite supply and demand

Bentonite supply in 2014

• Global bentonite production of 17.51Mt

• plus an additional 3.65Mt of fuller’s earth

• USA and China are the largest producers

World: Production of bentonite by country, 2014 (%)

Source: Roskill Bentonite: Global Industry Markets and Outlook, 12th edition 2015

USA 27%

China 23%

India 8%

Greece 7%

Mexico 5%

Russia 3%

Turkey 3%

Others 24%

Historical production of bentonite

World: Production of bentonite by region, 2004 to 2014 (kt)


• Increasing production in China and India

• Production in USA and Europe fairly steady in recent years

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

NAFTA Asia Europe CIS Africa and Middle East South and Central America Oceania

World: Demand for bentonite by region, 2004 to 2014 (kt)


Historical demand for bentonite

• Demand growing at 2%py - strongest in Asia and South America at 4-5%py

• North American demand much lower but still the largest consuming region

0

5,000

10,000

15,000

20,000

25,000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Asia Europe North America Central and South America Africa and Middle East

Bentonite demand by application, 2014

• Global demand of around 20.43Mt plus an additional 5.30Mt for fuller’s earth

• Drilling mud is the fourth largest market, behind foundries, pet litter and IOP

World: Demand for bentonite by application, 2014 (%)


Foundry Sands 34%

Iron Ore Pelletising

22%

Pet litter 11%

Drilling Mud 11%

Civil engineering 10%

Refining 4%

Industrial Absorbents

2%

Agriculture 1%

Other 5%

Historical demand for bentonite by application

World: Demand for bentonite by end-use, 2004 to 2014 (kt)


• Demand from drilling muds increased by 3-4%py over the last decade

• One of the largest growing end-uses

0

5,000

10,000

15,000

20,000

25,000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Foundry Sands Iron Ore Pelletising Pet litter

Drilling Mud Civil engineering Other

Refining Industrial Absorbents Agriculture

Bentonite supply and demand in

drilling mud

Bentonite demand by application and region, 2014

World: Demand for bentonite and fuller’s earth by application and region,

2014


• Bentonite demand varies widely with region

• Demand from the drilling market is largest in North America

0% 20% 40% 60% 80% 100%

Central and South America

Europe

Asia

North America

Foundry Sands Pet litter Iron Ore Pelletising

Drilling Mud Civil engineering Refining

Industrial Absorbents Agriculture Other

Focus on North America

• Drilling consistently accounted for just over 20% of US bentonite consumption until recent

increases lifted its share to over 30%; this is expected to fall in the future

• The USA represents around a third of the global supply of bentonite

• Supply assured

• Drilling activity fallen off in 2015

USA: Demand for bentonite by end-use, 2004 to 2014 (kt)

Source: USGS

0

1,000

2,000

3,000

4,000

5,000

6,000

Consumption in drilling mud Consumption in other applications

Bentonite production

Focus on North America – USA bentonite production and exports

Source: GTA, Roskill

• The USA is the second-largest

exporter, accounting for 19% of

global bentonite exports – it was

overtaken by India for first time

in 2013

• It accounts for 18% of world

bentonite consumption

• The USA consumes the majority

of what it produces – around

3.6Mt

• Rise in tight oil and gas

production from late 2000s

USA: Bentonite production and exports,

2004-2014 (kt)

0

1,000

2,000

3,000

4,000

5,000

6,000

0

200

400

600

800

1,000

1,200

1,400

1,600

Pro

du

ctio

n

Ex

po

rts

Canada Japan Saudi Arabia

China Other US production

The role of bentonite in

drilling mud

Why is bentonite used in drilling?

Cool and lubricate the drill-bit, tubing and rig

Remove cuttings from the bottom of the well and

transport them to the surface

Hold cuttings in suspension if drilling is halted

Control subsurface pressure

Seal the borehole by depositing low-permeability

filter cake on the walls of the well bore to prevent

the loss of circulation fluids

Stabilise the well bore without damaging the

formation

Source: 3M

Specifications for drilling-grade bentonite

Set by API, OCMA

Source: Industrial Minerals

API specification 13A for bentonite and allied clays, 18th edition August 2010

Bentonite

Viscometer dial reading @ 600rpm 30 minimum

Yield point/plastic viscosity ratio 3 maximum

Filtrate volume 15.0ml maximum

Residue >75µm 4.0% maximum mass fraction

OCMA bentonite


Yield point/plastic viscosity ratio 6 maximum

Filtrate volume mm 16.0 maximum


Non-treated bentonite

Yield point/plastic viscosity ratio 1.5 maximum

Dispersed plastic viscosity millipascal-seconds 10 minimum

Dispersed filtrate volume mm 12.5 maximum

Attapulgite and sepiolite



Moisture 16.0% maximum mass fraction

Where is bentonite used in drilling?

• Bentonite is mainly used in water-based drilling muds – easier to dispose of /more ‘natural’ –

used in most traditional wells

• Increasing use of oil-based muds in deeper wells - much smaller amounts of bentonite are

used in the form of organophilic clays

Water-based muds

Water/brine 76%

Baryte 14%

Clay/polymer 6%

Other 4%

Oil-based muds

Non-aqueous fluid 46%

Baryte 33%

Brine 18%

Emulsifiers 2%

Gellants 1%

Synthetic-based muds

Dry gas

Mist

Foam

Gasified mud

Source: S&M Industrial Minerals

• Increasing drilling for unconventional oil and gas resources

• These may require alternative drilling products to be developed – increasing use of artificial

materials?

• Hectorite is an example of alternative natural product that may be used in harsher

conditions, at higher depth and temperature – current market is very small

Trends in the oilfield drilling

industry

Global distribution of oil and gas production

Source: BP Statistical Review of World Energy, June 2014

World: Oil and gas production, 2013

(7.2Bnt oil equivalent)

Middle East 26%

Europe and Eurasia

25%

North America 22%

Asia Pacific 12%

Africa 8%

South and Central America

7%

Global production of oil and gas – North America and ROW


North America and ROW: Production of oil and gas, 2003 to 2013 (Mt oil

equivalent)

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Oil (ROW) Oil (N. America) Natural gas (ROW) Natural gas (N. America)

Global rig count

Source: Baker Hughes

Notes: Mexico included in South and Central America; 2015 ytd Jan. to May

World: Average monthly oil and natural gas rig count by region, 2000 to 2015 ytd

(number of rigs)

0

500

1,000

1,500

2,000

2,500

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015ytd

Ben

ton

ite c

on

su

mp

tion

(kt)

Rig

co

un

t

USA Middle East South and Central AmericaCanada Asia Pacific EuropeAfrica Bentonite consumption

Focus on North America – oil and gas production

Year-on-year change in oil and gas production, 2004 to 2013 (%py)


-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

7%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

North America World

Focus on North America - US crude oil production

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,0001

98

1

19

82

19

83

19

84

19

85

19

86

19

87

19

88

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

Gulf Coast (PADD 3) Midwest (PADD 2) West Coast (PADD 5) Rocky Mountain (PADD 4) East Coast (PADD 1)

Source: US Energy Information Administration

USA: Field production of crude oil, 1981 to 2013 (thousand barrels)

Focus on North America – trends in tight oil consumption

Sources: US Energy Information Administration tight oil and shale gas production estimates, Canadian

National Energy Board

Focus on North America – increased horizontal drilling

Sources: Baker Hughes

0

200

400

600

800

1,000

1,200

1,400

Directional Horizontal Vertical

USA: Average annual drilling rig activity by type, 2000 to 2015

Focus on North America – increased horizontal drilling

Sources: Baker Hughes; USGS, Roskill estimates

USA: Average monthly rig count and consumption of bentonite in drilling mud, 2000

to 2013

0

500

1,000

1,500

2,000

2,500

Average monthly rig count Consumption of bentonite (kt)

Trends in energy demand

Global distribution of oil and gas consumption


World: Oil and gas consumption, 2013 (7.2Bnt oil equivalent)

Asia Pacific 28%

North America 26%

Europe and Eurasia

25%

Middle East 11%

South and Central America

6%

Africa 4%

Global consumption of primary energy

World: Historical consumption of primary energy by type, 2003 to 2013 (Mt oil

equivalent)


0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Oil Natural gas Coal Nuclear Hydroelectricity Other renewables

Global energy consumption has increased by 52% over the last 20 years and by 30% over the

last 10 years

Focus on North America – trends in oil/gas consumption

Oil and gas as a proportion of primary energy consumption, 2003 to 2013 (%)


30%

35%

40%

45%

50%

55%

60%

65%

70%

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

World Asia North America

Future distribution of oil and gas consumption

Source: BP Energy Outlook 2035, January 2014

• Global energy consumption to rise by 37%

in total to 2035. Slower than in previous

decades – increasing energy efficiency.

• 96% of consumption growth will come from

emerging economies (more than half from

China and India).

• Consumption in mature economies of North

America and Europe forecast to grow slowly

and decline in the long-term.

• Fossil fuels (oil, natural gas and coal)

expected to account for 81% of demand by

2035.

• Natural gas - strongest growth in demand of

the fossil fuels at 1.9%py to 2035.

• Coal - weakest growth in demand of the

fossil fuels at 0.8%py to 2035.

World: Forecast consumption of primary

energy by type

Significant energy production growth in India and China

World: Forecast production of primary

energy by region, 1990-2035 Mnt oil equiv.

Source: BP Energy Outlook 2035, January 2015

• Overall global energy production is

forecast to grow at 1.5%py.

• Growth concentrated in non-OECD

countries, accounting for nearly 80%

of the volume increases. Fastest

growth in Asia-Pacific at 2.1% py

• Middle East and North America next

largest growth areas. North American

energy production will grow by 1%py

to 2035, and it is on the path to

achieve self-sufficiency by 2021.

• Growth in all regions except for

Europe

0

5,000

10,000

15,000

20,000

25,000

30,000

1990 1995 2000 2005 2010 2013 2015 2020 2025 2030 2035

OECD Non-OECD Europe FSU USA China India

Future supply and demand of

bentonite

Bentonite supply and demand in 2020

• Global production could rise at a rate

of 4%py to reach 22.3Mt of bentonite

and 4.2Mt of fuller’s earth by 2020.

• China is expected to become the

largest producer of bentonite

worldwide, overtaking the USA.


World: Demand for bentonite by application,

2020 (%)

• Global demand for bentonite

is forecast to reach 25.1Mt

plus an additional 6.1Mt for

fuller’s earth by 2020

• Drilling mud could become

the third-largest application

Foundry Sands 35%

Iron Ore Pelletising

22%

Drilling Mud 11%

Civil engineering

10%

Pet litter 10%

Refining 4%

Industrial Absorbents

2%

Agriculture 1%

Other 5%

Demand for bentonite by application and region, 2020

World: Demand for bentonite and fuller’s earth by application and region,

2020


• Drilling will continue to be an important market for bentonite in North America

• Consumption of bentonite in drilling will increase in Asia and South America

0% 20% 40% 60% 80% 100%

C and S. America

Europe

N. America

Asia

Pet litter Foundry Sands Iron Ore Pelletising

Drilling Mud Civil engineering Agriculture

Industrial Absorbents Refining Other

Summary

• Global energy demand increasing at 1.4%py

• Growth in natural gas and oil still be strong. New exploration and production rigs will

increase demand for bentonite by ~3%py

• North America will continue to be the largest bentonite consuming region in drilling

• The jury is still out on the future of unconventional fields. This could drive changes in drilling

product specifications to adapt to harsher environments – bentonite may loose some ground

to alternative products

• Bentonite is still the best material for the job in most cases – relatively cheap, ‘natural’ and

consistent.

Are you facing major decisions

involving metals or minerals?

Roskill Consulting.

Approachable. Independent. Expert.

Contact Suzanne Shaw

[email protected]

Disclaimer

The statements in this presentation represent the considered views of Roskill

Information Services Ltd. It includes certain statements that may be deemed

"forward-looking statements“. All statements in this presentation, other than

statements of historical facts, that address future market developments, government

actions and events, are forward-looking statements. Although Roskill Information

Services Ltd. believes the outcomes expressed in such forward-looking statements

are based on reasonable assumptions, such statements are not guarantees of future

performance and actual results or developments may differ materially from those in

forward-looking statements. Factors that could cause actual results to differ

materially from those in forward-looking statements include changes in general

economic, market or business conditions.

While Roskill Information Services Ltd. has made every reasonable effort to ensure

the veracity of the information presented it cannot expressly guarantee the accuracy

and reliability of the estimates, forecasts and conclusions contained herein.

Accordingly, the statements in the presentation should be used for general guidance

only.

bentonite supply and demand in drilling · nafta asia europe cis africa and middle east south and...

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