Drilling Mud Continues to Lead Demand for Barite
Barite is a commodity mineral that occurs in a wide range of rocks including sedimentary rocks such as limestone and sandstone, hydrothermal ore veins, and marine deposits. Also known as baryte, heavy spar is the most common barium mineral. Barite is not a manufactured product and is considered ecofriendly material, thus does not require EU REACH regulatory registration. The product is extracted through surface or underground mining.
Overwhelming majority of barite consumption is from the oil & gas industry. More than 3/4th of the total barite consumed is used as weighting agent in the formulation of drilling fluids. Softness of barite also enables lubrication, preventing damages of drilling tools during the well drilling process. Though there are alternatives to barite it offers an economical and non-toxic solution over its counterparts such as ilmenite.
The high purity form of barite is used for medical purposes. For instance, barite is used to manufacture barium meals for detecting anomalies in gastrointestinal tract. Its density prevents X-ray from penetration, allowing analysis of normal and abnormal anatomy. Barite is also used as filler in rubber and plastics. It is also used to create bright colors in engineered plastics such as ABS.
Sp. Gr. 4.2 to Remain Dominant Grade Due to its Predominant Use in Oil and Gas
There are multiple grades of barites available in the market. Based on specific gravity and purity, it is classified as: Sp. Gr. 3.9, Sp. Gr. 4.0, Sp. Gr. 4.1, Sp. Gr. 4.2, and Sp. Gr. 4.3. Applications of barite depends on the grades and specific gravity. Most common grades set by American Petroleum Institute (API) for the oil & gas industry are Sp. Gr. 4.3, Sp. Gr. 4.2, and Sp. Gr. 4.0. Barite helps to control pressure, prevents blow-out, and provides lubrication during drilling operations. For offshore drilling, Sp. Gr. 4.2 is preferred. The daily crude oil demand worldwide stood at 99.7 million barrels per day and is expected to surpass 100 million barrels per day over the coming years.
In recent past, due to dwindling reserves of Sp. Gr. 4.2, API introduced new grade SG. Gr. 4.1 for the oil and gas industry This gave the drilling companies more choice of material to use for the formulation process. This is expected to drive the demand for Sp. Gr. 4.1 especially in land-based drilling operations. Other applications such as plastics, glass, chemical manufacturing, and paint uses grades between Sp. Gr. 4.1–Sp. Gr. 4.3, depending on the barium sulphate concentration required for product.
Middle East Continues to be the Largest Consumer Owing to Oil and Gas Production
In 2018, The Organization of the Petroleum Exporting Countries (OPEC) accounted for around 80% of the world’s proven oil reserves. The Middle East controls 64.5% of the total serves with Saudi Arabia, Iran, Iraq, and Kuwait, holding the highest share. In 2018, the Middle East and Africa region accounted for around 3/4th of the worldwide barite demand. The region contributes to around 30% of the total oil production. Traditionally, the Middle East and Africa largely consumed Sp. Gr. 4.2 grade for its drilling operations, however, in recent past Sp. Gr. 4.1 and lower grades have also become popular materials due to shortage of Sp. Gr. 4.2.
North America was the second-largest consumer of barite. In volume units, the U.S. was the topmost producer of oil in 2019. Significant rise in offshore rig counts in the past couple of years has been the key driving factor behind the growth in the region. More than 90% of the barite consumed in the U.S. is for the oil and gas drilling with remaining volume consumed in industrial applications such as fillers in paint and coatings, engineering plastic, and chemical manufacturing.
Focus on Strategic Synergies to Gain Market Position
The global barite market is highly consolidated with companies from China, India, the U.S., and Morocco dominating the market share. Strategic synergies such as M&A, JV deals with end users have become an important aspect of the barite business to improve upon the margins. In 2018, Andhra Pradesh Mineral Development Corporation Limited (APMDC), a leading barite manufacturer in India entered into an agreement with ONGC Limited, a leading oil and gas company for setting up a barite processing unit to improve the quality of barytes mined from Mangampeta mines, Andhra Pradesh. This will help APMDC to upgrade 30%-40% of its lower grade mined barite with ONGC taking up the purification process.
Furthermore, regional companies are also expanding their capacities to meet the growing demand. In 2019, CIMBAR Performance Minerals Inc. opened a new barite facility in Ohio, U.S., to serve oilfield market in Northeast region. This facility is expected to help CIMBAR strengthen its regional position as well as give advantage in terms of logistical costs and services.