Growth Outlook for Oil Country Tubular Goods Market Looks Promising with Sustained Demand from Oil and Gas Industry
Oil country tubular goods (OCTGs) are extensively utilised in onshore and offshore oil and gas industry. Governments of different countries have laid regulations with respect to OCTG products. These regulations and norms are specific to the manufacturing process of these products. The American Petroleum Institute (API) stipulates precisely standardised specifications that define the properties of oil country tubular goods and classify them into ten grades. These products must be standardised and API-certified so as to withstand harsh conditions during the oil and gas operations. The oil and gas industry is prone to accidents, thus the efficient and certified products and systems are preferred to minimise accidents and operational hazards. The global oil country tubular goods market is set to expand promisingly over the near future.
OCTG Demand Picks up as Non-conventional Oil and Gas Resources Garner Interest
The primary factors driving the growth of the global OCTG market include the increasing demand for oil and gas, accelerating economic growth, rising energy consumption, growing shale oil production and increasing investment in offshore drilling exploration activities. The global demand for OCTG is highly dependent on discovery of oil and gas wells, drilling, prices of crude oil, and drill rigs. The noteworthy trends that can be witnessed in this industry are the accelerating rig count, and an upsurge in footage of drilled wells. However, the market expansion continues to face the challenges such as depletion of oil and gas reserves, volatile crude oil prices, environmental issues, and the international political and economic instability.
Growing consumption of steel in the oil and gas sector is the key driver for the growth in deployment of OCTG such as drill pipes, tubing, and casing pipe used extensively during drilling. OCTGs are corrosion-resistance products especially developed to handle oil and gas operations without any breakdown or failure. Utilisation of rigs or active rigs are the major boosters to the OCTG market growth. A slow and steady climb in the international drill rig count is driving oil country tubular goods consumption, especially of premium grades, typically used in offshore drilling.
Declining prices of crude oil and natural gas, followed by increasing investments in green energy, are expected to hamper the sales of OCTG. The ongoing COVID-19 pandemic has badly hit the oil and gas industry. Prices of crude oil went below $0 in April, 2020, which has halted the various offshore oil and gas E&P projects, thereby deterring the OCTG market. However, a U-shaped recovery is expected post-2020 owing to new oil and gas field discoveries in Saudi Arabia, and India.
Seamless OCTG Products Highly Sought-after
OCTGs mainly comprise a wide range of steel tubular products that are used in oil and gas exploration and production (E&P), particularly drilling. They can be seamless and welded pipes (electric resistance welding – ERW) and come in various sizes and lengths. The process of manufacturing of seamless, and welded pipes, and tubes is different with the seamless pipes designed to bear much higher stress. OCTGs generally include three categories of products - drill pipe, casing, and tubing, the demand for which largely depend on the performance of the upstream sector of the oil and gas industry. Thus, the oil and gas prices play an important role to govern the demand for these products. Volatility in the prices of crude oil and natural gas is expected to hamper the long-term growth of the market.
Currently, seamless segment dominates, with more than 60% of the global oil country tubular goods market valuation. This includes threaded drill pipe, casing, and tubing that are used in drilling, equipping, and operating oil and gas wells. High share of the segment can be attributed to increasing demand for better and reliable products in the oil and gas industry. Compared to their welded counterparts, seamless OCTG products can withstand high pressure, high temperature, higher mechanical stress, and corrosive atmosphere, accounting for their higher demand in the OCTG market.
Asia Pacific Region to Witness a Surge in OCTG Orders
North America dominates the market for oil country tubular goods on the back of growing exploration and exploitation of shale gas reserves within the region, which tend to raise the demand for drill pipes, casing, and tubing OTG products. This growth was fuelled by new and extensive oil/gas developments in the US, and Canada, as well as in the Middle Eastern and Asian countries. North America maintained drilling levels with consumption owing to robust increase in the usage of higher OCTG grades. North American Free Trade Agreement (NAFTA) plays a crucial role in shaping up the demand for oil country tubular goods.
Many Asian markets predominately utilise heat-treated, and alloy grades, primarily for offshore and shale gas applications, while China, commonwealth of independent states (CIS), and Africa – more-price sensitive markets – use commoditised, non-heat-treated material. Directional drilling and an ever-growing number of new projects operating in more challenging environments have contributed to the undergoing process of shifting OCTG demand more towards higher heat-treated grades. Asia Pacific is estimated to be the most attractive region for the oil country tubular goods market participants. The growing expenditure in directional drilling for unconventional resources such as shale gas, tar sand, and coal bed methane (CBM) in China, and India is expected to benefit the demand for OCTG products in the near future. Growing consumption of premium and technologically advanced pipes in Asian, Middle Eastern, and African countries is the new trend expected to boost the market for OCTG in these regions.
Global Oil Country Tubular Goods (OCTG) Market Is a Highly Competitive Landscape
Some of the leading players operating in the global oil country tubular goods (OCTG) market include United Drilling Tools LTD, Sanjack Petro, ILJIN STEEL CO., LTD., ArcelorMittal, VALLOUREC, Tubos India, CONTINENTAL ALLOYS & SERVICES, NOV Inc., NIPPON STEEL CORPORATION, TMK Group, and Tenaris S.A. With several suppliers/manufacturers involved in the OCTG market activity, it becomes a highly competitive sector. Furthermore, with the upsurge in the number of drilling and exploration activities with respect to unconventional resources/reserves, the competition in the global oil country tubular goods market has progressed to a higher level. The advent of technology, coupled with rapid economic developments especially in developing countries, constitutes the key factor guiding the demand for energy. This has propelled the market growth of OCTG over the years.