his blog post is based on impressions gained from the process of searching for distributors in the U.S. for OSKL, a Russian oil drilling equipment manufacturer, in 2020.
Market situation in the U.S. before 2020
Despite the global trend toward the development of sustainable energy sources, there has been a steady increase in demand for oil and natural gas worldwide. It is anticipated that this growth will continue, following a temporary decline during the 2020 pandemic, and that oil will continue to be used as a raw material for energy and products.
There are more than 400,000 oil wells in the U.S. Most of these wells (85%) are marginal wells producing less than 15 barrels (1.8 m³) per day. A significant portion (11%) of the crude oil produced in the U.S. comes from marginal wells. The number of marginal production wells is expected to increase in the coming years; however, an increasing number of wells are reaching a critical production rate of 10 barrels (1.2 m³) per day, at which point production becomes inefficient.
Industry leaders have realized that increasing the efficiency of oil well pumps could extend the economic life of deep wells. Federal and state (and Canadian) governments are aware of this issue and are supporting solutions to extend the life of wells. Reasons for government support include policies to avoid dependence on energy imports and the economic development of other oil-producing states.
There has been a significant increase in the number of wells opened in the U.S. in recent years. Along with modern horizontal wells, the accelerated production rate and future expected production increase from marginal wells are noteworthy. According to statistics published on February 13, 2019, approximately 16,900 oil and gas wells were opened in the U.S. in 2017, and this number was expected to rise in the following years, with an anticipated 22,600 wells to be opened by 2022.
Traditional oil production is conducted in California, Kansas, Louisiana, New Mexico, Oklahoma, and Texas. Each of these six states has produced 10 million barrels of oil from marginal wells. Only Texas and California produced more than 55% of the U.S.’s total marginal oil production in 2012. In Canada, the highest oil production is in Alberta. Based on this data, the oil and gas equipment market in the U.S. and Canada is expected to continue growing in the long term.
However, since March 2020, there has been a rapid decrease in crude oil demand due to the pandemic. Oil-producing countries were slow to establish policies, leading to a sharp decline in oil prices. In our search for a sales partner for OSKL in the U.S., we can say that the pandemic caused companies to face upheavals such as bankruptcies and the loss of top executives while they were determining their general strategies for the new situation.
Opportunities for innovative oil and gas equipment
Due to oil prices occasionally falling below zero, opening new wells is no longer efficient. This situation increases the importance of efficiency in the oil and gas sector and creates opportunities for innovative equipment. Purchasing innovative pumps and valves requires a smaller investment. While the U.S. and Canada typically have saturated markets in terms of equipment, it can be said that innovative products like those from OSKL have a chance to enter the market, especially during this period. Whereas innovative equipment was seen merely as a good idea before 2020, oil companies now need to search for innovative equipment to operate more efficiently.
Although the market situation is beginning to stabilize, the disrupted balances offer the right timing for a new company entering the market. In any case, the high expectations for customer service support, infrastructure, and technical support in the U.S. and Canadian markets represent the most challenging aspects for new brands entering the market.
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