Global Oil Country Tubular Goods Market Outlook

  • The global OCTG market is estimated at $47.66 billion in 2016 and is anticipated to reach $57.7 billion by 2019 at a CAGR of 6.58 percent
  • The Asia-Pacific is the highest demand-generating geography, followed by North America
  • The US, China, and Russia are the most important global markets, due to high consumption of OCTG

Oil Country Tubular Goods market outlook

Global OCTG Industry Trends

Industry Overview

  • Demand for premium connections is growing at approx. 2 percent per yea
  • The Middle East is the largest premium connection market, due to sour gas discoveries, longer expected well life, and risk averseness
  • Demand has been growing steadily over the recent years, with the biggest gains in CIS countries, Middle East, and China
  • Asia (except China), the Middle East, and North America are mainly using heat treated steel and alloy steel, due to offshore drilling, sour application, and shale gas. CIS countries, China, and Africa historically have been consuming low-grade commodity products
  • Global distribution between heated-treated and non-heated-treated products is almost at par. More harsh drilling environment, such as sour services, shale gas, ultra deep-water, and horizontal/directional drilling, require more heat-treated products
  • Consumption of seamless OCTG is significantly larger than welded OCTG, as the seamless process can achieve higher grades and heavier wall thicknesses

Risks and Opportunities

  • Material selection can result in a price increase of as much as five times. Hence, it is important to ensure that OCTG specifications fit for the purpose. There is a very extensive list of factors that need to be considered, which, in turn, may result in faster delivery and lower price of OCTG
  • Metallurgy specialist: OCTG selection is usually done by a Drilling Engineer, who is not an expert in analyzing metal/steel chemistry or metallurgy. Hence, having an in-house Metallurgy Specialist may bring a significant value and cost reduction opportunities, whereby the fit-for-purpose material is selected

Cost Drivers and Cost Structure

  • Cost optimization can be done by:
  • Selecting cost-effective materials for the well
  • Reducing string weight and steel quantity
  • Using a standard drift/bit size
  • Cost of producing seamless pipe is expected to decline, due to falling scrap prices; the cost of producing welded pipe is expected to see notable increase, due to the rising hot-rolled sheet pricing
  • Manufacturing costs in the Asia-Pacific and the Middle East willincrease at a greater rate than those in North America and Europe
  • Direct manufacturing cost constitutes the highest share, due to:
  • Processes, like heat treatment, casting, piercing & rolling, refining (AOD & VOD) cold drawing, threading and inspection, which are involved in OCTG manufacturing, which are time consuming and costly. Mills incur large fixed cost to maintain and operate such facilities and variety of processes
  • Long repetitive cycles of certain processes and highly prescriptive and diligent QA/QC processes in chrome casing
  • Seasonal consumption of steel brings a lot of volatility into procurement of raw materials and energy
  • Direct input of raw materials: Steel and other required materials, such as Molybdenum (Mo), Manganese (Mn)., Nickel (Ni), Chromium (Cr), and Silicon (Si). Some of these raw materials are sourced from countries excluding the manufacturing areas
  • Overheads are based on industry analysis, average numbers, and accounting principles
  • Profits are based on industry analysis. There are companies that work with less than 6 percent net profits, while some with more than 9 percent net profits