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US drilling uptick does little to spur bentonite demand

By William Clarke
Published: Friday, 14 July 2017

Petrochemical extractors in the US are favouring oil-based muds, meaning that increased drilling is doing little to drive bentonite demand.

US drilling may be booming, but demand for bentonite drilling clay remains muted, as drillers continue to favour oil-based muds, industry sources told IM.

Bentonite is used in water-based drilling fluids, or muds, but the clay is not necessary in synthetic fluids containing hydrocarbons.

Drilling fluid is necessary in oil exploration and extraction to lubricate and cool the drill bit, as well as to maintain formation pressure, preventing a costly blow-out.

So bentonite producers might have been hoping for an increase in demand thanks to the recent uptick of US drilling activity.

Prices struggle

Last week the oilfield services company Baker Hughes reported the number of active drilling rigs at 941, compared to just 438 a year ago. This increase comes despite the fact that oil prices are still struggling to concertedly break the $50 a barrel mark, which many in the industry have identified as the break-even point for onshore US producers.

But speaking to IM, a source at a major oilfield services provider noted that the increase in drilling has been extremely localised.

The increase has only been seen in onshore US activity, with numbers outside the US remaining fairly stagnant.

And even within the US, new drilling activity is concentrated in the Permian basin, the oil-rich region of West Texas.

Drillers in the Permian basin are reported to prefer to use clay which is below API-grade, or oil-based mud.

Oil-based mud is often preferred for shale drilling, because it is less able to penetrate into shale formations, and is less likely to cause collapses or blockages of the formation.

Another source at an oilfield services provider told IM that sales of bentonite had remained stagnant, even as sales of barite, a heavy mineral used as a weighting agent in drilling fluid, recovered. 

High maintenance costs

One US bentonite producer noted that bentonite prices had remained flat despite the uptick in drilling.

"Drilling is still a very minor use of bentonite," he said. The swelling clay has a wide range of other uses, from metal casting, to wine production, to kitty litter.

"Drillers are using more oil-based muds," another US-based producer told IM. But he noted that demand for bentonite from non-oil drillers, such as pipeline drillers, was more active.  

And he was optimistic that the move toward oil-based drilling fluids might not be a permanent one.

"Oil-muds mean higher maintenance costs," he noted. "A lot of mud companies are saying that they want to go back to clay."

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