Industrial Minerals Inside Edge - 16 November

By Mike O'Driscoll
Published: Friday, 16 November 2012

Oilfield minerals market outlook – time to wake up and smell that Arabic coffee

The searing heat of Abu Dhabi played host to the great and the good of the Middle East oil and gas business, who convened at the 15th Abu Dhabi International Petroleum Exhibition and Conference for four days of meeting, mingling, and much discussion this week.

Yours truly was in attendance, navigating ADIPEC’s huge exhibition with clientele from all aspects of the oil and gas supply chain.

Chief targets were of course the oilfield service companies with all the usual suspects there in high profile, but especially interesting were some new and emerging local oilfield players keen to break into this regional growth market.

The event was possibly too universal in the oil and gas space for specific oilfield mineral suppliers, but typically that didn’t stop a smattering of Chinese proppant suppliers peddling their wares and the odd Indian barite (barytes) supplier in evidence – but I was still surprised there weren’t a few more.

And I’ll tell you why.

The talk of the town was the keen pursuit of natural gas reserves in the region, and in particular through unconventional resources, which appeared to be on the agenda of every oil and gas explorer and producer as well as the oilfield services companies present.

This can only be good news for potential future market demand for oilfield mineral suppliers working in the Middle East.

Already the market is very tight here for barite. Saudi Aramco, the world’s largest oil company, on its own demands some 700,000 tpa barite for its requirements.

But looking ahead, and with unconventional resources in mind, it is especially those that are supplying hydraulic fracturing operations that should take note – so we’re talking frac sand and ceramic proppants (thus the Chinese present at ADIPEC, in advance as ever).

The thing is we’re at the early stages here. Actually, amazing as it might seem, there is little, if any, fracking going on in the region right now, apart from in certain regions of Iraq, according to the dominant oilfield service player there, OilSERV.

This was echoed earlier in the year, when talking with leading Saudi silica sand producers who assured me they could produce frac sand, but as yet there was no domestic market for the material.

So why bother?

Indeed, Adwan Chemicals, which makes the grade, was at the time exporting frac sand to overseas markets.

This all looks set to change in the near-to-medium future. Saudi Aramco is steaming ahead to focus on developing unconventional gas resources in the region and is making no bones about getting its staff up to speed on fracking techniques and other innovations pioneered by US oilfield experts by sending them over to the US to soak up the knowledge for application back in the Kingdom.

Aramco has formed a new division to specifically target unconventional gas resources, and its chief exploration manager, Saleh M. Saleh, summed up the situation beautifully in this month’s issue of Petroleum Economist: “This is a good time for companies to come to Saudi Arabia. We are learning from the North American experience...success is our only option,” he said.

Saleh’s last point underlines the pressure now on Saudi Arabia to secure new and large energy sources to meet its soaring demand for power – led by rising domestic, rather than industrial, consumption, mainly in air conditioning.

Surely the time is ripe for oilfield mineral suppliers to check out their resources and logistics for a new wave of proppant demand in the Middle East. This will certainly be a major discussion point at IM’s upcoming Oilfield Minerals Outlook: Middle East, Dubai, 21-23 January.

Opportunities down the Danube

Proppant logistics also came up in conversation with Austrian oil and gas explorer OMV, busy fracking Romania’s Black Sea offshore fields, but also active in the Middle East.

A keen consumer of proppants for its Romanian operations, exploration staff at OMV mused whether given the interest in developing Poland and Romania’s shale gas (and other potential fields in central and eastern Europe), potential frac sand (silica sand producers) and ceramic proppant players (kaolin, bauxite producers) with proximity to the Danube might not consider their excellent logistical position to supply these new markets.

Check out the route of the mighty river, it’s highly instructive, which reminds me that leading Bulgarian kaolin producer, Kaolin JSC, was in attendance at this year’s Oilfield Minerals Outlook in Houston (which IM is repeating next June).

It’s possible to make a ceramic proppant from calcined kaolin – so a new ceramic proppant producer centrally located in Bulgaria near the Danube? Now that’s an idea. Any silica sand producers around there as well?

Mike O’Driscollis Global Head of Research and Consultant Editor at Industrial Minerals, previously he was Editor of IM 1995-2012.

T: +44 20 7827 6444; modriscoll@indmin.com



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