Global explosion in chromium and nickel OCTG demand expected

We expect year-on-year growth of 8% in demand for these alloy grades of OCTG collectively and a further increase of 10% in 2020.

For the highest grades – the nickel-alloy grades of OCTG – we forecast year-on-year growth of 22% in demand in 2019 and a whopping 40% increase in growth year on year in 2020. But what is driving this surge in demand?

These OCTG grades are primarily used for tubing applications for drilling for oil and gas in extreme conditions such as high pressure or high temperature, combined with aggressive environments such as high H2S (sour gas) and/or wet CO2 (sweet gas) conditions.

The Middle East and Caspian have some of the sourest geological drilling conditions in the world. In Qatar, the United Arab Emirates and Saudi Arabia, the focus is on offshore gas drilling.

We expect Qatar to ramp up its drilling in the world’s largest offshore gas field – the North Field – as part of plans to increase its LNG production significantly. Neighboring UAE is surging ahead with the development of the highly sour offshore Hail and Ghasha gas fields while Saudi Arabia is also looking to offshore drilling in fields such as Marjan, Zuluf and Berri.

Demand for alloy OCTG grades from national oil companies in the region, led by ADNOC and Qatar Petroleum, is increasing dramatically. But it’s not just the offshore markets in the MENA region requiring these alloy grades – Algeria and Oman are both developing their onshore gas drilling and are increasingly requesting 13Cr grades and above of tubing for their wells. And Iraq is also increasing using 13Cr grades while it pushes further into enhanced oil recovery (EOR) techniques.

This is having a significant impact on the traditional supply chains for the alloy grades of OCTG from Tier 1 OCTG mills to established buyers in the North Sea, the Gulf of Mexico and so on. The mills are already extending their lead times. While we have seen little significant movement in the pricing of carbon grades of OCTG over the past year, prices continue to accelerate for 13Cr grades and above on a monthly basis; there is no sign of this stopping in the short term.

In consequence, for the first time some major exploration & production (E&P) companies are now considering an audit of new OCTG mills to supplement their traditional suppliers for these higher grades of OCTG.

To evaluate the development of these markets on a quarterly basis, Fastmarkets’ research team has partnered Westwood Global Energy Group to produce a quarterly market report. Please click here to take a look.

Also included in our quarterly analysis is an evaluation of the development of the high-alloy grades of linepipe such as clad, lined and welded overlay.

Please contact us at hello@fastmarkets.com to learn more about our quarterly CRA report.