The sound fundamentals and double-digit growth of Composite Frac Plugs & Frac Balls Market

Composite frac plugs and composite frac balls market

Stratview Research 02-07-2019

The crude oil has for long been the world’s most prized commodity and has rightly earned the sobriquet “liquid gold”. So potent are the vicissitudes of oil prices that it can make or break a nation; oil has indeed been a key variable in the global geopolitics.

A technology that could help extraction from an oil & gas (O&G) field that was previously thought as unfeasible, would surely become the talk of the town. Such is the story of Hydraulic fracturing, though invented in the 1940s, it has found fame only in 2000s.

A conventional oil & gas field has porous and permeable rocks through which the oil and gas flows out naturally into the wellbore. But this might not always be the case; the rocks might not be porous, and oil might not flow out naturally. Hydraulic fracturing allows the access through impermeable rocks (like tight gas sandstone, shale, and some coal beds, etc.) by fracturing them, using water, sand, and chemicals under high pressure, thus enabling the extraction of a large amount of oil and gas.

Hydraulic fracturing in vertical wells has been done for over five decades, but the recent advancements in horizontal drilling, and multiple applications in a single well along with its increasing use in extraction from erstwhile unproductive fields are the reasons hydraulic fracturing has gained currency in the last two decades and is evolving rapidly.

Plug-and-perf process is the most widely used method with 85% share of the market. During the Hydraulic Fracturing via plug-and-perf or other method, different zones of the wellbore need to be isolated during the multi-stage stimulation treatment, and frac plugs and balls play a vital role in the creation of isolated zones during frac stages in both horizontal and vertical wells. Hydraulic Fracturing is simply incomplete without the frac plugs and balls.

They are made with either metal or composites. The composite ones offer several advantages, they can withstand higher pressure (up to 12000 PSI) and temperatures (180°C) than plastics and salt balls, while maintaining structural integrity under extreme temperatures.

Composites frac plugs and balls also offer chemical inertness with any type of fluid such as oils, water, and natural gas, etc. They also offer superior productivity, with less mill out & low drill out time vis-a-vis metal frac plugs and balls. These sought-after qualities have made them capture 70% of the total market.


Composite Frac Plugs & Balls Vs Metal ones

Composite frac plugs and balls fair better than their metal counterparts in all the parameters such as Mill Out Time, Weight, Strength, Temperature Resistance, Pressure Endurance, Productivity, and Drill Out Time. Cast iron plugs and balls are three times as heavy and are harder to mill than composite ones, as a result, the market has been experiencing a shift from the use of traditional cast iron frac plugs and balls to composite ones.


Epoxy, the resin of popular choice

Speaking of resins, Epoxy has been the most natural choice and thus holds majority share of the market. The phenolic resin is the second most popular resin, while the other resins such as PEEK, PAI (Polyamide-Imide) and Nylon 6/6, together hold a small share of the market.

The preference to Epoxy resin emanates from its excellent interlaminar strength and toughness, excellent adhesive property as well as low shrinkage ratio. On the other hand, Phenolic resin offers excellent heat, fire, and chemical resistance, while it also has high tensile and compression strength.


The Lucrative Market with Double-Digit Growth

After analysing the market fundamentals, the drivers and all pertinent factors, Stratview Research has extrapolated the market growth at an excellent CAGR of >10% over the next five years (2019-2024) to reach US$ 2.8 billion by 2024.

The USA has been the pioneer in the mass adoption of Hydraulic Fracturing, and over the years the share of hydraulic fracturing in the total US O&G production has increased substantially. Today its share in the total oil production is about half, and near two-thirds in case of natural gas.

Regnant USA with Canada, Argentina, Russia, and China held a significant market share of the global composite frac plugs and balls in 2018. Led by the USA, North America held the largest market share in 2018. Europe and Asia-Pacific held small, insignificant share.

The market of composite frac plugs and balls has at its helm, Haliburton Company. The other major players of the highly consolidated market were Baker Hughes, Schlumberger Limited, Weatherford International, and Downhole Technology Ltd.

There have been frequent mergers in the market. In 2018, Nine Energy Service, Inc. acquired Magnum Oil Tools International Ltd., which provides Nine with a powerful, first-mover advantage in the dissolvable frac plug market due to its extensive track record.

In 2017, General Electric Co. merged its oil and gas equipment and services company to Baker Hughes to form the new company Baker Hughes, which is the world’s second-largest oilfield service provider by revenue. In 2016, Pelican Energy Partners announced the sale of Downhole Technology LLC to Schoeller Bleckmann Oilfield Equipment, mainly to leverage the synergy and gain market share. The activities in the market seem to indicate the desire to strengthen the revenues and increase the market share as well as expertise.

Of the total composite frac plugs and balls market, frac plugs hold major share of the market. In terms of the fabrication process, only three methods are used. The most widely used process is Filament winding which has a sizeable portion of the market and is also the fastest growing process, while compression molding and injection molding have a relatively small share.

The central body of the frac plug is made via filament winding, as it can fabricate parts with augmented strength and with zero void content. It also has the ability to quickly generate complex shapes, in large volume. Glass fibers and Epoxy resins are excellent materials for making composite frac plugs through the filament winding process.

Compression molding is a high-volume and high-pressure method and is suitable for molding complex, high-strength fiberglass products. Frac balls made through the compression molding process have significantly reduced void content and have better strength.

Injection molding is mainly used for manufacturing frac balls. Balls made through the injection molding process offer high quality, low cost, lower part cycle time, better surface finish, and have the ability to sustain high pressure.


The Factors Contributing to Market Expansion

The average cost of crude oil from the hydraulic fracturing process oscillates between US$ 30 to US$ 50 per barrel, whereas the cost of crude oil from the conventional process is about US$ 5 to US$ 6 per barrel in the Middle East region. The vagaries of crude price can change the fortunes of those involved in hydraulic fracturing. In 2016, the crude plunged below USD 30 per barrel and forced many involved in hydraulic fracturing out of business. But a positive outlook of oil prices in the near future with the global economy doing good offers reassurance.

There has been a rapid resurgence in the number of rigs globally which is a positive trend for the market. Over the years horizontal drilling has gained a lot of ground and is about 80% of the total market. Horizontal drilling increases the productivity in low-permeability rocks by bringing the wellbore much closer to the source of the fluid. Horizontal wells require more numbers of frac plugs and balls and lead to market expansion.

Oil & Gas Rig Count

The rapid rise in the frac stages and the lateral length of the well over the years is the icing on the cake and increases the size of the market, multi-folds.

Lateral length of oil and gas wells

increasing frac stages


What Tomorrow Holds?

The per unit cost of Hydraulic Fracturing is very high, and it requires high technological infrastructure and skilled labor.

America has large reserves of shale gas and has exploited the opportunity. But its replication in many enthusiastic nations like Middle East and North Africa (MENA): Egypt, Jordan, Saudi Arabia, and Tunisia faces various challenges. The prime concern being the requirement of billions of gallons of water and chemicals for fracking, and poses serious limitations, especially in the Middle East.  The chemicals used in fracking, oil, and the gas, run the risk of leakage into water supplies, which may contaminate water and nearby aquifers. Environmental concerns need has to be carefully addressed before extraction.

Composite frac plugs & balls are facing competition from dissolvable ones as the composites are difficult to mill out. But the cost of dissolvable frac plugs and balls is very high and has thus limited their scope.

On the bright side, the rising oil prices, and advancements in technology are increasing productivity and efficiency. Despite the mild environmental concerns, more and more nations are becoming interested in the use of hydraulic fracturing. In the next five years, the robust fundamentals are going to push the market at an impressive rate.


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