The drilling automation market is expected to grow at a CAGR of more than 3% over the period of 2020 - 2025. Factors such as an increase in the complexity of wellbore due to increased depth and use of multiple horizontal wells, increasing the number of rigs, and rising production of natural gas is expected to drive the market. However, the volatility of crude oil and natural gas is expected to restrain the market's growth.
- Oil and gas production is expected to continue to be a vital part of meeting global energy demand, and the offshore segment is expected to grow fastest in the forecast period. Increasing advancements in technologies are expected to aid the growth of the sector.
- Gas hydrates production may become an opportunity for the market players as its economically viable production may pose new problems, which may require better drilling automation techniques.
- Due to the high output of shale oil and gas, North America is expected to be the largest market during the forecast period, with majority demand coming from the United States and Canada.
Key Market Trends
Offshore Segment to Witness Significant Growth
- Drilling automation is centered on the downhole activities necessary in the actual drilling of an oil or gas well. This involves linking surface and downhole measurements with near real-time predictive models to improve the safety and efficiency of the drilling process. In the offshore segment, high level of expertise is required to maneuver the drill below the surface, and therefore drill automation may prove its reliability, which may stimulate the growth of the market.
- Although technology is being continuously refined, it is expected to create a paradigm shift in the oil and gas drilling industry. Concerns over the environment and safety of individuals are expected to be mitigated with the large-scale operationalization of the technology, which is expected to aid the growth of the market, especially in the offshore segment where safety is a significant concern.
- Despite the volatility in oil and gas prices, expectations are that free cash flow continues to grow in 2019, giving major offshore customers greater flexibility to invest in oil and gas production. The free cash flow of major offshore exploration and production companies is expected by SpareBank 1 SMN to be around USD 109 billion in 2019. A high level of free cash flow aids in new investments into the sector, which may help the drilling automation market.
- Although significant growth has taken place in unconventional onshore production, offshore production represented approximately 28% of overall oil and gas production in 2018. Offshore production of oil and gas is expected to increase due to the increasing demand for hydrocarbon resources. An increase in the offshore sector is expected to contribute to the growth of the market.
- Natural Gas produced in the world has increased by 3.4%, to 385.98 billion cubic feet, in 2019 from 373.22 billion cubic feet, in 2018. The increased utility of natural gas has ordained an increase in natural gas production to meet the world's consumption.
- Offshore Rigs number in the world has increased significantly by 21.34%, to 2,963 units, in 2019 from 2,442 units, in 2018. An increasing number of rigs directly corresponds to the increase in the demand for drilling automation in the industry. The number of rigs may increase further in the forecast period, thereby boosting the market's growth.
- Hence, the offshore segment is expected to witness growth in the forecast period due to an increase in free cash flow, advancement in technology, and an increase in oil production.
North America to Dominate the Market
- North America region is expected to be among the largest drilling automation market and is likely to continue its dominance in the coming years. The region consists of major oil and gas oil production basins in the world, which provide fertile ground for further growth in the industry.
- The United States is expected to be the largest user of the drilling automation in the region, especially with the boom in shale oil and gas in many onshore basins like the Permian basin that have contributed to advancements in the drilling automation market. Shale oil and gas have steadily increased in the country and may provide a platform for increasing drilling automation in multilateral horizontal drilling in the shale basins.
- North America increased its output of crude oil increased significantly to 1116.5 million tons in 2019 from 1042.2 million tons in 2018. Whereas, the region's gas production increased from 101.6 billion cubic feet per day in 2018 to 109.13 billion cubic feet per day in 2019. Increasing production of oil and gas is expected to create demand for better drilling Automation techniques and thereby aid the growth of the market.
- In 2018, the United States allowed the drilling in nearly all of the United States waters, which is among the most significant expansions of offshore oil & gas leasing by the federal government in the history of the United States. This new development is expected to drive offshore exploration and production activity, and hence, the demand for drilling automation is likely to increase in the future.
- Hence, the North America region is expected to dominate the market due to its vast crude oil and natural gas upstream sector, rising exploration in the offshore industry, and increasing demand for fossil fuel.
The drilling automation market is partially fragmented. Some of the key players in this market are Schlumberger Limited, Halliburton Company, Baker Hughes Company, Weatherford International PLC, National-Oilwell Varco, Inc.
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