Finding reliable distributors for oil drilling equipment in the US is key to entering a competitive and highly specialized energy market. This article is based on impressions gained from the process of searching for distributors in the US for OSKL, a Russian oil drilling equipment manufacturer, in 2020.
Market situation in the US before 2020
Although the world focuses on sustainable energy, demand for oil and natural gas keeps growing. After a brief drop during the 2020 pandemic, this growth is expected to continue. Oil will remain a key raw material for energy and products.
There are more than 400,000 oil wells in the U.S. Most of these wells (85%) are marginal wells producing less than 15 barrels (1.8 m³) per day. A significant portion (11%) of the crude oil produced in the U.S. comes from marginal wells. The number of marginal production wells will increase in the coming years. However, many wells are reaching a critical production rate of 10 barrels (1.2 m³) per day, where production becomes inefficient.
Efficiency and government support
Industry leaders recognize that improving oil well pump efficiency can extend the economic life of deep wells. Federal, state, and Canadian governments support solutions to extend well lifespans. They do this to reduce energy import dependence and boost economic development in oil-producing states.
The US has seen a significant increase in new wells in recent years. Modern horizontal wells and the faster production rates from marginal wells contribute notably to this growth. According to statistics published on February 13, 2019, approximately 16,900 oil and gas wells were opened in the U.S. in 2017, and this number was expected to rise in the following years, with an anticipated 22,600 wells to be opened by 2022.
Key oil-producing states and market outlook
Traditional oil production occurs in California, Kansas, Louisiana, New Mexico, Oklahoma, and Texas. Each of these states produced 10 million barrels of oil from marginal wells. In 2012, Texas and California accounted for over 55% of the U.S.’s marginal oil production. In Canada, Alberta has the highest oil production. Based on this data, the oil and gas equipment market in the U.S. and Canada is expected to grow steadily in the long term.
Impact of the COVID-19 pandemic
However, since March 2020, crude oil demand has rapidly decreased due to the pandemic. Oil-producing countries were slow to respond with policies. This delay caused a sharp drop in oil prices. During our search for a sales partner for OSKL in the U.S., we observed that the pandemic forced companies to face major challenges. These included bankruptcies and the loss of top executives. All this happened while companies were trying to adapt their overall strategies to the new situation.
Opportunities for innovative oil and gas equipment
Oil prices sometimes fell below zero, making it inefficient to open new wells. This situation increases the importance of efficiency in the oil and gas sector and creates opportunities for innovative equipment. Companies can invest less by purchasing innovative pumps and valves. Although the U.S. and Canada usually have saturated equipment markets, innovative products like those from OSKL can enter the market, especially now. Before 2020, oil companies saw innovative equipment as just a good idea. Now, they actively seek such equipment to improve efficiency.
The market situation is beginning to stabilize. The disrupted balances create a good opportunity for new companies to enter the market. However, high expectations for customer service, infrastructure, and technical support in the U.S. and Canada pose major challenges for new brands.
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If you want more information about the oil mining industry, innovative equipment, or the market situation in the US, contact us. We can schedule a call with our consultant who managed the distributor search project in the US for this Russian company.
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