In the midst of the pandemic of spring 2020, when oil prices dropped even below zero, Alliance experts searched for for distributors in the US for a Russian developer of oil mining equipment.
Market situation before 2020
Although there is globally a trend of developing sustainable energy sources, the world has seen a rapidly growing demand of oil and gas. We expected this growth to continue after the temporary decline during 2020, where oil will be continued to be used for energy and as raw material for products.
Due to this increasing demand, the global market of oil & gas equipment was forecasted to keep on growing steadily, with the greatest potential in the US and Canada. Industry pioneers started to realize that by improving oil well pump efficiency, they could extend the economic life of far deeper wells by years.
Currently there are over 400 000 oil wells in the US. The majority (85%) of them are marginal wells, who produce less than 15 barrels (1.8 m3) of oil per day. A serious number of 11% of the crude oil produced in the US comes from a marginal oil well.
The number of marginally-producing wells is foreseen to increase in the coming years, but a growing number of wells are at the critical production rate of 10 barrels (1.2 m3) of oil per day, when it’s no longer efficient to produce. Governments on federal and state level (Canada: province) are aware of this issue and support solutions to increase the live-time of wells. Reasons for governments to support this sector include a policy of not to be dependent on imports of energy, and economic development of rural communities.
Recent years have seen a sharp increase in the number of wells drilled. There was also an accelerated production rate associated with modern horizontal wells, and another future surge in production from marginal wells was expected.
According to statistics (statista.com) published in February 13th 2019 (pre-pandemic), the estimated 16 900 oil and gas wells drilled in 2017 in the US was steadily increasing in the next years, and forecasted to grow to 22 600 wells drilled in 2022.
Traditional oil-producing US states are California, Kansas, Louisiana, New Mexico, Oklahoma and Texas. Each of these six states produced more than 10 million barrels of oil from marginal wells. Texas and California alone produced more than 55 percent of total United States marginal oil output in 2012. In Canada oil-producing is a primarily issue for the province of Alberta.
Conclusion, the market in the US and Canada for oil & gas equipment is expected to maintain growth on the long term, despite the on-going developments in sustainable energy and the temporary issues.
Rapidly changing market in 2020
2020 has shown a rapidly changing business environment. In March this year, the pandemic started to effect most countries, including the US and Canada. This lead to a rapidly decreasing demand for crude oil. At the same time, the oil producing countries had difficulties to find a common policy. This lead to a sharp decrease in oil price.
While we did our partner search work for Oklas, we experienced slower reactions of companies. Simply, “marginal wells” isn’t a “cool” issue at the moment, what is clearly understandable with the low oil prices. We have broken through this negativity, because it’s actually clear that there is a good future. But it all resulted in the situation that we had to contact more companies to get to proper results. This took more time than expected and we extended the duration of this partner search project.
We have seen in all markets around the world, that businessmen reacted in different ways in different phases of the corona outbreak. It started by re-organizing the operations for the safety of the employees. While doing that, long-term decisions were put on the long run. While solving the current problems, companies also started to look at the changing situation and where to put emphasis on in the future. The outcome is depending on the company’s situation and the visionary capabilities of the owner.
Due to the crisis, many people lose their jobs, including people in senior positions in the oil & gas industry. This was also why we couldn’t find some managers, just because they lost their jobs. Also having bankruptcies in mind, we can say that the sector is still being shaken. Where Covid-19 is currently (July 2020) braking records in the oil producing heartland Texas. But good is, this gives opportunities for new-comers in the market.
Where the US and Canada normally had saturated markets, innovative products have a chance in particularly in this momentum. While before 2020, innovative equipment was “just something nice”, in the new situation oil companies need to look for more efficient, innovative equipment. Due to the lower oil prices, it’s no longer efficient to drill for new wells. It requires a smaller investment to buy innovative pumps and valves.
We can conclude that the current situation is a real “game changer”. It increases the importance of efficiency in the oil and gas sector, and the chances for innovative equipment. While the situation will stabilize, the shaken market situation gives the right momentum for a new-coming company in the market.
Nevertheless, the markets of the US and Canada expect a high level of customer service, infrastructure and support. To get this well-organized is the most challenging part of the market entry of Oklas.
Alliance experts found three very different “short-listed” partner candidates in the US and Canada, with whom Oklas can work together to organize the market entry. These companies understood that technology is the solution in a quickly developing world. We have found a marketing specialist, a technical specialist who can locally manufacture the equipment, and a sales specialist with many shops for oilmen in the US oil heartland.
Alliance experts currently remains in touch with Oklas and the North American partners, to guarantee good communication and results.
Oklas, oil equipment developer from Moscow
Oklas Technologies Ltd. is a Russian company that develops innovative equipment for marginal wells, for oil mining and oilfield service companies. The company is an offspring of the innovation center Skolkovo in Moscow, a partnership institute of Massachusetts Institute of Technology. Oklas is participant in the project of creating and ensuring the functioning of the innovation center Skolkovo. Although a start-up company just founded in February 2018, Oklas is partnering with the largest Russian oil mining companies (including Gazprom, Rosneft and Tomskneft). The cooperation includes pilot testing of innovation products. Oklas actively collaborates with oil mining companies in the Russian region (EAEU) to collect information about current issues in mechanized oil production and development of new solutions.
Oklas invented and continues to invent unique equipment for effective oil production from marginal wells. The equipment of Oklas is: energy efficiency (low power consumption), reliability of the equipment (reduction of idle wells), submersible drive (oil production from deep, inclined, curved wells), low cost. Oklas aims to enter the North American market with these three innovative products:
Ursus Pump – Unified submersible pump with a reducer
Energy efficient well pump designed for operation in low-yield wells (up to 30 m3 / day). This pump has all the advantages of centrifugal and sucker rod pumps and with the same doesn’t have their disadvantages. Replacing the currently operating pumps with this one will increase the efficiency and reliability of oil production. Target market is marginal stock of oil wells.
Ursus Check Valve UCV-73-225 – Ball check valve
Designed to hold the formation fluid in the oil-well tubing when the submersible pump stops to prevent reverse rotation of the pump shaft, facilitate the re-start of the pump.
ESP Turbostop – Device for preventing turbine rotation
ESP Turbostop is designed to block reverse rotation of the shaft of the ESP (electric submersible pump) at the stop of the motor and leakage of a check valve, or without a check valve. It provides torque transmission from the motor, direct and reverse rotation. It is installed between the motor and protector. The use of Turbostop in the ESP with a motor with permanent magnets will prevent the generation of electric current by the motor during turbine rotation, which will ensure the protection of the control station and the safety of personnel. The use of Turbostop in the ESP without a check valve or with a leaking check valve allows to start the pump when draining fluid from the tubing string. The use of Turbostop in the ESP without a check valve will allow direct flushing of the pump through the tubing, as well as to reduce the time of killing the well.
If you want more information about the oil mining industry, innovative equipment, the market situation in the US and finding business partners in these and related sectors, please contact Cornelis Wildenberg, who executed this partner search project for Oklas. You can call or text (Whatsapp) him on +1 347-587-8712 or send an email to firstname.lastname@example.org.