The use of biocide products such glutaraldehyde, THPS [Tetrakis (hydroxymethyl) phosphonium sulfate]n and DBNPA, in the offshore oil and gas industry is subject to approval by the EU’s Biocidal Product Regulations (BPR); EPA’s Federal Insecticides, Fungicide, and Rodenticide Act (Fifra); and the OSPAR Convention, a convention for the Protection of the Marine Environment of the North-East Atlantic, due to the harmful effects of some of the biocides on humans and the environment. The EU BPR came into effect on 1 September 2013. The BPR evaluates the safety of active substances used in biocidal products and authorizes the use of biocidal products. Additionally, as of September 2015, biocidal products cannot be introduced in the EU market unless the substance or product supplier is not included in the Article 95 list in which the cost incurred to generate data required for evaluation of active substance is shared. In the US, the evaluation and approval of active substances are regulated under the Fifra.
The use of chemicals in the offshore oil and gas industry in the North Sea is also regulated under the OSPAR Convention. The regulations are set out in the OSPAR Recommendation 2000/2 for a Harmonized Mandatory Control System (HMCS), which is aimed at reducing the impact of offshore chemicals on the marine environment. Thus, the regulations on the use of biocides in the offshore oil and gas industry are expected to restrain the growth of the global market during the review period.
Overview Of Supply Scenario
Production/ Supply Scenario
The outbreak of COVID-19 has had a negative impact on the production of oilfield biocides due to the disruption in the supply chain across the globe. In response, to protect workers from the spread of the new coronavirus, the companies in the market have restricted travel and face-to-face meetings for the employees. According to the United Nations, the global economy is projected to contract by around 3% or more instead of registering 2.5% growth projected by the World Economic Situation and Prospects report 2020.
The companies are working aggressively towards safeguarding the health and wellbeing of their employees while also supporting government goals of maintaining critical business activities, such as healthcare, power generation, and food production. Additionally, the transition by major players in this market to support the need for medical products is a key factor impacting the growth of the market. For instance, BASF SE started providing support to worldwide academic research groups to search for a suitable active ingredient to treat patients infected with the coronavirus. In March 2020, the company initiated the production of hand sanitizers at its Ludwigshafen site due to the COVID-19 outbreak reducing regular supplies. The company has reallocated several metric tons of raw materials, especially isopropanol, for making the sanitizers.
The supply scenario is facing a few issues due to the restrictions on travel and the lockdown of cities; however, the sourcing teams are working closely with the suppliers to manage the supply of raw materials proactively. Companies are closely monitoring and managing the extent and duration of any local requirements impacting their physical locations. WCS, the Canadian heavy oil price, which traditionally lags behind WTI, was hovering near USD 22, with the lowest differential between the two in over a decade. The volatility in the oil price for the next several months is expected to be continued due to shortages and over-supply until demand begins to recover.
Impact On Oilfield Biocides Suppliers
The majority of raw materials suppliers in this market had to shut down their operating facilities due to the outbreak of COVID-19. In response to combat the virus, the key suppliers shifted their focus toward offering relief in the pandemic. However, these companies have begun operations again. They are following necessary measures, such as the enforcement of wearing masks, washing hands, sanitizing, social distancing, temperature monitoring, frequent clean down, and disinfection within facilities.
The major companies operating in the chemical industry getting affected due to coronavirus outbreak include BASF SE, DowDuPont, China Petroleum & Chemical Corp., SABIC, Mitsubishi Chemical Corp., Wanhua Chemical Corp., Chevron Phillips Chemical, Evonik Industries, Jianshi Yuantong Bioengineering Co., Ltd., PPG Industries, and The Linde Group. Looking at the situation, many chemical companies have halted their production facilities across the globe. Some other companies, which are still working, are operating at only 40-60% efficiency.
Impact On Oilfield Biocides Manufacturers
Manufacturers in this market have decreased their production capacities owing to the decline in demand from the end-use industries, reduced prices, and disruptions in the supply of raw materials. The outbreak has severely impacted the demand from end-use industries, which has resulted in a decline in the production of oilfield biocides. Moreover, players are focused on COVID-19 relief and are acting for the same.
The manufacturers are taking a toll due to reduced demand for products and have announced reduced capital for their prospects. Through its affiliate Imperial Oil Limited, the company offered 80,000 Esso and Mobil fuel vouchers worth USD 2 million to frontline nurses, paramedics, and doctors as part of its Heroes Campaign in Canada.
Impact On Oilfield Biocides End Users
The restrictions on travel and transportation coupled with strict lockdown resulted in low availability of manpower for upstream, downstream, and midstream oil & gas activities. This is due to the reduced outings, closed working places, and lockdown. On the other hand, the energy & power sector witnessed a spike in demand and has witnessed higher than usual consumption, which is expected to re-normalize in the coming years.
