World Oilfield Chemicals

World Oilfield Chemicals Industry Study with Forecasts to 2006 & 2011 for 25 Countries and Six World Regions STUDY #1645 March 2003 $4500 The Freedonia Group www.freedoniagroup.com 767 Beta Drive Cleveland, OH 44143-2326 USA Tel: 800.927.5900 (US) or 440.684.9600 Fax: 440.646.0484

World Oilfield Chemicals Industry Study with Forecasts to 2006 & 2011 Study #1645 March 2003 $4500 363 Pages Exceptionally fast advances are expected in West Africa (Nigeria, Angola and others), Central Asia and deepwater areas in Brazil and other Latin American countries Global demand to see healthy increases World demand for oilfield chemicals is forecast to expand 2.5 percent per year (from unusually high 2001 levels) to $7.8 billion in 2006, restrained by a significant decrease in exploration and development activity in the large US market. When the sluggish US market is excluded, global demand will increase a healthy 4.3 percent per year, driven by higher exploration and production spending activity; a growing focus on difficult offshore and frontier areas; increasing well depths; and the need to squeeze more oil and gas out of existing wells using both secondary and tertiary methods. Africa, Latin America, Asia to grow fastest North America will continue to dominate global sales of oilfield chemicals, with over half of the total in 2006. However, the fastest growth is expected in developing regions such as Africa, Latin America, and Central and Southeast Asia, where significant new crude oil and natural gas discoveries, especially in deepwater locations, will result in strong increases in chemical demand. The Middle East, which dominates global oil production, will continue to be a less significant market for chemicals due to the relatively low number of drilling rigs in use and a disproportionately small number of producing wells in the region. The fastest growth in oilfield chemicals demand will be registered in a variety of newer markets, located primarily in Africa, Asia and Latin America. Respect- World Oilfield Chemical Demand by Type, 2006 (US$7.8 billion) Completion & Workover Fluids 9% Stimulation & EOR Chemicals 14% Production Chemicals 15% Cement & Concrete Additives 25% Drilling Fluids 37% able gains are also expected in more established oil producing countries such as Mexico, Iran and a number of other Middle Eastern countries, which are experiencing a turnaround in exploration and production investment due to several years of relatively high oil prices. Exceptionally fast advances are expected in West Africa (Nigeria, Angola and others), Central Asia and deepwater areas in Brazil and other Latin American countries. Oil & gas demand to drive exploration spending Spending on exploration and development activity worldwide will be driven by a combination of factors, including strong global demand for oil and gas, maturity in many of the world's largest oil producing fields, and relatively high oil prices in 2000 through early 2003 (which provided much needed investment capital to the oil and gas industry). As a result, both the numbers of drilling rigs in use and the number of well completions are expected to increase significantly (except in the US), which will benefit global demand for drilling fluids, cement and completion fluids. Demand for production chemicals will be driven by the maturity of large oil fields in North America, Europe and parts of Asia and the Middle East, as well as growing production of heavy oils, which require higher treat levels. Efforts to increase the productivity of existing wells will spur demand for stimulation and EOR (enhanced oil recovery) chemicals. Visit www.freedoniagroup.com for complete text and table of contents

Table of Contents Letter From the CEO INTRODUCTION EXECUTIVE SUMMARY... 1 MARKET ENVIRONMENT... 4 General... 4 World Economic Outlook... 5 Recent Economic Performance... 6 Macroeconomic Outlook... 8 World Per Capita Gross Domestic Product... 9 World Demographic Overview... 10 World Manufacturing Outlook... 12 World Oil & Gas Output Outlook... 14 World Petroleum Outlook... 16 Reserves & Exploration... 17 Production... 18 Crude Oil Pricing Patterns... 20 World Natural Gas Outlook... 22 Reserves & Exploration... 23 Production... 25 Natural Gas Pricing Patterns... 28 Oilfield Services Outlook... 30 Environmental & Regulatory Issues... 33 OILFIELD TECHNOLOGY...36 General... 36 Well Drilling... 37 Directional Drilling... 37 Horizontal Drilling... 38 Other Drilling Technologies... 40 Drilling Fluids... 43 Well Completion & Workover... 46 Well Stimulation... 48 Fracturing... 49 Acidizing... 50 Other Well Stimulation Techniques & Technology... 51 Enhanced Oil Recovery... 52 Thermal Recovery... 53 Gas Recovery... 53 Chemical Recovery... 54 Other EOR Methods... 55 Other Oilfield Technologies... 56 WORLD OVERVIEW...59 Regional Overview... 59 Product Overview... 62 Drilling Fluids... 64 Product Characteristics... 68 Offshore & Deepwater Drilling... 70 Oilfield Cement & Cement Additives... 72 Production Chemicals... 76 Demulsifiers... 80 Corrosion & Scale Inhibitors... 81 Biocides... 82 Other... 83 Stimulation & EOR Chemicals... 84 Completion & Workover Fluids... 89 Chemical Consumption Trends... 92 Dear Colleague: In challenging economic times, it is more important than ever to have credible industry information on which to base your business decisions. At Freedonia, it is our mission to provide you with an unbiased, reliable outlook for each industry that we study. We carefully examine available sources, separate the wheat from the chaff, and distill an ocean of data into a concise presentation of where an industry stands today... and where it is going. At Freedonia, it is our mission to provide you with an unbiased, reliable outlook for each industry... Each Freedonia industry study provides you with the information and analysis you need to make important decisions. How large is your target market? Which product segments are growing fastest? Which markets are growing fastest? Our analysts review the relevant secondary sources and talk directly to participants in the industry to find the answers. Although Freedonia has previously completed a study on oilfield chemicals in the US, World Oilfield Chemicals represents our first effort in looking at the industry on a global basis. And whereas relatively flat growth is in store for the US, healthy growth in excess of four percent per year is forecast for oilfield chemicals demand in the rest of the world. I invite you to add the Freedonia Group to your team by acquiring our World Oilfield Chemicals study today. Very truly yours, Jeffrey Weiss, CEO

Table of Contents (cont.) NORTH AMERICA...96 North America... 96 United States... 102 Canada... 110 Mexico... 116 LATIN AMERICA...121 Latin America... 121 Argentina... 126 Brazil... 130 Venezuela... 135 Other Latin America... 140 EUROPE...146 Europe... 146 Norway... 153 Russia... 159 United Kingdom... 166 Other Europe... 172 AFRICA/MIDEAST...179 Africa/Mideast... 179 Africa... 184 Algeria... 187 Angola... 189 Egypt... 191 Libya... 193 Nigeria... 194 All Other Africa... 196 OPEC Middle East... 198 Iran... 201 Kuwait... 202 Qatar... 204 Saudi Arabia... 205 Other OPEC Middle East... 208 Non-OPEC Middle East... 210 Oman... 212 Syria... 214 Other Non-OPEC Middle East... 215 ASIA/PACIFIC...218 Asia/Pacific... 218 China... 224 India... 230 Indonesia... 235 Other Asia/Pacific... 242 INDUSTRY STRUCTURE...251 General... 251 Market Share... 254 Drilling Fluids... 257 Production Chemicals... 259 Completion & Workover Fluids.. 262 Other Oilfield Chemicals... 265 Acquisitions & Divestitures... 266 Competitive Strategies... 269 Cooperative Agreements... 273 Marketing & Distribution... 277 Company Profiles... 280-363 World Oilfield Chemical Demand, 2006 (US$7.8 billion) North America 53.1% Europe 16.7% Suez SA 72 avenue de la Liberte 92022 Nanterre Cedex France 331-4695-5000 http://www.suez.fr Asia/Pacific 16.1% ONDEO Nalco Energy Services LP 7705 Highway 90-A Sugar Land, TX 77478 281-263-7000 http://www.nalcoexxon.com Latin America 6.3% Africa/Mideast 7.8% COMPANY PROFILES Revenues: $43.6 billion (2002), $37.9 billion (2001) Geographic Revenues: (2002, as percent of total) France and Belgium 45%; European Union, excluding France and Belgium 32%; Rest of Europe 2%, North America 10%, South America 5%, Asia/Pacific 5%, and Africa and the Middle East 2% Employment: 188,050 (2001) Key Products: cementing, fracturing, drilling, acidizing, and completion and workover additives; water treatment chemicals; oil/water separation chemicals; scale control agents; and paraffin/asphaltene control chemicals Suez SA, which changed its name from Suez Lyonnaise des Eaux in March 2001, is an international company which provides products and services for private infra-

Freedonia Study #1645 - World Oilfield Chemicals Russia Oilfield Chemicals Demand (million US dollars) Item 1992 1996 2001 2006 2011 Oil & Gas Production (quad Btu) 40.0 34.7 35.7 39.3 43.7 $ chem/bil Btu 6.9 5.5 10.6 12.0 14.1 Mexico: Oilfield Chemicals Demand Oilfield Chemical Demand 275 190 380 470 615 MARKETS The Market Sections analyze trends and considers the threats and opportunities in 25 countries and six regions Drilling Fluids 35 25 75 95 130 Cement & Additives 90 62 130 160 205 Production Chemicals 85 68 80 94 119 Stimulation & EOR Chemicals 29 17 50 61 81 Completion & Workover Fluids 36 18 45 60 80 NORTH AMERICA % Russia 29.6 20.9 34.1 36.2 39.7 Europe Oilfield Chemical Demand930 910 1115 1300 1550 Demand for oilfield chemicals in Mexico is forecast to increase 6.6 percent per year through 2006 to $220 million, driven by improvement in crude oil and natural gas production and a renewed emphasis on exploration and development activity to SAMPLE replenish PAGE reserves. Much of this activity will be centered in the natural gas sector, fueled by Text sections support each increasing outside investment. Strong demand for oil and gas in the country table s is putting numbers pressure & projections on Mexico s energy industry. With much of Mexico s conventional oil reserves reaching maturity, the country is attempting to increase yields from existing fields. Such activities tend to be highly chemical intensive, boosting demand for a variety of oilfield chemicals, in particular stimulation and EOR chemicals. World Stimulation & EOR Chemicals Demand While Mexico has both onshore and offshore operations, by Type & the Region country is focusing its attention on its offshore (million resources, US dollars) namely in the Gulf of Mexico, including plans to develop Item technologies to produce crude oil from its deepwater sites. 1992 1996 2001 2006 2011 The country hopes to be capable of deepwater production by 2006. Mexico s marine environment, including World Oil & Gas Output (quad Btu)213.6229.1 247.8 278.0 314.0 deepwater areas, is largely unexplored and under $ exploited, chemical/bil Btu 2.50 2.77 3.31 3.79 4.25 creating significant opportunities for oilfield chemicals suppliers. Rising average well depths, as a result World of Stimulation & EOR Chemi 535 635 820 1055 335 deepwater activity, will also boost demand for drilling By Type: fluids, cement, cement additives and completions fluids. Stimulation 525 605 PRODUCTS 760 965 1195 EOR 10 30 The 60Products 90 Section 140 Reluctance to open the crude oil sector to outside By investors Region: provides demand for will continue to restrain the overall amount of growth North that America 295 historical 361 450 years 568 and 704 Latin America 31 37 44 55 forecasts growth to 2006 70 Europe 94 95 140 173 222 and 2011 Africa/Mideast 39 49 62 83 109 Asia/Pacific 76 93 124 176 230 % stimulation & EOR 12.5 12.2 11.9 13.5 14.1 Total World Oilfield Chem Demand4270 5190 6900 7800 9500

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