Category description

Well Stimulation is carried out to increase production by improving the movement of hydrocarbons into the well bore. In addition, drilling and completion fluids sometimes damage the formation by blocking the pores in the reservoir, thus preventing flow of hydrocarbons to the well. Matrix acidization and hydraulic fracturing are two main types of well stimulation. 

  • Matrix acidization is a process of injecting acid and chemicals into the wellbore, penetrating the formation pores at pressures below fracture pressure. The key benefit of it is it brings back the original permeability of the reservoir rock. During pumping, acids break up the deposits and / or any solid particles within the pores that prevent hydrocarbons to freely flow towards the wellbore. It also removes any damage around the wellbore, that in turn increases productivity.
  • Hydraulic fracturing is a process of pumping water, sand and chemicals underground, to have enough pressure to break the rock. It is mainly used in formations that have lower ability to transit fluids (aka permeability).

Placement of acid in the reservoir is of very high importance. There are number of tools and techniques available to achieve the right balance of pumping rate and acid placement. Application of such tools and techniques may vary from field to field. Placing fractures in the right place in deviated and horizontal wellbores with non-mechanical isolation tools is key. Generally, a jetting tool deployed on the coiled tubing, is used in order to place the acid in the right spot in the reservoir, which is more efficient that pumping from the surface.

A specialized vessel is required to conduct well stimulation offshore. Coupled with challenges in offshore application, 24hr operation and technical requirements, offshore well stimulation becomes a very well planned and thought-over process. There are a number of constraints that should be considered and planed in advance, such as vessel tanks and storage capacity, manning capacity to accommodate the required crew, pumping capacity and sailing time to refill the supply.

In general, well stimulation offshore requires larger pumping volumes than onshore. On some occasions, when a long horizontal well requires stimulation, 2 or 3 vessels might be required to provide continuous pumping operation without any interruption. In addition, blending rates, horse power and gearbox of the pumps  on board the vessel play one of the vital roles in providing uninterrupted pumping. 

Risks & Opportunities

  • When done offshore, weather is an important consideration. With non-dynamically positioned (DP) vessels, there are windows throughout the year when well stimulation can be conducted. On the contrary, vessels that have DP capabilities, would allow well stimulation conducted throughout the year, with significantly higher weather conditions tolerance. This of courses comes at a price, as DP vessels tend to be on average 20%-40% higher than non DP vessels.
  • Making this service work on a call out basis, i.e. using a standard supply vessel with equipment rigging up and rigging down, might be a solution that service companies may offer. Yet, a number HSE related aspects must be observed, as any proposed vessel and crew must be certified to handle hazardous materials.
  • Combining well stimulation with other services such as Coiled Tubing, as a deployment methods  is always advisable, unless the coiled tubing units are owned by the operator.

Supply & Demand Dynamics


After a long pause in 2015-2017, demand for well stimulation in the Middle East is set to grow significantly. This is due to 1) efforts to maintain production and 2) long years of deferred work. According to Rystal Energy, stimulation market is set to grow by almost 30% in 2018.

Yet, well stimulation is not entirely driven by old wells and oil-wells where the water cut (quantities of producer water) during production is low, will dominate the scene. Stimulating a well to produce more water than oil is irrational and not economic. 

With carbonate reservoir and long horizontal wells, acid placement, high volumes and pumping rates are vital. Utilization of acid in well stimulation (which is different to other major markets) stipulates special vessel requirements, to accommodate storage and pumping of high volumes of highly corrosive acid. This requirement makes such vessels less mobile and competitive in other parts of the world; hence the supply of such stimulation vessels in the Middle East is tight. 

As of Q3-2018, there are up to 7 dedicated/converted stimulation vessels available in the region.  ( source: offshore magazine,

External Scanning

Offshore well stimulation market is a high growth potential market, with power balance lying with suppliers. However, due to significant CAPEX requirements and fluctuating demand for offshore well stimulation, the number of service companies willing to be present in the market is limited. In the medium to long term, this is set to change, as the region may require more offshore well stimulation activities in 2017 and beyond. Hence, current service providers would be willing to expand, and new financially and technically sound players would be willing to enter the market. 

There are alternatives to purpose-built stimulation vessels, such as utilization of standard supply vessels, but this shall be subject to detailed risk assessment and cost / benefit analysis. 

New Entrants is Medium
  • Equipment manufactured by 3rd party
  • High CAPEX 
  • Suppliers are reluctant to mobilize a stim vessel  without long term contract
Supplier Power is High
  • Limited suppliers 
  • No spot / callout market
  • Stronger buying power for chemicals 

Competitive Rivalry
  • High Competition potential
  • High growth segment 
  • Technology and chemicals available to many players 



Buyer Power is Medium 
  • Spend is significant 
  • Can offer long term visibility
  • Buyer is willing to pay premium
  • Does not exist

Portfolio Positioning


Cost & Price Analysis

Price Analysis
As a result of the shale revolution in North America, demand for chemicals used in well stimulation grew significantly, without a correspondent supply capacity increase. This, in turn, created an undersupplied market, that drove the prices up. When the supply picked up, prices stabilized and with the oil price slump, over-supply of chemicals is imminent. Those supply & demands swings will introduce price volatility for chemicals used in well stimulation. 

Combined with offshore vessels price fluctuations and limited availability of dedicated offshore well intervention vessels with, price trends are very much dependent on the volumes and visibility of revenues. No contractor is willing to invest US$20M+ on a speculative basis and try and serve a spot market. 

in 2018, daily rates vary significantly,  depending on a number of variables, such as work duration and pumping performance requirements. In addition to services, chemicals may be a significant cost contributor. On average, the cost of chemicals does not exceed 30%-40% of the stimulation cost. Yet, depending on the stimulation type and subsurface conditions, it may go as high as 70% of the well stimulation cost. 

Cost Analysis
The overwhelming majority of the equipment is manufactured by third parties. Service providers build up their fleet based on their requirements. Depending on the company modus operandi, personnel rates may contribute a significant proportion of the costs. There might be cases, when the vessel, being the most CAPEX intensive asset, will be on hire basis. In addition, chemicals used in well intervention are produced by major chemicals suppliers.

This category is a high fixed cost segment; hence sustained revenue generation for contractors is for utmost importance.  Key cost drivers are:

  • Acquisition cost is one of the biggest cost for service companies. The average prices are:
    • Purposes built or converted stimulation vessel  - US$ 4m - US$ 10m ( if bought) 
    • Vessel charter rate per day ( if leased) - US$6k to US$10k
    • Stimulation Equipment package - US$4M - US$15M. Various companies may have different pumping requirements and this in turn drive the costs. 
  • Maintenance costs - Maintenance costs are highly driven by the nature of the chemicals. The corrosive nature of the stimulation chemicals reduces the working life of equipment tremendously. Apart from that, the maintenance is geared towards routine and preventative programmes.  In the case of vessel, maintenance requirements are governed by industry bodies and very comprehensive. 
  • Personnel costs - most of the personnel provided in offshore well stimulation are part of vessel crew.  On average, manpower costs in marine industry constitute around 30% of the vessel charter rate and grow on average 3%-5% per year. 
  • Chemicals costs -  the majority of chemicals used in well stimulation are highly commoditized. Both, Matrix Acidization and Acid Fracking use large quantities of hydrochloric acid (high concentration HCI), together with water and variety of chemicals including gels, proppants and other agents and additives. 75% of the demand for HCl has been driven by companies outside of oil industry, such as PVC and polyurethane production, and around 25% made available for swimming pool disinfection, steel pickling, food industry and others. If no supply capacity is created, prices for HCI will be volatile and will witness an increase, when activities pick up. Another major cost contributor is the logistics of HCI, it is costly and inefficient, as it concentration in water when transported. Locating a closer source of HCI is beneficial.

Total Cost of Ownership

Procuring offshore well stimulation services is complex and requires a long term view of the requirements. This category is not likely to work on a call-out basis, as such long term commitment or cooperation with other operators is required to provide incentives to service providers. Common compensation structure in the industry is:

  • Mobizaltion  / Demobilization fees
  • Daily  / Hourly Operating Rate and Standby Rate
  • Dynamic Positioning Rate 
  • Pumping for various type of materials, i.e. corrosive and corrosive
  • Unit prices for chemicals 

Important considerations:

  • DP vs. non DP vessel - It might more cost effective to use a non DP vessel during workable weather windows, than vessel to be used throughout the year.  A DP vessel has weather limitations as well and does not automatically mean that a well stimulation can be done at any time during the year.
  • Vessel pumping rates, storage capacity and blending rates are important considerations. Not only higher rates might be a technical requirement, but in some instances a job can be done faster, hence saving on day rates.  
  • Cost of diesel for stimulation vessel
  • If procuring a dedicated vessel, the right size and fit-for-purpose is critical, as it affects the prices dramatically 


This subcategory is a complex area and requires a long-term view of the requirements. There are a number of options available to explore. 

  • Commit for guaranteed periods of time
  • Unless work is available for 365 days a year, clubbing arrangements with other operators represent one of the best options to secure the services with high level of availability.
  • Buying a dedicated vessel with maintenance and manning arrangements outsourced, and stimulation chemicals procured on a commodity basis, will move this category into Leverage and ensure that a more competitive environment and favourable to the buyer, is created.   


  • Utilization of domestically  produced chemicals and acids
  • Domestically built tailor-made vessels