Demand in the water treatment business is determined by population growth and water standards, not the economy, Remy points out. And population and water standards are both rising in developing countries, to the benefit of SNF’s international business. Industrial water treatment is more reactive to booms and downturns—but only to a point. “Demand would decrease if sites were to close, but it’s not a phenomenon that is happening in a very noticeable way at the moment,” Remy says. “If industrial sites exist, they need to process their water.”
Beyond water treatment, polyacrylamide plays an important role in enhanced oil recovery (EOR), an oil extraction technique that boosts well productivity. EOR, which is mostly practiced in the U.S., is economically viable as long as oil trades at more than $15 per barrel, Remy says. Given that oil currently sells for close to $100 per bbl, he expects oil drilling to remain a strong market for SNF.
Daniel Choi, a research associate at the consulting firm Lux Research, agrees. “As global oil consumption rises to over 90 million bbl per day, the world’s key oil fields are declining and producers are looking to squeeze every last drop,” he says. “We expect EOR to play a crucial role in SNF’s strategy.”
Similarly, polyacrylamide is used in hydraulic fracturing, or fracking, a relatively new method of hydrocarbon extraction also practiced mostly in the U.S. The growth of EOR and fracking in the U.S. has boosted SNF’s North American sales to nearly half the company’s global turnover.I wonder if oil will ever fall back to below $50 a barrel? (Remember back when gas was below $2/gallon?)