Because of the direct correlation between electronic product sales and fuel prices, the outlook for the immediate future of high-reliability passive electronic components is excellent as we see the emergence of more advanced electronic tool solutions.
Oil and gas electronics, with emphasis upon logging tools and downhole pump electronics, represents the overall feast and famine nature of the high-reliability supply chain for passive electronic components. The market has experienced significant supply chain turbulence that has negatively impacted the growth in high-temperature and high-vibration advanced components.
The 2023-2028 outlook for high-reliability passive electronic components in this sector is excellent as there is a direct correlation between electronic product sales in this sector and fuel prices. The reader will note that this industry sector remains at about 65 percent of its former high point of global revenues noted in 2013 (see Figure 1).
Figure 1: Oil & Gas Electronic Equipment Manufacturers – Revenue Trends 2012-2022
Source: Paumanok IMR estimates. In millions of U.S. dollars. Represents the combined revenues of Schlumberger, Haliburton, GE Baker Hughes, Weatherford and other vendors of oil and gas electronic sub-assemblies as discussed in this market report.
For the oil and gas industry, we have tracked shipments of high-reliability passive electronic components including capacitors, resistors, inductors and circuit protection components. Our conclusions show that the segment represents one of the most technologically demanding and financially rewarding segments in the high-tech ecosystem. Electronic components consumed in this market are required to withstand high-vibration frequencies at high voltages and high temperatures.
In capacitors, we see a significant amount of consumption of ceramic type capacitors, followed by tantalum, plastic film, aluminum and double layer carbon. In resistors, we note very strong markets for thin film resistors, especially tantalum nitride and also some related demand for nichrome foil, film and wire products on ceramic substrates as well as some high-voltage tin-oxide resistor solutions. In magnetics, there is a market here for high-temperature ferrite and ceramic coils. Circuit protection solutions include primarily zinc-oxide varistors for overvoltage protection and solid matrix fuses for overcurrent protection.
Oil & Gas Electronics and Sub‐Categories: 2023
The following sub-categories describe the sub-categories of consumption within the oil and gas electronics sector:
- Downhole Sensors
- Downhole Logging Tools
- Downhole Pumping Electronics
The Downhole Sensor Module Market for Passive Components:
In down-hole oil exploration, electronic sensors are utilized to relay information from the tool beneath the surface of the earth to the drilling engineers on the oil rig. This information is collected by various sensors within the tool. Information logging consists of sending, receiving, recording and analyzing of essential data allowing engineers to make critical decisions on further drilling operations based on the characteristics of the material surrounding the well trajectory. Electronic components consumed in downhole sensors will have to be engineered for high temperatures and high vibration frequencies.
The Logging Tool Market for Passive Components:
Logging tools for oil and gas electronics represent some of the most advanced and demanding applications in the supply chain. Sonic logging is a type of advanced tool employed in downhole drilling applications to determine the porosity of the materials surrounding the well hole. As tools go, this is the largest market by technology and where we see the majority of passive electronic component- related revenues in the oil and gas industry. Furthermore, we note a crossover between high-voltage and high-temperature component requirements. These sensors operate deep below the surface where temperatures can exceed 200°C. Along with drastic temperature increases, the vibration in the tool is severe. It is necessary for the components in these sensors to have “known reliability” features such as added mechanical shock and anti-vibration characteristics.
Resistivity logs are used to indirectly measure the resistance of the various formations around a borehole. The resistivity tool works by probing the various formations with magnetic fields that induce a current in the formation. Since current will flow through low resistance material and fail to flow through high-resistance material (like hydrocarbons), the resistivity tool helps to determine possible locations of oil deep inside the earth’s crust. Several tools are used to measure resistivity including: the electric tool, induction tool and focused electric tool. The three different tools conduct three different resistivity measurements on the formation surrounding the borehole As with all electronic devices, power must be supplied for the device to become operational.
The Downhole Pump Motor and Variable Speed Drive Markets for Passive Components:
The electrical submersible pump, typically called an ESP, is an efficient and reliable artificial lift method for lifting moderate to high volumes of fluids from wellbores. These volumes range from a low of 150 barrels of oil per day to as much as 150,000 barrels per day. Variable-speed drive controllers, which are passive component intensive in design, can extend this range significantly, both on the high and low side. The product literature notes that well holes have drilling depths of more than seven miles and internal module temperatures exceed a grueling 200 degrees Celsius.
Passive Components Suited for Oil & Gas Exploration Electronics:
Capacitor (and other passive component) requirements, especially with respect to operating temperature, increased dramatically, as did the cost to produce and consume related components. Ceramics have proven the best choice for the oil and gas industry for the longest time. This is because ceramics were initially preferred for under-the-hood applications in automobiles which face similar environments as downhole pumps and tools, but only as a jumping off point.
However, the data was readily available in ceramics and plastic film type capacitors from the space program, i.e., PTFE capacitors. Plastic film capacitors are preferred in certain applications where its self-healing characteristics usually prevent a failure that would generate smoke or flame. Tantalum is robust and is a favorite in high-temperature aircraft and safety systems, therefore it was successfully introduced into then oil & gas tool industry because of its high capacitance in an ultra-small case size. Tantalum has some additional interest here because of its future [potential to be asymmetrical in design which would lend itself to any advances in tool designs. Tantalum is also consumed in thin film resistors for the oil & gas industry for its ability to provide ohms at high temperatures and in harsh environments.
Sixty percent of capacitors sold into the oil and gas electronics industry are for high-voltage (power supplies) and other applications, such as high-reliability components for general purposes smoothing, DC blocking, bypass and decoupling. The reader will note that some components will be required to be high temperature, high voltage and high reliability and these components would have the highest prices and the highest operating margins of 65 percent or better due to the technology requirements to compete in the space.
As mentioned previously, the ceramic capacitor is the market leader in the oil and gas electronic electronics industry with respect to usage by dielectric. This is because it satisfies all the requirements of the oil and gas industry and its harsh environments. Ceramic MLCC capacitors are non-polar devices. Made up of alternating many thin ceramic layers with staggered metal electrodes, multiple layers are stacked to increase CV density, CV being the capacitance voltage product or CV/cc per unit volume.
Market Outlook: 2023-2028
A Focal Point of High-Temperature Component Value
Passive component vendors who sell into this high-reliability ecosystem have expertise in high-temperature electronic component production in ceramic, plastic film or tantalum materials with parts that operate above 170°C and in high-vibration environments with serious mechanical shock requirements. The outlook for this market remains robust for electronic components and sub-assemblies, especially ceramic MLCC capacitors, tantalum capacitors, plastic film capacitors, mica capacitors, tantalum nitride resistors, nichrome foil resistors, nichrome film resistors, ferrites, ceramic coils and varistors. Long-term oil and gas solutions will involve more advanced electronic tool components such as logging tools, sensors and pumps to maximize the return on investment and efficiency for each well.
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