Rystad Energy: Oilfield Service Newsletter - May 2019 - eng

Вторник, 14 мая 2019 09:02

Engineering Procurement Construction and Installation (EPCI) spending to bottom out in 2020 with a rise in greenfield contracts on the horizon

The EPCI market has withstood challenging market conditions since the oil price collapse in 2014 and the contagion effect it had across the oil and gas industry. Despite a 45% drop since 2014, the EPCI sector spending has yet to reach rock-bottom. Rystad expects the EPCI market to remain flat in 2019 before stagnating in 2020.

This trend will make the EPCI market among the slowest service segment to bottom out this cycle. In comparison, the average Oilfield Service (OFS) market reached its nadir in 2016, mainly driven by increased spending on short-cycled shale and conventional onshore back in 2017. Offshore on the other hand, typically categorized with a longer cost cycle compared to conventional onshore and shale, bottom out in 2018 with 2019 set to be the first year with increased offshore purchases year-on-year since 2014.

As depicted in Figure 1 below, the spending growth curve for EPCI is U-shaped, which means once it bottoms out, recovery will be much slower than in the V-shaped onshore spending curve. 

The downturn has been challenging for EPCI contractors, who have seen awards decrease by more than 70% from 2013 to 2016. For many contractors, orders received prior to 2014 provided a cushion to survive the market downtown.

Rystad Energy analysis shows that EPCI contract awards have already been on the rise since 2017. As shown in Figure 2, the EPCI sector locked in roughly $70 billion in greenfield contracts per annum in 2017 and 2018. In the first recovery year of 2017, $47 billion was awarded in onshore projects and $23 billion in offshore projects. Going forward, we expect offshore greenfield awards to reach $31 billion in 2019 and $48 billion in 2020.

The increased award volume offshore is driven partly by big projects in Saudi Arabia (Berri, Zuluf expansion, and Marjan), Qatar (North Field Expansion T8, T9, T10, and T11), the United Arab Emirates (Hail & Ghasha and Upper Zakum), Mauritania (Tortue West), and Brazil (Carcara, Lula and Atapu North)

Furthermore, most of the expected increase in award volume are in projects with fixed or floating units. Over the next two years, a potential 28 FPSO projects may be committed. Similarly, for a fixed facility, there is a potential of 90 steel platform projects to be committed. For onshore, we expect awards to reach $58 billion in 2019 and $45 billion in 2020. The increased award volume is driven partly by mega projects such as Golden Pass LNG and Calcasieu Pass LNG in the United States, Arctic LNG2 in Russia and Area 1 LNG in Mozambique. In total, the increased activity in awards is expected to breathe new life into the EPCI market even though purchases are expected to decrease in the short term.

In the period from 2018 to 2023, Rystad Energy expects the EPCI market to achieve a growth rate of 5% per annum compared to the average market of 3% per annum. The market for construction and installation services – which includes onshore topside and structure construction and offshore construction – is expected to grow 5% per annum. The market for procurement, construction and installation equipment such as rotating equipment, cables, electro, pipes, and valves is expected to lead growth with 5% growth per annum. Engineering services such as FEED, studies, project management, and detailed engineering, is expected to lag with an estimated growth of 1% per annum.

Increased greenfield activity will be the main growth driver through 2023. We expect the Middle East and North America to be the biggest markets over the next five years, where each region accounts for 21% of the total market. In comparison, the Middle East accounted for 13% of the same market from 2014 to 2018, whereas North America accounted for 20 %. In fact, the Middle East is the only region where activity levels – measured in greenfield spending – will be higher in 2023 than in 2014. Other regions such as Africa, South America, and Russia will reach activity close to levels seen in 2014, whereas Europe, North America, Asia, and Australia are expected to see activity ranging from 20 to 70% of the activity levels seen in 2014.

СЛЕДУЮЩИЙ МАТЕРИАЛ РАЗДЕЛА "Аналитика, прогнозы, статистика"

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