Evolving Oil and Gas Industry Presents Multiple Opportunities for EPC Contractors
In the past few years, the oil and gas industry has witnessed some extraordinary changes. In line with the transforming industry scenario, the oil and gas engineering, procurement, and construction (EPC) contractors are also upgrading themselves. Oil and gas companies often rely on EPC contractors for large-scale, and long-term projects that require skilled labour, and fine-tuned project management. While the current trends offer many opportunities to the EPC players, on the flipside, EPC companies have to address many challenges while executing large-scale projects from inflated bidding process, to backlogs, and lack of skilled labour. Moreover, the entire risk of loss is borne by the contractor which is discouraging the entry of small local players into the global oil and gas EPC market.
Increased Investments in Digitalisation to Boost EPC Demand
The oil and gas EPC market is driven by growing investments in digitalisation along with shale gas exploration, production, and processing activities, and increased investments in offshore oil and gas assets. Extraction of shale gas is being investigated in different locales for financial purposes. The transportation of such gases requires significant distance surface pipeline, and subsea pipeline transportation which are principally built by EPC players. It is expected that the interest for these pipelines in the near future will encounter significant development. The COVID-19 pandemic has disrupted several oil and gas EPC processes, and brought site operations to an abrupt standstill. This has compelled oil and gas EPC players to provide seamless digital solutions so as to attain both cost, and schedule optimisation. Thus, EPC companies in the oil and gas sector are increasingly digitalising operating models/packages to thrive amid the changing customer demand, shrinking margins, and new geopolitical influences amid the pandemic.
Up until now, the venture by oil and gas organisations outside their core business areas has been under 1% of all out-capital use. For the occasion, there are not many indications of a significant change in organisation venture spending. For those organisations hoping to enhance their energy tasks, redeployment of the capital towards low-carbon businesses would require appealing venture-open doors in the new energy showcases just as new capacities inside the organisations. Companies involved in oil and gas EPC are progressively shifting their methodologies towards cleaner energy portions. Significant oil and gas EPCs have customarily depended on projects inside the oil and gas esteem chain, assembling moderately little openness to renewables. In any case, with a hopeless venture standpoint for the area post-COVID-19, and significant oil and gas organisations making vital movements for the energy change, these EPCs are looking to renewables, as well as other clean energy areas for the future development. Aker Solutions, TechnipFMC, and Petrofac have rebuilt their organisations to develop dedicated units for low-carbon projects.
Offshore EPC Market Set for a Rebound
Oil and gas EPC industry activities include but are not limited to project management, process engineering, procurement of necessary materials, construction, commissioning, start-up, and maintenance. Increase in oil and gas investments, and demand along with rapid globalisation, are driving EPC activities in the oil and gas industry. The investments in offshore oil and gas activities have drastically declined over the recent past owing to concerns regarding oil prices. In the year 2020, due to the pandemic situation, the investments further declined to a new level. A majority of offshore oil and gas projects were put to a halt. However, after a torrid 2020, the outlook for the offshore EPC market in 2021 looks promising, boosted by projects deferred from the previous year. Offshore EPC projects are set to rebound through backlogs, and greenfield, and brownfield projects. Apart from offshore oil and gas, the onshore oil and gas EPC activities are also likely to grow at a significant rate. Discoveries on new onshore and offshore oil and gas assets, followed by the developments in upstream, midstream, and downstream activities are expected to generate a substantial revenue for companies involved in the EPC space.
Shale Gas E&P Activity Solidifies North America’s Position as a Lucrative Market for EPC
North America oil and gas remains the leading global EPC market, led by the US, attributing to the shale boom, and rising E&P activities in the Gulf of Mexico. Driven by fast-developing economies such as India, and China, Asia Pacific becomes one of the fastest growing regional markets for the oil and gas EPC. The oil-rich Middle East, and North Africa also hold significant shares in the global market. National oil companies from these regions have moved to integrate vertically, thereby boosting their downstream portfolios, to have EPC contractors. In the Middle East & Africa, UAE, Saudi Arabia, South Africa, and Nigeria remain the key growth countries for oil and gas EPC projects. In April 2021, Abu Dhabi National Oil Company (ADNOC) announced to award a US$744 Mn EPC contract for Belbazem Offshore Block field development. ADNOC also awarded a US$510 Mn contract to Saipem for the expansion of Shah sour gas plant capacity in the UAE. In Latin America, a Brazilian state-owned company is expected to contribute around US$6.5 Bn of EPC awards in 2021, the highest of all E&Ps, across its Buzios, Mero, Itapu, and Marlim revitalisation projects.
Global Oil and Gas EPC Market: Competitive Landscape
In 2019, 4-5 upstream players accounted more than 75% of the award value in 23 projects, and five largest projects contributed close to 56% of the total offshore EPC value. These players were Woodside, ExxonMobil Corporation, Equinor ASA, CNOOC Limited, and Petrobras. Increased spending by a few E&P players — notably Petrobras, Royal Dutch Shell, and Woodside — is driving a forecast increase in offshore EPC awards in 2021. Besides, some of the key companies involved in the global oil and gas EPC market are Saipem SpA, McDermott International, Inc., TechnipFMC, Plc., John Wood Group PLC, WorleyParsons Limited, Mott MacDonald, Aker Solutions, Fluor Corporation, LARSEN & TOUBRO LIMITED, TechnipFMC, and Petrofac Limited.
Key Elements Included In The Study: Global Oil and Gas EPC Market
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