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Happy New Year 2019

Game Changers lead Oil & Gas and Petrochemical

Voeux2_2019

As every year, we expect that our message will find you well and 2B1st Consulting wish you a Happy New Year 2019 well on track with your expectations.

2018 : When the Majors lag behind

2018 will remain as a break-through year in the Oil & Gas and Petrochemical history as the International Oil Companies (IOCs), such as BPChevronExxonMobil, …, are leaving the market to the game changers.

Already in 2017, we could detect from our Oil & Gas and Petrochemical data base what we called a Market Upturn resulting from a Market Shift among the operators.

This Market Shift did happen in 2018 as anticipated, but more like a swing than a simple shift.

At the end of 2018, we have extracted some data and pictures from our projects pursuit tool www.projectsmartexplorer.com to illustrate how much the market has shifted.

Capex_Awarded_in_2018_per_Operator_Profile This picture is referring to the 263 projects for which the engineering, procurement and construction (EPC) contract has been awarded in 2018.

These projects represent nearly $300 billion capital expenditure (Capex) out of which:

– Independent companies (Independents), in green, are leading the game with 47% of the Capex 2018.

– National Oil Companies (NOCs), in red, are following right behind with 44%

– International Oil Companies (IOCs), in blue, are lagging far behind with only 9%

Of course this Market Shift has a different impact on upstreammidstream and downstream sectorsbut the overall trend is very much the same.

A this stage we may wonder if this trend will be reversible or if in the long run, the IOCs will not leave the hydrocarbon activities to the NOCs and Independents.

Twice more EPC contracts awarded in 2018

At the same period last year, the data extracted from www.projectsmartexplorer.com were anticipating a significant growth of 20% to 35% in 2018 over 2017.

The reality went far beyond our expectations since twice more EPC contracts, in volume of capital expenditure, were awarded in 2018.

The difference is mostly coming from the game changers, mostly the Independents, which have a different business model.

The barre graph below represents the volume of Capex to be spent year per year in project AWARDED to EPC contractors.

Therefore these numbers are not forecast, but actual numbers.

We can see that 2018 is slightly above 2017, but the surprise comes from 2019.

Capex_per_Year_of_EPC_Contracts_Awarded

On January 1st 2019, the volume of Capex related to EPC contracts awarded is already at the same level as the previous year 2018.

In 2018,  about $240 billion Capex have been awarded to EPC contractors in following the final investment decision (FID) for immediate execution.

In 2019, this graph shows that about the same amount of Capex, has been awarded in 2018 to EPC contractors, but to be executed in 2019 providing the FID.

Most of the pending FID are related to administration approval while financing is already in place.

All together the projects awarded in 2018 represent the $240 billion Capex we see in 2018, plus the $230 billion Capex appearing on January 1st of 2019, meaning a total of $470 billion, more than twice the $225 billion of 2017.

The reason behind these numbers is not related to any barrel price speculation, but to the new business model of the game changers.

Most of the Independents do not tender the EPC contract, they award it automatically to the engineering company which performed the front end engineering and design (FEED) work.

They save time, costs and run faster on commercial operations.

The market shift we anticipated last year is turning the Oil & Gas and Petrochemical market into a new game requiring from the key players more agility.

More than ever, the New Year will be agile and collaborative to be prosperous.

We wish you a great success in 2019.

pse

1 Comment to “Happy New Year 2019”

  1. Interesting analysis guys.

    With the new players joining in the Oil, Gas and Petrochemical industries, it would be interesting to see how the industry dynamic changes, especially with new potential reserves being discovered and drilled in South Asia

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