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Oil & Gas and Petrochemical Market to Double in 2018

First quarter 2018 nears entire year 2017

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From the actual numbers registered at the end of the first quarter 2018, the Oil & Gas and Petrochemical market is likely to double in 2018 compared with 2017.

Earlier this year, our market analysis based on www.projectsmartexplorer.com data base, tracing the 1000 most active projects in the world, Upstream, Midstream and Downstream, was showing how the market has grown up by 30% in 2017 compared with 2016.

It was also indicating how this trend should continue in 2018 in the same range.

But the actual numbers related to the engineering, procurement and construction (EPC) contracts awarded during the first quarter 2018 are much higher than expected since they are already reaching about 80% of the entire last year.

The barre-graph below is showing the volume of Centrifugal pumps in KUSD per year related to projects where the EPC contracts have been awarded year per year.

Centrifugal_Pumps_Business_Opportunities_Year-per-Year_April_15th_2018 EPC Awarded

These numbers are therefore no longer forecast but actual numbers.

They show how the EPC contracts awarded on the first quarter 2018 contain nearly the same volume of potential orders in KUSD for centrifugal pumps than during the 12 months last year.

The centrifugal pumps are a valid case, as this commodity is present in all projects, UpstreamMidstream and Downstream, thus it can be used as a relevant indicator of the activity in the whole Oil & Gas and Petrochemical sector.

Electrical cables could also be used at pertinent indicator and would lead to the same conclusions.

Regarding the sources of this major market rebound, we witness the confirmation of the trends observed last year with the market shift from the international oil companies (IOCs) to the national oil companies (NOCs) and the Independent companies (Independents), just gearing up.

NOCs and Independents take over IOCs on Q1 2018

The key players at the source of the rebound are the NOCs and the Independents against the IOCs.

The ring below is showing how the Business Opportunities of Centrifugal Pumps in KUSD related to projects awarded on first quarter 2018 are 96% due to NOCs and Independents.

Centrifugal_Pumps_Business_Opportunities_by_IOC-NOC-Independent_from_EPC_Awarded_on_Q1-2018_April_14th_2018

In maintaining the same level of investment in 2018 than in 2017, approximately 50% below 2014 level, the IOCs improve their financial performances but see their market share continuing to melt away.

Interestingly we also notice for the first time since 2014, when the barrel price crashed, that all the regions in the world turn bullish in projects final investment decisions (FID).

One can say that this rebound is fueled by the barrel price recovery, but so far we can’t see any correlation in between.

From the EPC contracts awarded since 2016, we can notice that the key factors of FID are:

Strategic, as per example the gas projects in Middle-East to compensate Qatar ban consequences.

Based on the local value to be created Downstream or for power generation from the investment as per example in Africa, South America or Asia.

In both cases, representing the vast majority of the projects final investment decisions (FID), the barrel price or gas price is not in the agenda.

Then we observe that there is no major difference between UpstreamMidstream and Downstream, the upturn is very much the same all along the value chain, the reason is that hydrocarbons piped-in must be piped-out, eventually in different forms.

Market Rebound Challenges Sales Organizations Agility

Here below you will find the same barre graph as above but with our revised forecast for the next 3 years according to  www.projectsmartexplorer.com.

For comparison purpose, it is still based on centrifugal pumps and shows how the 12 months 2018 should double the volume of business over 2017.

Centrifugal_Pumps_Business_Opportunities_Year-per-Year_April_15th_2018

In addition, we can see on this graph how this trend should continue until 2020 at least.

The only challenge in this rosy picture is about the perception of this market upturn.

First because the IOCs, the most visible companies in this market, are not part of it.

Second because the projects led by the NOCs and Independents are much smaller than the IOCs projects, unless to trace systematically these projects one by one, their visibility is much lower.

In addition, the time frame of the NOCs or Independents projects is much shorter than the IOCs projects requiring more agility to capture them.

With the market shift from the IOCs to the NOCs and Independents and the projects nature changing drastically, the ongoing market rebound is not enough to boost business growth, capturing projects requires also to address the right targets and to adapt the marketing and sales organizations to see beyond IOCs and move first.

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