February 2017, Vol. 244, No. 2

TechNotes

Midstream Oil & Gas Equipment Industry to Slowly Recover

A study by ReportBuyer.com projects U.S. demand for equipment used in midstream oil and gas applications will decline to $10.5 billion for the next two years. The study suggests that low oil and gas prices limiting production growth and U.S. midstream infrastructure becoming better adapted to the recent shifts in energy production within the country.

While demand will be significantly lower in 2016, the market for midstream equipment is expected to return to healthy levels of demand by 2019. Spending on equipment for use in crude by rail and gas processing plants will both fall from elevated 2014 levels, but pipeline construction and liquefied natural gas (LNG) activity will continue to support a high level of demand.

Significant declines in equipment demand were seen in 2016, driven by a dramatic fall in well completions after the collapse of oil prices since mid-2014. A recovery in drilling and completion activity is expected by 2019, however, with the upstream sector benefiting from improved cost efficiency, an eventual price recovery, and the presence of new export opportunities for both crude oil and LNG. In turn, better conditions in the upstream market will promote demand for equipment used in new gathering and transmission pipelines, storage facilities, and other types of midstream infrastructure. 

Line Pipe Demand to Nearly Recover by 2019

The largest product category in midstream oil and gas equipment will remain line pipe, as demand is expected to almost fully recover by 2019 despite a sharp decline in 2015 and 2016. Although demand for these products will not recover to the elevated levels seen in 2014, equipment associated with natural gas infrastructure – including gas treating and processing equipment, and compressors used in pipelines – will continue to be strong by historical standards.

The rapid growth of gas production in the Marcellus and Utica plays of the Appalachian Basin has required high levels of new gas processing and pipeline infrastructure to meet changing gas transportation dynamics. By 2019, the need for more construction there will begin to ebb. 

New LNG facilities, Crude-by-Rail to Boost Demand

Although the prospects for LNG export facilities are clouded by short-term price uncertainty, market fundamentals will drive the eventual construction of a number of facilities in coming years.

These facilities, each of which will be a major investment, will boost the overall market for a range of equipment, including compressors, valves, and pumps. Additionally, several new projects will require construction of LNG storage tanks, which can make up a large part of total project cost due to their size and heavy engineering requirements.

Use of Drones Expected to Skyrocket

In another study released by ReportBuyer.com, it is estimated that the global oil and gas drones market has will grow from US$609 million in 2014 to US$4 billion by 2020, at a CAGR of 37.07%. The view from 50,000 feet shows signs of drones, or unmanned aerial planes, poised to become the next major game-changing service to influence the oil and gas industry. Drones allow oil and gas companies to monitor pipelines, roads, storage tanks, buildings, bridges, power lines, etc. These also enable flare stack inspections, off- and onshore oil derrick inspections, tailings pond inspections, oil spill detection and damage assessment and gas emissions monitoring.

“It is a revolutionary breakthrough to the oil and gas industry already facing the wrath of decline in oil prices. It is bound to increase multi-fold in the oil and gas industry due to the revolutionary nature of drones to source huge amount of information in negligible period. The usage of drones would literally astonish the industry with its capability to get as much data available in the last 30 years within 45 minutes,” the report states.

It adds that “any segment of the oil and gas industry from the upstream to the downstream would welcome the usage of drones, as it would be a game changer to any field it is used in. The advantage of reduction in time, reaching the unreachable places, ability to give out all types of data required, safety improvement, weather independency are all the factors which could revolutionize the oil and gas industry.”

While the market is driven by several factors, such as the increasing safety norms in the oil and gas industry, the cost advantage will be affected if falling oil prices and volatility continue. Other potential drawbacks, such as federal regulations limiting the usage to line-of-sight and the lack of technological advancements for processing the raw data may act as a roadblock to the growth of the market. North America occupies the largest consumer base in the world followed by Europe and the Asia-Pacific (APAC).

“The growing oil and gas activity across all its streams in APAC has made this region an area of immense potential and opportunities. However, the usage of drones is relatively new to the leaders which could hinder the intensity of usage in this area,” the study concluded.

Pipeline Safety Market Expected to Reach $8.67 Billion by 2021

A new market research report indicates the the pipeline safety market size is expected to grow from US$5.57 Billion in 2016 to US$8.67 Billion by 2021, at a Compound Annual Growth Rate (CAGR) of 9.3% during the forecast period.

The major drivers of the market include a growing need for sustainable use of resources, increased spending by oil and gas companies for infrastructure and network protection, and expansion and upgrading of refineries. Furthermore, increasing security regulations, mandatory standards, and rising oil and gas demand in developing countries provide huge opportunities for pipeline security vendors, service providers, solutions providers, and consulting companies.

Rising incidents of oil and gas attacks is the major reason to deploy pipeline safety solutions across the globe, say authors of the report, entitled “Pipeline Safety Market by Technology and Solution (Pipeline Monitoring Systems, Secure Communication, Perimeter Intrusion Detection, SCADA for Pipelines, Intrusion Control Systems Security), Service, Vertical, and Region – Global Forecast to 2021,” published by MarketsandMarkets,.

“Transportation of oil and gas through pipelines is one of the safest modes of transportation,” the report noted, adding that cyberattacks on oil and gas pipelines are not new. For instance, the 2008 Turkey pipeline blast was a well-planned cyberattack in which hackers cut off communications and shut down all the alarms.

In order to combat such cyberattacks on critical infrastructure, the pipeline safety solutions are being increasingly deployed in existing infrastructures as well as a large number of ongoing pipeline projects across the world especially in the Asia-Pacific (APAC) region.

Increasing demand for risk management is the driving factor of professional services in the pipeline safety market. The professional services are classified into three major categories, such as risk management, consulting services, and repair & maintenance. These services contribute in essential support for enhancing the efficiency and increasing the growth, along with reducing operating expenses and resource losses. These service providers help the pipeline operators in planning and deploying the new systems into their existing infrastructure. As pipeline safety has strict regulatory and safety standards, risk management is highly required in all pipeline safety solution deployments.

North America and Europe are expected to hold large market shares and dominate the pipeline safety market from 2016 to 2021. The main drivers responsible for the growth of the pipeline safety market in North America are the technological advancements, large pipeline infrastructure, and growing demand for oil and gas. The pipeline security market in APAC is expected to witness high adoption rate as the U.S. Energy Information Administration has forecast that till 2035, Asia’s liquid fuel consumption would reach 30% of world consumption.

The major vendors covered in the pipeline safety market for this study include ABB Group, GE Company, Schneider Electric and Siemens AG and Honeywell International.