World News: 11:30 GMT Friday 7th December 2018. [Research and Markets via Globe Newswire via SPi World News]
Dublin, Dec. 07, 2018 (GLOBE NEWSWIRE) -- The report has been added to offering.
In 2016, the global spending on oil and gas projects was about USD 437 billion, a decrease of nearly 41.7% when compared to that of 2014. Factors, such as a decline in the investments in oil and gas projects and cancellation of projects, worth USD 380 billion since 2014, have resulted in a severe downturn in the global oil & gas EPC market.
As a result, it is tough to maintain the profit margins, which has fueled the level of competition between EPC contractors. Oil & gas EPC companies are partnering with seasoned companies to complement their skillset, increase strength and improve the overall business portfolio.
If the new projects are not approved, the global oil supply is expected to fall behind the global oil demand by 2020. Two scenarios can be considered due to this situation. Firstly, a majority of operating companies anticipate such situation and take the risk of investing in new projects, even if the oil prices are low; however until the prices rise, the companies can delay the production to prevent the oversupply.
In this scenario, companies are expected to invest in exploration, so that the discovered oil reserves are utilized later when the oil & gas prices rise, resulting in the growth of upstream exploration contracts during the forecast period; while midstream and downstream contracts are expected to rise after 2020.
The second scenario is that, if the majority of operating companies do not take the risk of investing in new projects due to low sustained oil prices, then the supply of oil and gas is expected to fall behind the demand, leading to a drastic rise in the oil prices. In this case, the oil & gas EPC contracts are expected to rise substantially during the forecast period.
Therefore, in either case, the contracts in oil & gas sector are expected to increase within next five years. The low crude oil prices and lack of skilled labor are the major restraints for the growth of the global oil & gas EPC market.
A decline in crude oil prices has led to a slump in the upstream oil & gas industry. On the other hand, it has had a variable effect on the downstream oil & gas industry based on geography.
For instance, in Europe, the decline in crude oil prices has increased the profit margins for the downstream industry; while in the United States, the low oil prices have resulted in an oversupply of end-product in the downstream industry.
This has led to the demand-supply deficit, which, in turn, has had an adverse effect on the US downstream oil & gas industry. The midstream oil & gas industry witnessed a sharp decline over the years, due to a decline in the volume of investments owing to the uncertainty of oil prices.
The North American upstream EPC market is expected to grow at a faster rate, due to the positive outlook of the oil & gas industry in the United States, Canada, and Mexico. Oil production in the United States is expected to grow, drastically, due to the growing production from the Permian region of Texas and the Federal Gulf of Mexico. Canada provides tremendous a growth opportunity for the oil & gas EPC market as the country's major oil reserves, like oil sand, are open to private companies and not controlled by national oil companies.
Mexico is the third-largest player in the oil & gas EPC market in North America, after the United States and Canada. New oil & gas projects are expected to start in Mexico, due to the growing requirement for infrastructure development activities in the oil & gas industry.
This factor is expected to fuel the market growth in Mexico. Hence, growth in the United States, exploration opportunity in Canada, and need to build infrastructure in Mexico are likely to drive the oil & gas EPC sector in North America in the coming years. Moreover, in Canada, the transparency in the oil & gas sector is expected to help in mitigating risks in EPC projects.
In 2016, India accounted for about 4.6% of the global oil consumption and registered a CAGR of nearly 8% for oil consumption during 2014-2016. Industrial growth, urbanization, growing population, and increasing per capita income are the major drivers fueling India's demand for oil.
India is expected to be a major source for the global oil & gas demand during the forecast period. This demand is expected to drive the global oil & gas investments, thus, driving the oil & gas EPC market.
Laura Wood, Senior Press Manager
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Related Topics: Gas, Oil, Engineering
Globe Newswire: 11:30 GMT Friday 7th December 2018
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