Global Oil & Gas Industry Sees Planned Project Spending Topping $1.79 Trillion
The pipeline of planned capital and turnaround maintenance project activity within the Oil & Gas Industry being tracked globally by Industrial Info stands at more than 10,821 projects valued at over $1.79 trillion. The latest data on the trends and drivers shaping the outlook were presented in Industrial Info's Asia Pacific Market Outlook webinar, which was conducted on March 6 by Shaheen Chohan, vice president of global analytics, Chris Paschall, head of global refining research, and Gordon Gorrie, head of global O&G research.
The U.S. and Canada continue to top the spending outlook, with $570 billion worth of production, storage and pipeline project opportunities still in the planning or engineering stages. Not all of this spending activity will move ahead as planned, with some projects being put on hold or cancelled. However, a continuously improving economic outlook across most markets, and a better demand profile, is resulting in more positivity coming back into the sector.
"Demand for the oil and gas market has continued to improve with increasing levels of rebalancing seen in the crude markets. Not all producers may like the current price levels, but there is more stability and less uncertainty, and this will help support improved capital investments. Although current crude price levels, whilst trending upwards, still continue to put stress on some of those higher-cost upstream grassroot crude projects such as offshore and Canadian Oil Sands -- the big play at the moment is on the gas side of the sector," Chohan said.
However, Paschall said the overall volume of projects coming to a construction start has tapered off somewhat, and overall project realization rates have fallen.
"We have certainly seen a drop in what is currently under construction this year compared to the same period last year," Paschall continued. "We are currently tracking a little over 2,500 projects that are under construction, worth a total investment value of $433 billion, compared to $473 billion for the same period last year, which equates to about an 8% decrease. This is a result of lower commodity prices being around for a lot longer."
Collectively, Asia Pacific accounts for $652 billion of project opportunities still in the planning or engineering stage, with Australia's gas-related spending currently topping $51 billion of planned spending to kick off in 2018 out to 2020.
However, the Australian market is in a state of transition according to Paschall.
"There is a shift in the types of projects we are seeing now. In 2012 through 2017, most of the investments moving forward were geared towards grassroot spending, building out the LNG [liquefied natural gas] export market, which captured 81% of the spending," Paschall said. "Now looking into the near term over the next 36 months, the grassroot spending continues to see less share of the allocation and we are tracking a shift in the composition and focus of projects towards more plant expansions and other in-plant spending dollars, now that the LNG plants have been built, backfilling natural gas as fields are depleted, plus the buildout of domestic pipelines. Taking a peek into the future longer term, we could see several LNG trains added to an existing plant, to meet the growing needs of natural gas industry."
Industrial Info's research teams are tracking more than 1,250 active oil and gas projects worth more than $208 billion across Southeast Asia. More than $103 billion of the $118 billion still being planned for a construction start in 2018-2020 is associated with natural gas. This includes natural gas and natural gas liquids (NGL) production, gas processing and treatment, pipelines and compressor and metering stations, and storage infrastructure, with over $36 billion associated with LNG.
Natural gas demand drivers remain strong and Industrial Info is tracking daily project activity that shows two trends playing out. The first is the major buildout of LNG regasification capacity and supporting transmission infrastructure, which is both competing with or complementing regional or localized upstream natural gas production and processing investments, and trans-border pipeline and associated compressor station buildout.
According to Gorrie, "different markets are adopting different supply strategies; it's about diversifying your supply risk and building greater levels of optionality into how you fulfil your long-term energy needs." Industrial Info is tracking $114 billion worth of investments globally across nearly 400 active LNG regasification projects.
"On the demand side, we are tracking almost 1,400 natural gas-fired, new-build [grassroot and unit addition] power generation projects globally valued at $564 billion," Gorrie continued. He added that not all of those projects will be fed by LNG, but Industrial Info's data shows that there are 185 active new import projects valued at $80 billion, which is associated with 32 new, first-time buyer countries of LNG.
In conclusion, the mid-term outlook for Asia Pacific oil & gas investments continues to look promising on the back of strong pan-regional demand fundamentals.
"The bulk of regional project activity will be channeled toward natural gas. Crude spending is still moving forward, but the composition and shape of that spending [is] with a focus on smaller, in-plant capital projects geared toward production efficiencies and margin," Chohan said.
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