North America Capital and Maintenance Infrastructure Spending Shows Decline
Planned capital and maintenance project spending is showing a 7.4% decline for the forthcoming 12-month period out to third-quarter 2019, according to the latest analysis from Industrial Info. The pipeline of planned infrastructure spending across the 12 industries Industrial Info researchers track and monitor stands at $593 billion from fourth-quarter 2018 to third-quarter 2019. However, the volume of projects has increased almost 2% for projects with a planned kickoff date in the next 12 months, and stands at almost 6,500 capital projects and a further 6,400 maintenance projects and turnarounds.
Shaheen Chohan, Industrial Info's vice president of global analytics and author of the quarterly market outlook report, said, "This is a trend that has been continuing for some time as we see some sectors such as upstream crude and mining continue to retrench and hold back on committing dollars into some of those large grassroot and expansion projects. This comes from favoring the channeling of investment toward smaller in-plant capital projects, which are more geared toward process optimization and efficiency upgrades."
The current 12-month outlook still shows a 3% year-over-year improvement in infrastructure spending and is up $17 billion compared to the same 12-month period reported last year. Despite flat long-term electricity demand growth expected in the U.S., power generation project spending is up $32.5 billion compared to the same 12-month period last year, driven in part by the continued decarbonization of the fuel mix and a wave of additional battery storage projects now being tracked. On the oil and gas side, planned pipeline spending is up $24.4 billion year-over-year and reflects the continued demand growth for additional crude, gas and natural gas liquids (NGL) takeaway capacity.
Year-over-year comparative spending in upstream oil and gas production is mixed. Overall, North American production spending for the forthcoming 12-month period is lower by almost 19% compared to last year. Industrial Info expects considerable headwinds to persist for any new grassroot Canadian oil sands projects, as investment has continued to shift away from these and move into U.S. shale plays.
U.S. shale plays have continued to produce more crude, but with only a limited uptick in capital spending due to greater levels of advancement in drilling and production techniques. Overall, U.S. gas production is expected to hit 79 billion cubic feet per day (Bcf/d) this year and grow to 93 Bcf/d in 2020. A similar theme to crude is occurring with shale players achieving more gas production volumes without the need for a huge rise in additional drilling rigs. This has been achieved by efficiency gains, and the knock-on effect is less wells. However, Industrial Info is tracking a big increase in new NGL processing capacity currently under development.
All in all, across all 12 industries that make up the report, both capital and maintenance spending across the U.S. is looking decent and is trending in line with our expectations. There are some headwinds that the market still needs to contend with, namely the ongoing trade dispute with China. Chohan highlights that "if this extends deep into next year and isn't resolved, it will have some impact on lowering global trade flows, and this will have a knock-on effect across both energy and industrial manufacturing supply chains and may put a little more uncertainty into the minds of some current projects owners. However, uncertainty is the daily fabric of what today's decision-makers need to factor into their planning and for those equipped with the right data and insights, then they can help turn some of these headwinds into opportunities."
Industrial Info Resources' North America 12-Month Market Assessment report is produced quarterly and provides an analysis on planned capital and maintenance project activity across each of the 12 industries across the energy, power and industrial markets. The report comes complete with commentary on the prevailing trends and drivers shaping planned spending activity and includes assessment of the key market and industry indicators.