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Happy New Year 2020

Oil & Gas is booming while other Industries slow down


2B1st Consulting expects that you could already benefit from the business upturn in the Oil & Gas and Petrochemical market in 2019, to wish you an even better NEW YEAR 2020 as this positive trend should continue while other industries are slowing down amid the international trade war and protectionism.

Oil & Gas and Petrochemicals is still a Global Business

At the difference with other industries directly exposed to trade conflicts between USA and other countries such as China, Europe, or South America slowing down the activity, the Oil & Gas and Petrochemicals remains a global business, escaping from the trade war.

According to the International Monetary Fund (IMF) in its World Economic Outlook (WEO) of October 2019, the Global Growth 2019 will go down to 3.0%, the lowest level since the financial crisis in 2008, as a result of the trade war.

Global Growth in Advanced Countries vs Emerging and Developing Countries IMF October 2019

The Advanced Economies, such as Western Europe, Asia Tigers and North America, where industry is concentrated are going to continue to slow down in 2020, while the Emerging Markets & Developing Economies, such as Central Europe, Asia, Middle-East, Africa and South America, where energy sector is dominant, will turn up and grow three times faster than Advanced Economies.

Oil & Gas and PetroChemicals in Sustainable Growth

In this slowdown context, the Oil & Gas and Petrochemical sector is booming, confirming the trend we detected in our forecasts in 2018 and 2019, offering significant growth year to year.

Here we aggregate data from data base tracing all the Oil & Gas and Petrochemical projects in the world.

Oil&Gas and Petrochemicals Capital Expenditure Project Smart Explorer January 1st 2020

This graph is showing the amount of capital expenditure in US$million per year Upstream, Midstream and Downstream.

Until 2014, this graph is not reflecting the market, but since 2015, we can measure in 2016 the impact with two years time delay of the 2014 barrel price crash.

Since 2016, the market is growing steadily with with even stronger perspectives for the next five years.

Until 2019, the growth was fueled by the crude oil production, regardless the barrel prices, in Middle-East, Asia, and of course USA.

Then, in 2019 and beyond, the market benefits from a restless demand for natural gas and petrochemicals pulling the projects for floating, production, storage and offloading (FPSO) vessels and ethylene crackers.

After two flat decades, the liquefied natural gas (LNG) projects start to materialize, well supported by new world-scale integrated refineries and petrochemical complexes.

Projects Business to Turn Supply Side

The Oil & Gas and Petrochemical market is booming far beyond the engineering companies and contractors capacities.

The barre graph below is the same as above except that it is related to the projects for which the engineering, procurement and construction (EPC) contract has been awarded.

Therefore this picture is no longer a forecast and showing actual numbers.

Oil&Gas and Petrochemicals Capital Expenditure Project Smart Explorer January 1st 2020 Awarded

Although the year 2020 is just beginning, this graph indicated that the amount of projects awarded to EPC contractors in 2020 is already nearly at the same level as last year.

In proportion, the following years of 2021 and beyond are also unusually high for projects already awarded at this period of time.

These actual numbers give credit to our forecast to see a demand twice higher on the next five years than previous period.

This significant increase on the demand side from the End Users is going to congest the supply side of the contractors on the period 2020 to 2024, at least.

As a consequence the market will turn supply side where the EPC contractors will select the projects they want to bid instead of the End Users selecting the contractors.

This unbalance situation will last until the demand side and the supply side align on prices and capacities, thus providing the Oil & Gas and Petrochemical market with sustainability on the next decade.

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