Demand for equipment used in midstream oil and gas applications in the US is expected to decline through 2019 as a low oil and gas price environment limits production growth and US midstream infrastructure becomes better adapted to the recent shifts in energy production within the country. 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 equipment demand through the forecast period.
Eventual upstream recovery to boost midstream infrastructure
According to Midstream Oil & Gas Equipment from Freedonia Group, although the market for midstream equipment is expected to return to healthy levels of demand in 2019, significant declines are expected in 2016, driven by a dramatic fall in well completions in 2015 and 2016. A recovery in drilling and completion activity is expected by 2019, with the upstream sector benefiting from an eventual oil price recovery along with additional export opportunities, which had not been previously available, for both crude oil and LNG. As growth returns to the upstream sector over the next few years, demand will again accelerate for midstream infrastructure projects, in turn boosting demand for equipment.
Pipe segment to recover by 2019
Freedonia forecasts pipe will remain the largest product category in midstream oil and gas equipment, with demand expected to fully recover and post modest gains by 2019 despite a sharp decline in 2015 and 2016. Demand for equipment associated with natural gas infrastructure -- including gas treating and processing equipment and compressors used in pipeline and other applications -- will continue to be strong by historical standards, although it is not expected to return to 2014 levels in the near future. The rapid growth of gas production in the Marcellus and Utica shale plays of the Appalachian Basin has necessitated a high level of gas processing and transportation infrastructure investment to accommodate changing regional gas transportation needs; by 2019 the need for ongoing construction will begin to ebb.
Major LNG export facilities expected
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 -- several of which are likely to remain under construction in 2019. These facilities, which will be major investments, 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 component of the total project cost due to their size and heavy engineering requirements.
Midstream Oil & Gas Equipment presents historic demand data (2004, 2009, 2014) plus forecasts (2019, 2024) by product, application and US region. The study also assesses key market environment factors, analyzes the industry structure, evaluates company market share and profiles 37 US industry players.
Freedonia's market research studies provide timely access to reliable, unbiased analysis from which to benchmark performance and answer critical questions: Is your business growing faster or slower than the overall market? Is your organization gaining or losing market share? Which products and markets are the most desirable to explore for expansion? Are there industry trends or competitor activities that present a threat or opportunity to your business?
Studies offer a great ROI and can help business leaders make informed, analytically driven decisions. When considering the time, effort, and expertise that goes into it, our off-the-shelf research saves our clients time and money.