Date of publication: January 2018
The past year has been a veritable rollercoaster for global relations and energy matrix changes. In such a dynamic, flexible industry much has happened since the previous edition of AMI Consulting’s Global Steel Pipe Coating Report, published in 2016.
The world is going through some turbulent times. Credit lines are finally being relaxed and this is allowing for an increase in consumption and flexibility in production. However most of this is predicated on tentative growth, poor productivity, and escalating diplomatic issues within and between the most econopolitically influential countries.
Global news is littered with the response to actions, tweets and pictures of world leaders. While the attention is diverted towards the man in power, the country itself is in socio-economic turmoil driven by visible differences within and between its populations. The lack of oil revenue has resulted in Venezuela suffering from social unrest. This is affecting other parts of the South America. The number of people seeking asylum is increasing there, and in other parts of the world. Diplomacy is breaking down over the best way to tackle the terror threat from war-torn countries. There are r tensions in the Middle East. Asia has had disappointing economic growth in recent years. And while world relations may be non-transitive, social movements are polarising public opinion around the world.
The pipeline coating market is driven by investment in oil and gas. These industries are strongly affected by economics, but also by socio-political factors, military conflicts and diplomatic relations. The building of pipelines for these industries is also predicated on a few other sensitive factors. Pipeline construction is a big investment, with many stakeholders to appease, and many risks to mitigate; coalescing into complex projects that require to take account of issues such as finance, economics, environmental protection, socio-economic effects, return on investment and social mood, to name a few. As mankind is attempting to access oil & gas reserves that are more and more difficult (and therefore expensive) to exploit, trends in crude prices have increasingly become an issue. Projects that are highly profitable at $70 per barrel may be losing money at $50 per barrel. Large cross-border projects exhibit additional layers of complexity, because politics as well as economic interests render decision processes opaque and their outcomes often impossible to accurately predict.
The oil and gas business has become more risk averse in recent years, and has found it hard to raise capital for investment due to a shift in mood towards green energy. Due to this and many other reasons, pipeline construction has suffered as an industry in the past few years.
The fundamental forces driving the oil and gas industry, however, remain strong. The world is consuming ever more energy, and this will continue to grow into the future. While oil may have fallen off the favoured list, gas is viewed as a cleaner alternative to coal. Changing energy preferences in developing nations, and growing populations (through migration) in temperate regions, are increasing the demand for natural gas. The market for renewable sources of energy is still very much in its infancy and cannot keep up with the demand. Also gas is a cheaper, quicker and easier source of energy short to medium term. Fossil fuels still rule the energy market. This growth in demand is reflected by appetite for new transportation routes. These have become of strategic importance to some countries, and even regions. While LNG transport plugs a gap in the demand, pipelines are still the most economic, reliable and safe means of product transport. Most pipelines continue to be manufactured from carbon steel – which necessitates active and passive means of corrosion protection. Furthermore, both the composition of oil and gas and the environments from which they are extracted present tougher challenges, necessitating more and better-performing coatings to provide protection against corrosion and mechanical stresses. And finally, challenges related to climate change open new applications for pipelines in water transport and carbon capture and storage.
This leads to the conclusion that there will be growth in the pipeline coating market. It is obvious that this will not be uniform across the world. The question remains as to what the most likely evolution in the various geographic and application segments and, hence, how suppliers should position themselves to exploit the upcoming opportunities.
The study provides well-researched and reasoned answers, based on the collective expectation of the industry in its many different segments, as revealed through a large number of interviews with coaters, pipe manufacturers, raw material suppliers, machinery manufacturers, contractors, pipeline operators and end-users.