Long cooled by the recession, U.S. oil and gas pipeline construction is heating up and poised for a major comeback, with sustained demand for repairs, replacement and new construction, according to a new market forecast.
Construction will be fueled by investment in new domestic energy sources like gas shale and oil sands, pressure to repair and replace aging infrastructure, and recovery in the residential construction market, reports Oil & Gas Pipeline Construction in the US, a new five-year forecast by IBISWorld of Santa Monica, CA, the world’s largest independent publisher of U.S. industry research.
Pursuit of natural gas has kept business flowing over the past five years, but the $39 billion industry’s fortunes are about to get even better, the report says.
Luca Galuzzi - www.galuzzi.it
|The Trans-Alaska Pipeline, shown here in 2005, is part of the aging infrastructure that is expected to help drive a new boom in pipeline construction, repair and replacement.|
Over the next five years, pipeline construction industry revenue is expected to grow at an average annual rate of 3.3%, far outstripping the current sluggish GDP rate of 0.6% per year.
Those gains should percolate through all facets of the industry: contractors who build, renovate and repair pipelines, refinery facilities and tanks; construction management firms; and special trade contractors.
Pipelines are essential for transporting fuel supplies to households and businesses, and a surge of investment in gas and oil infrastructure construction has driven the market since the middle of the 2000s.
Skyrocketing energy prices and advances in extraction technologies pumped up domestic oil and natural gas production significantly, bringing demand for construction of the pipelines, tanks and other facilities and infrastructure to transport and store it, according to IBISWorld industry analyst Kathleen Ripley.
The pipeline industry sustained a number of setbacks from 2009 to 2011, as energy prices slumped, financing became more difficult, and the 2010 Deepwater Horizon disaster—the worst oil spill in U.S. history—clamped a moratorium on deep-sea drilling and cooled pipeline investment.
That should all change this year, however, as global energy demand boosts domestic investment in energy infrastructure, the report says.
Plenty of Players
Unlike many industries that are consolidating, the oil and gas pipeline sector is still fairly diverse, with even the largest players—Bechtel Corp., Fluor Corp. and Jacobs Engineering Group Inc.—accounting for a relatively small percentage of revenue among more than 2,000 businesses that employ nearly 150,000 people.
However, Ripley says, “The industry is more concentrated than many in the construction sector.”