Douglas-Westwood: Operations and Maintenance Activity to Boost Onshore Pipeline Spend

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Douglas-Westwood has released the 6th edition of the World Onshore Pipelines Market Forecast with new operations expenditure (Opex) forecasts. The report considers the prospects for the onshore pipelines construction business and values the future capital expenditure (Capex) and Opex markets through to 2021 by key component/segment, region, pipeline product and diameter.

The sector has been negatively impacted by the sustained low oil price environment, whereby reduced investment in early feasibility and front-end engineering and design (FEED) work is expected to impact the latter years of the forecast period. However, overall expenditure is expected to be bolstered by greater installation activity in the near-term, due to projects that were sanctioned prior to the downturn.

Report Author, Katy Smith, commented, “Douglas-Westwood expects total onshore pipeline Capex over the forecast period to increase slightly to $203 billion (bn), a rise of 5% compared with $194bn over the preceding five-year period. Pipeline additions are predicted to increase overall, compared to 2012-2016, though many regions will see declines during the forecast. Global installed kilometres (km) over the forecast will total over 276,000km, representing an increase of 2% compared to the previous five-year period.

“North America and Asia remain the highest volume markets, together accounting for approximately 53% of global Capex over the forecast period. Australasia, having seen a large increase in installations over recent years due to the number of LNG projects in the area, is expected to see a significant decline in Capex as a number of these projects begin operations mid-forecast. Eastern Europe & FSU is expected to be the most resilient pipeline market, with 2021 expenditure of around $5.6bn seeing only a 7% decline from $6bn in 2017, owing to key pipeline projects such as Power of Siberia 1 and 2.

“The operations and maintenance market has a more positive outlook, as the majority of regions already possess a large installed base of pipeline. Total Opex is expected to be approximately $132bn over the 2017-2021 period, compared to $114bn in the preceding five years, representing a 16% increase. Unlike Capex, this sector is somewhat sheltered by stringent pipeline regulations and the need to continue operations.

“North America will see the greatest operations and maintenance expenditure – 37% of total Opex during the forecast – due to the region having the largest installed base. More than half of the $10.5bn Opex expenditure in North America will be associated with pipeline operation costs (covering routine expenditure associated with the day-to-day operation of the pipeline facility, including monitoring, routine pigging, and cleaning), due to ageing infrastructure and more stringent pipeline regulations, whilst a quarter of it will be linked to station costs.”

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