MRC Global October 2017 InSight

Europe

Mainland Europe & UK

The European region has experienced a contraction in the refining market since before the slump in oil prices and a slowdown in offshore activity after oil prices diminished in 2015-2016. However, the chemical market has been robust. In response to the reduced upstream and refining activities, customers have been exploring strategic initiatives to reduce costs. Tendering activity has been high across European borders as customers seek to consolidate, aggregate and leverage spend with global players such as MRC Global.

The outlook across Europe is varied. In the short term, outlook is quite positive in the Benelux. In the Netherlands and Belgium, capital investments in coastal storage have increased. Feasibility and FEED activities have increased. Our centralized location and Regional Distribution Center (RDC) in Bleiswijk, Netherlands, has positioned MRC Global to be a key supplier to our European customer base.

In the UK, the government recently announced plans to provide tax incentives to assist existing operators to sell oil and gas fields in the North Sea. This will generate cash to keep existing operations productive for longer. During 2017, we saw Shell sell a large part of its North Sea oil and gas assets to private equity-backed Chrysaor for $3 billion. Global energy player, Engie, sold its exploration and production assets, most of which are in the North Sea, to Neptune. More recently, Maersk sold its oil division, mainly comprising assets in the North Sea, to French giant Total for $4.95 billion. These consolidations are evidence of the changing face of the North Sea market, as the industry continues to address the challenging market conditions by prolonging the service life of existing facilities to meet the local UK demand.

MRC Global’s European business has a strong mix of active sectors covering oil and gas, chemical, petrochemical and tank farms.

Nordics

The Scandinavian offshore market is concentrated on the Norwegian Continental Shelf (NCS) and Statoil is the dominant operator. From 2018 to 2021, Statoil is forecasted to become responsible for more than 60% of the NCS market. Statoil has been active with large capital investments, which have sustained the market despite greatly reduced OPEX levels. The Johan Sverdrup project is well-advanced into the execution phase, while the Johan Castberg is just entering the procurement and execution phases. MRC Global is participating in both of these turnkey projects, supplying a combination of Norsok qualified high alloy PFF, instrumentation packages and advanced valve monitoring technology.


MRC Global is participating in...turnkey projects, supplying a combination of Norsok qualified high alloy PFF, instrumentation packages and advanced valve monitoring technology.


Offshore developments and suppressed oil prices have driven a quest for greater efficiency in project execution. E&P companies and suppliers have worked intensively on methods to reduce costs. Costs have been lowered due to rightsizing, design standardization, integration of solutions, technological innovations and margin reductions. This development is driving interest in starting up new projects required to keep oil and gas production stable for the coming years.

The production in the Norwegian offshore market is forecasted to remain stable at around 3.8 mmboepd towards 2021. However, post-2021 and towards 2025, production is forecast to increase to 4.0 mmboepd. This growth will be driven by liquids production from fields such as Johan Sverdrup in the North Sea and Johan Castberg in the Barents Sea, more than offsetting the decline in gas fields such as Ormen Lange and Aasgard.

The MRO market has been very slow in recent years, but we now see signs of increased activity. In 2016, MRC Global invested in a new state-of-the-art Valve and Engineering Center (VEC) in Bergen. This complements our operations in Stavanger and Hokksund where we have centers of excellence in field instrumentation and measurement, with production of pressure gauges, transmitters and thermometers.

In the rest of Scandinavia, economies are generally strong and improving. The Finnish and Swedish markets are predominantly downstream. Neste and Preem continue to invest in their refining capacity and are important strategic companies for these countries.

*NORWEP Annual Offshore Oil & Gas Market Report 2017