MRC Global Volume 9 Issue 1 May 2018 InSight
MRC Global InSight

Europe, Middle East & Africa

General market conditions across the EMEA region have improved. Activity is up across all streams with positive investment decisions from our customer base for both greenfield projects and brownfield expansions. Major turnarounds are either ongoing or scheduled during 2018, with all of our major end-users. This is a welcomed increase in activity after a period where maintenance budgets were under pressure and reduced due to the tough market conditions. The MRC Global inventory profile has been expanded to support the growth in MRO business, which also includes growth from new contract wins.

The MRC Global inventory profile has been expanded to support growth in MRO business, which also includes growth from new contract wins.

Our European business has a strong blend of activity across oil and gas, petrochemical, chemical and tank storage markets. We are seeing increased MRO activity and project wins from these sectors, and the level of activity in Q1 2018 is very encouraging as FID decisions are generally positive. Investments in the midstream storage market along the European coastline are strong, driven by a demand for increased capacity.

In recent years, we have seen a number of plant upgrades and projects to enhance the efficiency of refineries and chemical plants in the downstream sector. This has led to reduced costs for operators, which has created cash for new investments. Another effect of these initiatives is that the industry has moved significantly towards digitalization.

Diagnostics are an important element in the new environment. With our ValveWatch® product, MRC Global can assist customers with the monitoring of safety-critical valves.

...with our ValveWatch® product, MRC Global can assist customers with the monitoring of safety-critical valves.

ValveWatch® is a live monitoring system that was developed in Norway and is now gaining traction on a global scale wherever critical valves are installed.

The Norwegian oil and gas market has been slow during the last three years, but is now showing increased investments in new build and MRO. The signs of recovery are evident in the North Sea basin, with oil discoveries at their highest in almost a decade with the recent rise of the oil price driving activity. During 2017, 10 offshore oil and gas field developments were sanctioned, among them Johan Castberg, the largest development in the Barents Sea. These developments have an estimated total investment of 120 billion NOK ($14.8 billion USD), and more developments are expected to be sanctioned in 2018 and 2019. Activity is expected to reach a new peak level in year 2021.

The UK Continental Shelf has a positive outlook for 2018 with 16 new developments that could be sanctioned in the basin. This is a potential investment of nearly $7 billion. A notable example of this, in the first quarter of 2018, is Shell’s decision to move forward with construction of a floating production, storage and offloading (FPSO) vessel to redevelop the Penguins field. This is the first new manned installation for Shell in the northern North Sea in almost 30 years.

Growth in the Middle East region is expected to be 3% to 3.5% in 2018, assuming a modest rise in oil prices. Hydrocarbons remain a key pillar of the region’s economy, which will allow oil exporting countries to implement more expansionary fiscal policies, translated into higher capital expenditure.

We anticipate this region will remain the world’s largest producer of crude, and the second-largest producer of gas, accounting for 34% and 20%, respectively, of the word’s total over the next two decades. We expect to see large investments in exploration and production in the coming years. Saudi Aramco is reportedly planning to invest more than $330 billion by 2025, 70% of which will be in the Kingdom of Saudi Arabia (KSA).

In the UAE, there are plans for a $72 billion investment, of which $17 billion is currently in the FEED phase. Part of this investment plan is to expand refining and petrochemical production. Iraq’s Oil Ministry is expected to invite IOCs to bid for nine blocks in 2018, largely present on the borders with Iran and Kuwait. The state and the IOCs will need to continue to invest in upstream development to maintain the high levels of production.

Qatar expects higher investments in gas development after the recent lifting of the self-imposed moratorium declared in 2005. The country plans to double the size of its expansion and to increase LNG capacity to 100 million tons/year. In Egypt, the start-up of Al Zohr gas field will attract big investment and could prove to be a turning point for the country’s energy sector.

Oil production in the Caspian Region will continue to grow in 2018. The Kashagan Field (NCOC) is expected to reach 370,000 bpd in 2018, with no major turnarounds or projects planned, as they remain focused on oil production. The Tengiz Field (TCO) will keep production at 565,000 bpd and the Karachaganak (KPO) will maintain 300,000 bpd.