MRC Global InSight

United States of America

Careful optimism continues as 2021 progresses. At the time of this writing, oil prices have rebounded to around $84 per barrel and the U.S. rig count continues to increase. Natural gas prices are also at their highest level in three years, now averaging more than $5/MMBtu, which is driving increased investment in this space as well.

Gas Utilities

The gas utility segment has been extremely robust in 2021. Year-over-year, gas utility companies in the U.S. have spent significantly more than in 2020. Many gas utilities scaled back in 2020 due to COVID-19, and they are regaining ground 2021. This growth can be attributed to continuing infrastructure improvements and integrity projects, as well as new construction. Additionally, many utilities are adding smart meter technologies and new systems which allow for remote access. We do not expect any slowdown in spend from this business segment for the foreseeable future.

Downstream, Industrial & Energy Transition

The downstream, industrial and energy transition sector, which includes refining, chemicals, petrochemicals, steel production, power generation, pulp and paper and other industrial business segments, experienced significant withdrawals and declines in most product consumption and spending in 2020 and has been slow to recover in 2021. Most companies in this segment either canceled or delayed turnarounds and future projects in 2020 to reduce spend, and they have been slow to start spending money again.

Increasing pressure on Environmental, Social & Governance (ESG) issues has forced many of the larger customers in this segment to rethink how they will allocate their capital going forward. In an effort to reduce their carbon footprints, companies such as Shell, Chevron, LyondellBasell, BP, and ExxonMobil have begun divesting themselves of assets, such as refineries, as they look to be carbon neutral in the future.

This segment is growing fast...MRC Global is well positioned for heavy involvement in these projects...

The time for serious and sustained investments in forms of renewable and alternative energy is here. In 2021, an ever-increasing number of renewable energy and alternative energy projects have been announced or are being planned across the country. These projects include areas such as bio-diesel, renewable natural gas, green hydrogen, geothermal, hydro-power, carbon capture and storage, as well as wind and solar. This segment is growing fast and now has the traction needed to gain funding and move forward. MRC Global is well positioned for heavy involvement in these projects as the PVF requirements on many of these projects is equivalent to, or in many cases, even more than, that of traditional energy projects.

Upstream Production

Upstream activity is modestly improving this year as compared to last year. Capital expenditure levels for 2022 are still a work in progress at this time, although according to analysts at Daniel Energy Partners, an upturn is expected. Based on their recent E&P survey, the U.S. rig count could increase another 80 to 90 rigs with the U.S. fracking crew count expanding by another 20 fleets.3

Midstream Pipeline

Much like the upstream sector, midstream pipeline activity has also been very slow with no new major projects started or announced in 2021. Pressure from environmental lobbyists continues to be a challenge for any new activity or projects currently underway. Most of the activity seen in 2021 has been for gathering systems in the shale plays or projects that gas utilities have initiated to replace existing systems or enlarge delivery capacity. Another strong headwind has been the price of steel and, more specifically, carbon steel pipe. Pipe prices have doubled year-over-year and are at the highest levels ever recorded. This is not driven by demand for pipe, but rather, the demand for steel in other industries. Hot rolled coil, the main component of carbon steel pipe, exceed $1,900/ton in early September, surpassing the highest levels ever and more than four times its price in September 2020.

3., September 22, 2021