Oil and Gas EPC Market Size, Share & COVID-19 Impact Analysis, By Contract Type (Fabrication & Equipment, Construction & Installation, Management Services, Others), By End-User (Upstream, Midstream, Downstream), By Application (Onshore, Offshore), and Regional Forecast, 2022-2029

The global Oil and Gas EPC market size was valued at USD 46.60 billion in 2021 and is projected to reach USD 92.81 billion by 2031. The global market is expected to grow at a Compound Annual Growth Rate (CAGR) of 7.2% over the forecast period 2022-2031.

The global impact of COVID-19 has been unprecedented and staggering, with oil & gas EPC contract witnessing a positive demand across all regions amid the pandemic. Based on our analysis, the global market is exhibited a higher growth of 15.4% in 2021 as compared to the average year-on-year growth during 2018-2020. The sudden rise in CAGR is attributable to this market’s demand and growth, returning to pre-pandemic levels once the pandemic is over.

Oil & Gas Engineering, Procurement & Construction (EPC) includes engineering, procurement, and construction activities for upstream, midstream, and downstream oil & gas sectors. These activities include design, fabrication, construction, installation, equipment production, pre-commissioning, and maintenance contracts. Various oil and gas operators award contracts for EPC to service providers for different applications. These service providers make up the competitive landscape of this industry. 

Disruption in Oil & Gas Industry to Impact Global Oil and Gas EPC Market Growth

The spread of COVID-19 had a detrimental effect on every industry, specifically the industry. The shutting down of businesses in the commercial sector, loss of industrial operational times, lower energy and power demands directly and indirectly affected the demand for oil and gas. Moreover, the excessive supply and low demand led to a massive drop in the prices during the pandemic, making businesses reanalyze their capital expenditures and reduce investments in the sector. The global industry faced a negative demand shock owing to the low number of contracts awarded in the year due to stalling of numerous projects globally.

LATEST TRENDS

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Tremendous Demand for Hydrocarbon to Propel Growth

The demand remains high and is constantly increasing due to high consumption rate of hydrocarbons worldwide, anticipating the market's growth. To meet the extensive demand for oil and gas, government and private entities are taking the initiative to invest in the large-scale exploration of hydrocarbon.

OPEC countries in the Middle East & Africa are anticipated to dominate this industry, owing to high reserves of oil and gas, which is expected to increase the investment in the extraction of hydrocarbon by major oil companies in the world. Asia Pacific plays a crucial role in oil and gas consumption due to emerging and high potential economies such as India, China, Australia, and Malaysia. Due to the high demand, companies and government organizations are keen to increase hydrocarbon production. Thus, many contracts and agreements are underway to develop oil & gas production.

The major projects are on the bucket list to meet the evolving demand for hydrocarbon. Leading companies are very keen on exploring oil and gas, driving this sector.

Steadily Growing Oil and Gas Exploration to Augment Market Growth

Several factors are driving future developments in this market. The key elements include population growth, changing demographics, economic growth, policy changes, technology advancement, and oil prices.

The international and local government policies impact the evolution of this market, mainly focusing on eradicating hydrocarbon poverty in developing countries. The Asia Pacific records the highest consumption and demand. China was leading in the Asia Pacific in hydrocarbon production and stood in the top ten countries globally. Chinese conglomerate Sinopec, CNPC, and Sinochem are eyeing on enlarging their production facilities to meet the rising demand. India, Indonesia, and Malaysia continuously strive to enhance their home production to cut foreign exchange on importing oil and gas.

OPEC and ally countries recently pledged to cut oil production to reach the steady and fruitful market thus, concentrating on the future development of this market. The primary source of income for the Gulf countries is oil and gas, which in, turn helps to stabilize their economy. Thus, government and private agencies are focusing on increasing their production in the forthcoming years.

The U.S. is highly developed in the production of shale gas. Companies are likely to invest heftily to meet the growing demand. To increase the production of existing oil wells and explore new wells, companies employ various techniques for maximum output. Russia, Norway, and the U.K. have steadily invested in offshore oilfield development to achieve high production rates.

DRIVING FACTORS

Industrialization and Rapid Urbanization to Bolster Growth

The world is witnessing immense growth in broad areas such as automobile, aviation, manufacturing, and construction due to substantial potential development in different industries in every corner of the world. Oil & gas plays an essential role in providing the primary energy source. Therefore, market is continuously growing.

Also, the extensive population growth has increased the demand for daily essentials. Therefore, companies are expanding their manufacturing units that require a continuous and reliable energy source. Thus, a significant portion of oil and gas is utilized in generating electricity to meet the enormous demand for energy.

The growing global transportation system, which plays a significant role in socio-economic development, utilizes many hydrocarbon products as fuel. Thus, the demand is consistent and steady, which is expected to increase exploration and production activities, thereby directly driving the market.

Growing Oil and Gas Trade Leading to Construction of New Pipelines to Augment Growth

The growing demand globally has led to the development of oil and gas fields in countries rich in resources. Therefore, there is increasing trade between producer and consumer nations. The rising energy demand and increasing trade have led to increased pipeline construction across countries for oil and gas transmission. Moreover, the massive utilization of natural gas in the end-user has advanced the development of the distribution gas pipeline network.

With growing energy demand, pipeline construction is anticipated to grow. This will result in many midstream EPC contracts for oil and gas for further sector development. This acts as a profitable opportunity for Market growth.

RESTRAINING FACTORS

 Increasing Renewable Energy Usage Poses a Threat to Market Growth

The frequent fluctuation in the market prices has stunted hydrocarbon exploration. The COVID-19 has highly impacted the major oil producer companies in the world.

The rise in pollution levels and serious global warming threat is a by-product of the oil and gas industries. Leaders worldwide have come together to combat these significant issues to thwart the rising GHG emission. International environment regulatory bodies and government agencies are amending and enforcing strict rules and regulations on oil and gas producing companies.

Also, the recent trend and development in renewable energy, such as wind, solar, and geothermal, have gained momentum for an alternative to oil and gas. Oil & gas investment is not viable in the long term. Moreover, the automobile industry was going through a transformation phase with the introduction of electric vehicle. Batteries are playing a crucial role, as they are accompanied with a renewable source of energy to store an enormous amount of electricity. These factors are creating barriers to the growth of this industry.

SEGMENTATION

By Contract Type Analysis

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Numerous Construction & Installation Activities to Bolster Segment Growth in Market

The Market by contract type is broadly categorized into fabrication & equipment, construction & installation, management services, and others.

The construction & installation segment includes installation projects where a company provides services of installing platforms, pipes, pipe fittings, boiler, turbines, mud pumps, fans, engines, whereas the construction involves the building of drilling rigs, production platforms, and refineries at either onshore or offshore locations. The development of oil & gas fields and facilities has led to the domination of the construction & installation segment. This trend is expected to continue during the forecast period. 

Fabrication & equipment is an integral part of this industry. It involves the fabrication contracts for various tools and important machinery parts covering valves, boiler, turbines, pipes, pipe fittings, elevators, conveyors, machine tools, industrial storage, etc. The management services type of contract includes management of labor, plants, rigs, sites, etc. The rising penetration of IoT and industrial automation has increased software integration in this industry. Companies are focusing on providing the EPC for managing such software. The others segment includes all the remaining contracts involving site procurement services, designing services, maintenance services, etc.

By End-User Analysis

Growing Development of Oil & Gas Fields Will Lead to Domination of Upstream Segment

This Market is divided into upstream, midstream, and downstream based on the end-user.

Upstream operations include drilling and field development operations to enhance production volumes of oil and gas fields. The growing upstream activities, well development in onshore and offshore, and investment in gas fields are likely to propel growth in the upstream segment.

Midstream operations include the transportation of fuels from rigs to the refineries using pipelines and other modes of transport. Storage of oil and gas is also considered in the midstream segment. Increasing investment in pipeline transport and comprehensive storage solutions propels the segment growth.

The downstream activities include a refinery, sales, distribution, and marketing, requiring logistical support. Setting up refineries and increasing modifications in processing plants drive the segment growth.

By Application Analysis

Offshore Segment to Hold Lion’s Share Owing to Increasing Investments

Based on application, this market is divided into onshore and offshore. Onshore EPC projects are conducted on land.

Onshore is the traditional application sector. Growing investment in brownfield redevelopment, onshore processing facility development, and up-gradation will enhance segment growth.

Offshore EPC projects are conducted in water bodies like seas and oceans, wherein oil and gas are procured from subsea surfaces. With onshore oil wells getting matured in countries like Saudi Arabia and U.A.E., there is an increasing investment scope in offshore oil and gas field development.

REGIONAL INSIGHTS

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The global market has been analyzed across major regions, including North America, Europe, Asia Pacific, Latin America, and the Middle East & Africa.

The Middle East & Africa has a growing industrial landscape and has a developing economy. According to the World Investment Report published by the United Nations Conference on Trade and Development (UNCTAD), the Foreign Direct Investment inflow across the Middle East & Africa was USD 76,332 million in 2020. This is anticipated to propel the industrial landscape driving the region's Oil and Gas EPC Market. In 2020, global refinery runs decreased to 76.9 million barrels per day (mmbpd) and is expected to increase to 78.9 mmbpd. In Middle East & Africa, Saudi Arabia’s refinery runs are expected to increase to 77% in 2021 vs. 68% recorded in 2020. Global gas markets also experienced their most significant recorded drop in 2020, with an estimated 2.5% year-on-year (Y-o-Y) decrease in consumption.

According to the International Energy Agency, fast-growing markets in the Middle East and sub-Saharan Africa are projected to account for about 70% of global demand growth in 2021. Iraq is endeavoring to continue the development of its gas sector. Libya finally returned to form a unity government in January 2021 for the first time in years. Provided the country solidifies its political breakthrough and progresses with governmental consolidation and legislative reforms, the upstream investments are anticipated to portray a high growth rate.

The North Sea offshore oil & gas field development, majorly in Norway, the U.K., and Russia, bolsters EPC for oil and gas in Europe. Major upstream and midstream projects have helped the region grow magnanimously. The growing downstream activities in the U.S. have propelled the development of this market in the region. North America boasts of an intricate gas distribution pipeline network, contributing to the market dynamics.

Asia Pacific heavily invests in oil, gas, and coal. Malaysian oil & gas company, PETRONAS, awarded various projects to TechnipFMC in 2021. The consistent upstream investments in the region propel the segment growth. The USD 940 million project was awarded to Saipem by Petrobras to develop SURF in the offshore field. The offshore development in the region is anticipated to propel the market during the forecast period.

KEY INDUSTRY PLAYERS

Larsen & Toubro and Petrofac to Lead with Management of Large EPC Contracts

The market is fragmented, with many small players providing construction, fabrication, and installation activities to the oil & gas sector. EPC contractors are actively operating to cater to the increasing demand for EPC services, owing to the growing demand for oil & gas reserves. Key players include Larsen & Toubro, Petrofac, TechnicpFMC, McDermott, Subsea 7, KBR, WorleyParsons, and Saipem, among other players. With increasing energy demand and greenfield & brownfield development activities, this market is anticipated to grow, promoting lucrative opportunities for market players.

LIST OF KEY COMPANIES PROFILED:

• Petrofac (U.K.)


• Wood (U.K.)


• Larsen & Toubro (India)


• McDermott (U.S.)


• Saipem (Italy)


• NPCC (UAE)


• WorleyParsons (Australia)


• TechnipFMC (U.K.)


• KBR (U.S.)


• Lamprell (UAE)


• Aker (Norway)


• Subsea7 (U.K.)


• Fluor Corporation (U.S.)

KEY INDUSTRY DEVELOPMENTS:

Oct 2023 - ADNOC approves $17bn investment in Hail and Ghasha offshore project, securing $16.9bn EPC contracts. Advanced decarbonisation tech aims for net zero CO₂ emissions and boosts ADNOC's carbon capture capacity.

July 2023 -Petrofac secures $700M EPC contract from ADNOC Gas Processing for a gas compressor plant at Habshan Complex, boosting Abu Dhabi's gas production and energy industry growth.

September 2021 - Petrofac was awarded a contract valued at over USD 100 million by the Zallaf Libya Oil & Gas Exploration and Production Company. Petrofac will deliver Erawin Field Development Project Phase 1 Early Production Facilities to Zallaf in southwest Libya. The project involves EPC and the commissioning of surface equipment like well pads and flow lines at the oil field. The construction of a 100 km long pipeline to the El Sharara oil field to transport crude oil is also included in the contract.

December 2021 - McDermott was awarded three new EPC and installation projects by Saudi Aramco. The project includes EPCI of four drilling jackets, seven oil production deck modules, three contract release purchase orders (CRPOs) for construction of 45 kilometers of pipelines, more than 100 kilometers of subsea cables, and tie-in works to existing facilities. These will be utilized in Saudi Arabia's Zuluf, Ribyan, Abu Sa'fah, and Safaniya fields located offshore in the Arabian Gulf. The project is anticipated to be completed by 2023.

REPORT COVERAGE

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The global Oil and Gas EPC Market report highlights leading regions to offer a better understanding to the user. Furthermore, the market research report provides insights into the country-level and regional markets. The latest market trends and technologies deployed are analyzed in the report. It further highlights some of the drivers and restraints, helping the reader gain in-depth knowledge about the industry.

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