IBISWorld Market Research
Industry revenue has been driven by investment in oil and gas extraction.
Melbourne, Australia (PRWEB) July 18, 2014
The Pipeline Construction industry builds transport infrastructure that supports the activities of the Oil and Gas Extraction industry, Pipeline Transport industry and Gas Supply industry, as well as providing services to the Manufacturing division. Demand for pipeline construction services is derived from investment trends in these industries, which has meant stable to moderate growth over past decades. Pipelines are expensive to build and maintain. Investment in major construction is lumpy and undertaken to support new projects, while expansion work to meet domestic demand is a more consistent source of industry revenue.
IBISWorld industry analyst Caroline Finch states “in the past five years, industry revenue growth has been extremely strong, bucking these trends, as the upstream Oil and Gas Extraction industry has embarked on unprecedented capital investment in gas export projects.” The extent of this investment has dominated the industry's performance, reducing the role of other major markets. According to Finch, “the upstream Oil and Gas Extraction industry has adapted new technology to tap into previously so-called unconventional reserves and is seeking to capitalise on high world prices by building export facilities for more traditional reserves.” With several hundred billion dollars of capital expenditure associated with new projects, the industry has been able to grow at a compound annual rate of 41.0% in the past five years in the course of meeting demand. In the current year, the industry is forecast to grow by 14.1% to be worth $5.6 billion. The industry is also forecast to perform strongly in 2015-16, reflecting the upswing in demand for industry services as a number of new LNG export projects near completion. After 2015-16, the pipeline of committed projects lessens upstream. The industry's revenue performance after 2016-17 remains uncertain. The industry will depend on the viability of projects in the development pipeline to maintain current revenue. This means exposure to the factors that determine the return from such projects, such as the world price of gas, the strength of the Australian dollar and the cost of construction in Australia relative to other gas-producing companies.
The Pipeline Construction industry has a low level of market share concentration. The industry is characterised by specialised pipeline construction firms, or construction firms with pipeline construction experience. While these firms can be large, they are limited by the lumpy and infrequent nature of large pipeline projects and lack the sufficient scale to win entire construction contracts for major pipelines. Therefore, firms bid for subcontracted projects awarded by large front-end engineering and design (FEED) or engineering, procurement and construction (EPC) firms.
For more information, visit IBISWorld’s Pipeline Construction report in Australia industry page.
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IBISWorld Industry Report Key Topics
Businesses in this industry are primarily engaged in building pipelines for the transport of oil and gas, urban supply mains for gas, pipelines for refined petroleum products and non-hydrocarbon products such as chemicals and foodstuffs. The construction of pipeline networks is excluded from the industry.
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