As a result of an oversupply of oil and gas, demand for new energy-related projects will decrease and market prices will grow slowly during the forecast period
Los Angeles, California (PRWEB) October 25, 2014
Oil and gas facility construction and maintenance has a buyer power score of 2.2 out of 5, indicating that vendors have a substantial amount of pricing power over buyers. IBISWorld market research analyst, Eriick Delgado, says, "The price for facility construction services has been rising over the three years to 2014 as a result of heightened investment into energy infrastructure and significant backlogs held by contractors." World energy prices have been growing over the past three years, strengthening oil production and increasing demand for new facilities. Oil and gas contractors recognize that there are no substitute providers for their highly specialized work. Thus, they have been justifying prices increases by citing rising demand. The technical skills and infrastructure required in the construction of oil and gas facilities have been shifting a substantial portion of negotiating power in favor of vendors, eroding buyer purchasing power. Major vendors in the market include Bechtel, Fluor, Keppel and Sembcorp.
Additionally, buyers that switch contractors mid-job face high switching costs due to delays in project completion and startup costs. "Furthermore, the number of operators that have the capacity to complete large-scale and offshore projects in the oil and gas facility construction and maintenance market is limited," says Delgado. These factors negatively affect buyer negotiation power.
Unpredictable steel prices contribute to unstable procurement costs for drilling equipment and building materials. While the years from 2011 to 2014 have been marking a period of high price volatility, this is forecast to stabilize during the three years to 2017 in line with stabilizing steel prices. The world price of natural gas and crude oil are estimated to be remaining relatively stable in 2014, resulting in flat service prices. Buyers can use this period of lower input prices to negotiate better contract deals. However, as the cost of natural gas and crude oil begins to rise, demand from key markets like offshore production will increase, giving contractors more flexibility to raise prices. Rising steel prices and overhead costs will likely pressure contractors' profitability in the three years to 2017. Nonetheless, rising input costs and demand from offshore markets is anticipated hurt buyer power. For more information, visit IBISWorld’s Oil & Gas Facility Construction & Maintenance procurement category market research report page.
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IBISWorld Procurement Report Key Topics
This report is intended to assist buyers of oil and gas facility construction and maintenance services. Providers of these services build oil rig platforms, drilling rigs and other oil and gas field installations. Specifically, this report focuses on onshore, offshore, and liquefied natural gas (LNG) projects. This report excludes manufacturers of drilling equipment, contract drilling services, and the rent or lease of oil and gas facilities.
Recent Price Trend
Product Life Cycle
Total Cost of Ownership
Supply Chain & Vendors
Supply Chain Dynamics
Supply Chain Risk
Market Share Concentration
Buying Lead Time
Key RFP Elements
Buyer Power Factors
About IBISWorld Inc.
IBISWorld is one of the world's leading publishers of business intelligence, specializing in Industry research and Procurement research. Since 1971, IBISWorld has provided thoroughly researched, accurate and current business information. With an extensive online portfolio, valued for its depth and scope, IBISWorld’s procurement research reports equip clients with the insight necessary to make better purchasing decisions, faster. Headquartered in Los Angeles, IBISWorld Procurement serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.