Oil and gas refiners have increased their production, thus creating the need for new or expanded refineries. In response to this rising demand, oil and gas refinery construction prices have risen steadily
Los Angeles, CA (PRWEB) March 21, 2015
Oil and gas refinery construction services have a buyer power score of 3.1 out of 5, reflecting a mixture of favorable and detrimental factors that influence buyer negotiating power. During the past three years, prices of oil and gas refinery construction have been growing on the back of rising demand for new or expanded refineries stemming from rising oil and gas production levels, says IBISWorld analyst Deonta Smith. While rising demand and price growth have hampered buyer power, prices have risen at a relatively slow and steady pace. This low price volatility aids buyers because it provides them with the time to evaluate their oil and gas refining needs and make informed procurement decisions without fear of major price swings.
Buyers also benefit from the market's fixed time and materials pricing model, which allows buyers to invite competing firms to engage in tendering activities. Tendering practices are being adopted to ensure that potential contractors offer fairness, clarity and accountability when submitting bids for proposed projects, continues Smith. Moreover, this practice shifts the risks of cost overruns on to suppliers, as they are to incorporate a contingency amount into their bids. This pricing model also helps the buyer select the most qualified contractor for their specific projects. This aspect of the market further bolsters buyers' negotiating power.
Nonetheless, the highly specialized nature of refinery construction services and high switching costs undermine buyer power. Considering the varying capabilities of each refinery, suppliers create a refinery design tailored to the buyer's specific needs. These services require a qualified contractor with adequate resources to carry out specialized designs, allowing suppliers to charge more for their services. Buyer power is further restrained by the high cost of switching suppliers. When buyers switch suppliers, they may face contract cancelation penalties as well as costs associated with the reevaluation and changes made to the project. For more information, visit IBISWorld’s Oil & Gas Refinery Construction 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 natural gas refinery construction services. Oil refineries and natural gas plants are often large, complex structures that require a number of different trades to construct. To this end, most service providers act as general contractors that manage the entirety of the construction process, from bidding and contract negotiation to design and construction. This report excludes food oil and sugar refinery construction.
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.