Easing levels of oil and gas production will suppress demand slightly and restrict price growth
Los Angeles, CA (PRWEB) April 23, 2015
Pipeline integrity management services have a buyer power score of 3.1 out of 5. This score indicates a purchasing leverage that is moderately in favor of buyers. “Buyers benefit from low price volatility but a low level of substitutes and high level of specialization limits buyer power,” according to IBISWorld business research analyst Ian Buchanan.
In accordance with the Pipeline Safety Improvement Act, enacted in 2002, all pipelines must complete integrity assessments every seven years. Aside from completing this assessment in-house, which can be very costly, there are no practical substitutes that allow buyers to fully comply with regulations. Knowing that buyers have limited options, suppliers gain pricing leverage. In addition, pipeline integrity management services are highly specialized as a result of the varying characteristics of each pipeline. Suppliers must develop custom plans and use specific equipment for each buyer. This factor limits the number of available suppliers that can provide effective solutions for a specific buyer, leading to weakened competition among qualifying suppliers. Consequently, negotiation power is decreased further.
“Due to growing demand for commodities transported via pipelines and rising levels of oil and gas production, prices for pipeline integrity management services have increased during the three years to 2014,” says Buchanan. Although prices have grown during this period, price volatility has been low. Buyers benefit from low price volatility because it provides the assurance that prices will not fluctuate significantly, which allows buyers to perform more accurate cost estimates. During the three years to 2017, buyers are projected to experience a more favorable purchasing environment as price growth eases back to a slower rate due to suppressed oil and gas production, while maintaining a low level of volatility. Still, buyers can enter into long-term contracts with suppliers to secure discounted rates and mitigate future price increases. Major vendors include Weatherford International, Halliburton Company, GE Energy and SGS International. For more information, visit IBISWorld’s Pipeline Integrity Management Services procurement category market research report page.
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IBISWorld Procurement Report Key Topics
This report is intended to assist buyers of pipeline integrity management services. Providers of these services repair and prevent corrosion, inspect for cracks or leaks and perform maintenance as needed to maintain the integrity of pipelines designed to transport commodities (i.e. gas, oil or coal) from one location to another. Services can be purchased on an ad hoc basis, or with a contract to have the supplier provide regularly scheduled assessments. This report excludes pipeline construction services and pipeline inspection services.
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
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