Oil and Gas EPC Market

Oil and Gas EPC Market Market Size

Oil and Gas EPC Market is projected to grow at a CAGR of 5.9% in the forecast period (2024-2034), with the market size valued at USD 50.2 billion in 2023 and expected to reach USD 94.8 billion by 2034.

Oil and Gas EPC, or engineering, procurement, and construction, is a comprehensive method to manage projects within the oil & gas sector, which includes project inception to completion. It consists of three key phases i.e., engineering, procurement, and construction. During the engineering phase, detailed designs for facilities and systems are developed, whereas procurement involves sourcing materials and services necessary for the project. Construction comprises the physical realization of the infrastructure according to the engineering designs. In addition, EPC contractors supervise the entire project, along with ensuring safety standards and monetary limitations. Besides, oil and gas EPC projects cover a broad spectrum, ranging from production facility creation to refineries and distribution networks. As a result, due to their complexity and capital-intensive nature, these projects demand expertise in engineering, project management, logistics, and risk management to achieve desired outcomes.

Market Highlights

Oil and Gas EPC Market is expected to exhibit a CAGR of 5.9% during the forecast period, 2024-2034

Oil and Gas EPC Market is anticipated to reach USD 94.8 billion, growing at a CAGR of 5.9% during the forecast period, owing to a notable rise in the energy demand, encouraging a search for efficient and affordable solutions. Innovations in technology, such as digitalization and artificial intelligence, are transforming the way projects are executed and mitigating operational risks. In addition, there's a high focus on sustainability, which further urges the adoption of cleaner technologies. However, the market encounters multiple challenges such as oil price volatility, geopolitical instabilities, and regulatory intricacies. Despite these challenges, the oil and gas EPC market is forecasted for growth due to the changing dynamics within the industry and the pursuit of innovation and efficiency.

Source: Fatpos Global

Oil and Gas EPC Market Segmentation

Engineering Services Have Been Leading as a Vital Component in the Entire Process

Oil and Gas EPC Market has been segmented based on Services Type into Engineering, Procurement, Fabrication, and Construction. The engineering segment is leading the market as engineering sets the foundation for entire projects, such as conceptual design and risk assessments. These steps are important to define the scope of the project, along with technical specifications and potential challenges. Additionally, oil and gas projects involve advanced technology and several market restrictions, due to which, considerable knowledge is needed to build facilities that meet the criteria of demand, safety, and environment. Subsequently, procurement and fabrication have been the major market contributors as they help in securing the right materials at competitive prices and building necessary components according to engineering specifications.

Upstream services have been dominating the market due to a greater emphasis on fresh reserves

Oil and Gas EPC Market, based on End User is categorized into upstream, midstream, and downstream. The upstream segment attracts larger investments in comparison to midstream and downstream projects, as it requires the development of infrastructure such as drilling rigs, offshore platforms, pipelines, and processing facilities. This has resulted in a wider range of EPC services being used. Moreover, the focus on discovering and developing new oil and gas reserves has also boosted the demand for EPC services in the upstream sector. On the contrary, the midstream and downstream segments are playing important roles. Although individual projects are smaller than Upstream, the sheer number of pipelines and storage facilities that are required for transit has created the demand for Midstream services.

Source: Fatpos Global

Market Dynamics

Growth Drivers

Rise in Hydrocarbon Demand to Accelerate Market Growth and Development

Increasing demand for hydrocarbons, which consist of both oil and natural gas, has been providing growth opportunities in the oil and gas market. High demand helps companies to invest in multiple projects to meet the needs of exploration and production activities within the upstream segment. This makes it compulsory for EPC services to adapt to infrastructural developments, which require EPC services in refinery or modernization projects. In addition, the demand for hydrocarbons may also increase different downstream activities, which results in the requirements for EPC services in refinery expansion or modernization projects and ensuring an adequate supply of refined crude oil into usable products such as gasoline, diesel, and petrochemicals.

Development in Natural Gas to Promote the Growth of Oil and Gas EPC Market

Growing preferences for natural gas as a cleaner alternative to traditional fossil fuels such as coal are driving infrastructural development and benefiting the oil and gas EPC market. The global trade of liquefied natural gas (LNG) is increasing and requires the construction of new LNG terminals for export and import, as well as pipelines for onshore and offshore transportation. These projects require EPC services for design, engineering, procurement, and construction. This growth helps building pipelines to connect production areas to different population centers, that require EPC services for design, construction, and installation.

Restraints

Oil and Gas Prices to be the Major Concerns Obstructing the Market Growth

Volatile nature of oil and gas prices has been presenting market challenges for the oil and gas EPC market. Fluctuations in prices can create investment uncertainty, as various companies may be reluctant to invest in projects during times of low operations, which results in the decline of demand. Moreover, budgetary burdens also arise as companies struggle to forecast project budgets accurately, which potentially leads to mismanagement of funds. Besides, financial institutions are also becoming more risk-averse, which is making it difficult for EPC companies to secure project financing. Thus, to lessen these risks, EPC companies can focus on cost optimization through efficient project management practices and technology adoption.

Recent Developments

• In 2023, Flour Corporation has focused on digitalization and sustainability solutions for EPC projects. The company has also acquired Stork, which has expanded its assets integrity and maintenance services for the oil & gas sector.
• In 2023, Petrofac Limited, secured a major EPC contract for Mero 4 development project in Brazil. The company has also gone through a financial restructuring to address debt challenges.
• In 2023, Bechtel Corporation, formed a joint venture with Baker Hughes to develop the next generation of carbon capture technologies. They have also been awarded an EPC contract for the LNG Canada project, one of the largest LNG projects in the world.
• In 2023, Saipem S.p.A., secured several offshore EPC contracts in the Middle East, valued at over 1.25 billion. They have successfully formed a partnership with Eni to focus on decarbonization and energy transition projects.
• In 2023, KBR Inc., acquired S&B Engineers and Constructors, to strengthen its capabilities in the nuclear decommissioning sector. They have also been awarded a contract for engineering, procurement, and fabrication of modules for a new LNG facility in the US.

Oil and Gas EPC Market

Key Players:

• Fluor Corporation
• Petrofac Limited
• Bechtel Corporation
• Saipem S.p.A.
• McDermott International, Inc.
• Hyundai Engineering & Construction Co., Ltd.
• KBR, Inc.
• TechnipFMC PLC
• Wood PLC
• WorleyParsons Limited
• SNC-Lavalin Group Inc.
• Larsen & Toubro Limited
• National Petroleum Construction Company (NPCC)
• Chiyoda Corporation
• China Petroleum Engineering & Construction Corporation (CPECC)
• Other Prominent Players (Company Overview, Business Strategy, Key Product Offerings, Financial Performance, Key Performance Indicators, Risk Analysis, Recent Development, Regional Presence, SWOT Analysis)

Regional Analysis

Oil and Gas EPC market is segmented based on regional analysis into five major regions: North America, Latin America, Europe, Asia Pacific, and the Middle East and Africa. The Asia Pacific region has maintained rapid economic growth in countries such as China and India, due to the rise in energy demand, which attracts a high investment in oil and gas infrastructure. The region has been a key producer of oil and gas, with China being the largest producer, which has contributed to the strong growth of the EPC market. In addition, regional governments are spending extensively on oil and gas projects to address rising energy demand across the region.

North America has a historic and robust market with better downstream activity and a well-developed pipeline network. Meanwhile, strict government rules have shifted the market toward renewable energy in the North American region. Furthermore, Latin America has huge oil and gas deposits, thus expecting to witness a favorable growth rate in recent years.

Source: Fatpos Global

Impact of COVID-19 on Oil and Gas EPC Market

Oil and Gas industry in recent years has experienced low demand due to lockdowns and travel restrictions, that led to significant delays and cancellations of capital expenditure projects. Supply chain disruptions delayed the movement of people and goods, resulting in project delays and cost overruns. Additionally, social distancing tactics hampered the availability of staff and consequently resulted in higher labor costs. Besides, several projects were declined, which resulted in the bankruptcy of numerous EPC companies. The pandemic has led to economic uncertainty which has made companies avoid any form of risks and reduced investments in newer projects. Despite these challenges, EPC firms helped towards better cost optimization measures and focused on maintenance and upgrades for existing facilities.

Oil and Gas EPC Market is further segmented by region into:

• North America Market Size, Share, Trends, Opportunities, Y-o-Y Growth, CAGR – United States and Canada
• Latin America Market Size, Share, Trends, Opportunities, Y-o-Y Growth, CAGR – Mexico, Argentina, Brazil, and Rest of Latin America
• Europe Market Size, Share, Trends, Opportunities, Y-o-Y Growth, CAGR – United Kingdom, France, Germany, Italy, Spain, Belgium, Hungary, Luxembourg, Netherlands, Poland, NORDIC, Russia, Turkey, and Rest of Europe
• Asia Pacific Market Size, Share, Trends, Opportunities, Y-o-Y Growth, CAGR – India, China, South Korea, Japan, Malaysia, Indonesia, New Zealand, Australia, and Rest of APAC
• Middle East and Africa Market Size, Share, Trends, Opportunities, Y-o-Y Growth, CAGR – North Africa, Israel, GCC, South Africa, and Rest of MENA

Oil and Gas EPC Market Scope and Segments:

Frequently Asked Questions (FAQ):