Navigating the Energy Evolution

Oil and gas was one of the worst hit industries during the Covid-19 pandemic. Numerous midstream companies in fact witnessed low demand till the third quarter of 2020. However, if we go by the Mordor Intelligence report on Oil and Gas Pipeline Market, one can expect a CAGR of more than 6% between 2021- 2026 for the pipeline industry.

Due to imposed lockdowns world over, pipeline projects in several countries witnessed delays. Countries like the United States, Australia, India and others contributed to this fall, given the sharp decline in gas demand as the electricity consumption decreased and travel restrictions came into effect.

Despite this negative trend, International Energy Agency (IEA) now believes that the oil demand will rise by approximately 1 million barrels per day (BPD) on an average for every year until 2025. This will be a big push in light of the 2018 figure of 97 million BPD. An increase in oil and gas consumption bodes well for the pipeline industry overall as the nations and industry members will again begin to expand their pipeline capacities and commission new pipeline projects. This also means an increase in offshore activities, which includes deep-water and ultra-deep-water pipeline development and production, thereby further giving an upward thrust to the oil and gas pipeline market.

While there is a global shift towards renewables, yet oil and gas are here to stay as they are fundamental to industrial growth, which in turn is deeply connected to the geopolitical strength of a nation.

  • One of the biggest reasons for this is the cost-effective pipeline network which enables easy availability and transfer of abundant natural gas reserves. In comparison to renewables, pipeline system has lower cost, better maneuverability, and with innovative technology at horizon- better management with respect to installing, gathering, monitoring and evaluation. This means timely delivery to the end-user industries for power generation and other uses. This, in fact, is anticipated to be one of the top catalysts for the oil and gas pipeline market in the coming decade.
  • Presently, there are large scale pipeline projects underway. For example, Russia and India have signed a deal worth USD 40 billion on natural gas exports to India. Globally, oil and gas players plan to develop 14,235 miles of pipeline by the end of 2021, of which 93% are natural gas projects. Such large-scale projects can result in a robust growth of the pipeline industry.
  • The Asia-Pacific region accounts for more than 46% of the forecasted construction of major oil and gas pipeline projects. This is due to the increased demand for oil and gas from the major countries in the region such as China and India.

The latest trends also suggest that it is the natural gas pipeline segment which will be dominating the market for the next decade.

  • In 2019 the natural gas consumption increased significantly, reaching 3,929 billion cubic meters. This was due to the increased demand for natural gas in number of industries, such as transportation and power generation. This trend is expected to further continue in the next few years which will in all likely drive the gas pipeline infrastructure.
  • As of 2030, one can expect factors, such as quest for energy security especially in Asia pacific, Africa and Middle East coupled with environmental benefits to propel the natural gas pipeline infrastructure demand further.
  • For decades now, Qatar has been the largest LNG exporter, with 107 billion cubic meters being transferred in 2019 alone. In the coming decade as well, the LNG trade will further increase world over, thereby resulting in augmented demand for the natural gas pipeline network.
  • Next, there have been a lot of conversations around new sources of natural gas, such as shale gas deposits. This has pushed R&D teams to explore and develop pipeline system which in turn is expected to increase the international trade among nations. With a gamut of processes involved such as gathering, transporting, refining and storage; it means there will be a demand for pipeline network expansion and maintenance in near future. In other words, the pipeline market is set to experience a sharp growth in the coming decade.

2021 started with demand for new energy products, systems and demands owing to new era (during and post pandemic). With technological advancement, environmental awareness and socio-economic models, the energy industry too is evolving by the day. In its support stands the pipeline industry. It is then time for companies to come together, combine their strengths and complete the value chain. New partnerships will be vital, with energy pipeline manufacturers who should seek a larger role in the value chain. This would enable them to develop repeatable models which will allow for a better geographical expansion; along with covering gaps in the oil and gas and end-consumer markets.