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EIC Monitor indicates a slowdown in new development proposals across global energy industry

LNG Industry,

The latest EIC Monitor quarterly report shows that all sectors across the global energy industry have seen a decrease in the number and the potential investment value of new projects.

The total potential investment value of new projects this quarter (Q4: October - December 2011) is US$ 260 billion – down 48% on last quarter, and down 9% on Q4 2010, while the number of new projects (408) is down 21% compared to Q3 2011.

Overall in 2011, both the number and potential investment value of new projects has slowed in growth with the renewables sector seeing a steady drop in projects proposed for development through the year.

It should be noted that in nearly all cases newly proposed projects must first undergo various planning and consent approvals which may take several years. Also, early stage proposals do not necessarily have financing agreed and in place and so there will always be a proportion of projects that do not gain consent or finance.

Upstream, midstream and downstream sectors

The upstream sector has seen a slight decrease in the number of new projects down from 67 in Q3 2011 to 51 in Q4 2011 with a resulting 19% drop in potential investment value from US$ 42.7 billion to US$ 34.6 billion in Q4 2011. Key hotspots of activity this quarter can be found in Russia and the USA representing 25% and 15% respectively of the total potential investment value. The largest project is the US$ 5.2 billion Novoportovskoye oil & gas field in Russia.

The midstream sector has seen a 9% decrease in the number of projects and a 72% decrease in project value since Q3 2011, down from US$ 156 billion to US$ 44 billion this quarter. This decrease is due to the proposed US$ 100 billion Trans-Asian Oil and Gas pipeline that was announced in Q3 2011 which represents the first natural gas pipeline network between the ASEAN countries and China. The largest project this quarter is the future US$ 12 billion Venezuela-Colombia oil pipeline linking the Orinoco heavy oil belt in Venezuela to the port of Tumaco on the Pacific coast of Colombia.

In the downstream sector, the number of new quarterly projects has dropped by 42% since Q3 2011 and stands at 46 projects this quarter. There has been a 68% decrease in the total potential investment value of new projects from US$ 100 billion in Q3 2011 to US$ 32 billion in Q4 2011. China represents nearly a third of the new projects in this quarter’s downstream figures, representing US$ 9.9 billion. The largest projects can be found in Iraq with the proposed US$ 6 billion Basra petrochemical complex and in China with the future US$ 4.1 billion Junggar Basin coal-to-gas project.

Global power projects

In the renewables sector the number of new projects is down 12% from 175 in Q3 2011 to 154 in Q4 2011, while the potential investment value dropped 42% from US$ 110 billion to US$ 64 billion in Q4 2011. This quarter, the UK leads the way in the number of new projects with 39 new projects potentially worth US$ 8.2 billion, while the US leads the way in potential investment value with 20 new projects valued at US$ 8.8 billion. Major projects include the US$ 4.2 billion De Aar solar power project in South Africa, the US$ 3.7 billion Xayaburi hydropower project in Laos, and the US$ 3 billion Offshore Wind Farm County Down.

In the power sector, there have been 84 new projects this quarter, down 27% on Q3 2011, while the potential total investment value of new projects dropped 7% to US$ 85 billion in Q4 2011. Japan, China and Nigeria are leading the way this quarter with a combined potential investment value of US$ 35.4 billion spread over 8 projects. The bulk of this is accounted for by the US$ 14 billion proposed Fukushima nuclear power plant decommissioning project in Japan, the proposed US$ 10 billion Sparkle Gas Fired Power Plant in Nigeria and the future US$ 8 billion Guangxi Beihai coal fired power plant in China.

The EIC Monitor figures for 2011 show that the global energy industry remains an attractive sector, in which to do business, despite a slowdown in new project proposals announced towards the end of 2011.

Looking ahead to the coming year, it is reassuring to see that opportunities exist across all sectors of the energy industry, with ambitious new projects being proposed. It will be interesting to view the results for Q1 2012 and to see if the number of projects proposed increases as they did in Q1 2011, following disappointing Q4 2010 figures, or whether we will continue to see a slowdown in proposals for new projects due in part to the current global economic conditions.

Author: Ian Stokes, CEO of the EIC

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