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Global energy industry shows encouraging signs of growth

LNG Industry,

At the end of last year, it was disappointing to see that the number of new projects was down across all sectors, with recovery across the industry appearing to have stalled. However, hopefully the tide has finally changed, as it is encouraging to see in the Q1 (January – March 2010) report that the number of new projects has increased across all sectors, apart from a slight decrease in the power generation sector. Overall there were 422 new projects compared to 353 last quarter and 326 in the same quarter last year.

The total value of new projects has increased significantly on the last quarterly report (Q4 2009) and on the same quarter, Q1 2009. The total estimated value of new projects across the energy supply chain this quarter stands at US$ 503 billion, up 72% on the value of Q1 2009 (US$ 292 billion) and up 84% on last quarter of 2009 (US$ 273 billion). 

Let us look at some of the sectors in more detail.

Global power projects

The renewables sector is continuing to go from strength to strength and remains a key growth sector in the energy industry. This quarter, renewables represent the largest segment of new projects by value in the industry, up by almost 200%, and largely driven by the UK’s nine Round 3 offshore wind schemes with a combined value of US$ 150 billion and an installed capacity of 25 GW. There have been 121 new projects in the renewables sector, totalling US$ 224 billion in Q1 2010.

In the power sector, reasonable improvements can be found in total project value. This quarter, new projects have increased by over 40% on the previous quarter’s results.

Again, China and India dominate the global power sector. China has six new nuclear plants valued at a combined US$ 59.7 billion, the largest being the Chisong (Jilin) nuclear power plant. India has 11 thermal plants with a combined value of US$ 13.9 billion.

Overall, there have been 99 new projects in the power sector totalling US$ 137 billion in Q1 2010. In comparison, there were 106 new projects totalling US$ 93 billion in Q4 2009 and 92 new projects totalling US$ 104 billion in Q1 2009.

Upstream, midstream and downstream sectors

The upstream sector is continuing to recover with the total value of new projects standing at US$ 49 billion, an increase of 28% on the previous quarter. The new projects this quarter with the highest values are seen in Venezuela (Junin 1 Oil Block) and the USA (Barnett Shale Gas Project), demonstrating that the growth of unconventional resources in the USA might well be the target of significant investments over the coming months and years.

The midstream sector has shown good growth in the number of new projects this quarter although the total value of the projects has decreased by around a third compared to the previous quarter and totals US$ 20 billion. New and emerging projects are well distributed. The largest of these are the US$ 6 billion Azerbaijan - Georgia - Romania Gas Pipeline (AGIR) and the US$ 2 billion Zapolyarny to Purpe Oil Pipeline in Russia.

In the downstream sector, the number and value of new projects have both increased with the number of projects up by 20% and the total project value almost doubling compared to the previous quarter’s results, totalling US$ 70 billion.

New projects are widespread with the Middle East, India and China all having several large schemes emerging. The largest new project is the US$ 20 billion Yanbu Petrochemical Complex in Saudi Arabia. Although many refinery projects in Western Europe have been cancelled, and some existing refineries are up for sale, the demand for new refinery projects elsewhere continues to grow. A number of new early stage refinery projects are identified at Novonikolskoye (Tambov) in Russia, Maharashtra Refinery (India) and Perak Refinery (Malaysia). However, many of the new refinery projects are heavily dependent on securing private financing.

While the last quarterly EIC Monitor showed a mixed bag of results, Q1 2010 certainly highlights more cause for optimism across the global energy industry. Let’s hope this positive start to the year continues.

Author: Mike Major, CEO, The EIC.

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