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During the first quarter of the year, the industry witnessed an extraordinary phenomenon of tanking crude oil markets taking prices to levels not experienced since the 1980s. This phenomenon has spread like a virus, resulting in an industry-wide contraction of planned CAPEX projects and new drilling ventures.
The slowing of activity in the upstream markets is adversely affecting the sales of PVF products industry wide. Restructuring of workforces, re-evaluation of inventories, the idling of pipe mills and re-evaluation of investments in infrastructure by manufacturing and distribution have become the forefront of decision-making initiatives to deal with this downturn.
Seamless pipe, plate and rough forgings continue to be stable in price and availability and will likely remain unchanged during the second quarter of 2015. These are the basic raw materials that are necessary for the production of these commodities. They are expected to be readily available to meet the demands of industry through the second quarter, as business hopefully picks up.
Pricing for domestic carbon steel welding fitting and forged steel flanges will most likely remain unchanged during the second quarter. However, due to the uncertainties facing the global markets, and the volatile turbulence escalating in the Middle East, it is important to monitor the market on a regular basis.
The average decline in expenditures in U.S. oil-related industries is forecast to diminish to $119 billion this year. U.S. declines are likely to be most severe in the vertical drilling, secondary plays and on the periphery of some basins. Drilling in the Eagles Ford, Permian and Bakken will hold up surprisingly well according to a survey of 186 companies.
Even as crude's rampant price plunge rattles this industry the Gulf Coast is on the brink of an unprecedented oil boom. It's been nearly five years since the BP Deepwater Horizon disaster, analysts now predict oil production to be headed into the largest growth spurt in history. Production is likely to peak at 1.5 million barrels of crude a day by 2016.
Another positive for our industry is the natural gas sector. The increase in gas-fired combined cycle power plant construction and utilization is increasingly fueling demand. Production has been perfected and conversion into LNG product and the construction of internal and global delivery systems are in the development stage. A number of gas pipeline projects are scheduled for 2015 construction with right-of-ways obtained and permits granted.
New England is set for approximately $10 billion in projects starts in 2015. The power industry alone will contribute more than 50% of the regions 2015 total investment with $5.54 billion in project starts. Pharma-Biotech industries will introduce $2.7 billion in project initiatives and planned upgrades. Manufacturing ventures are also expected to begin construction projects valued at $1 billion or more in 2015.
U.S. Mid-Atlantic states are set to see more than $9 billion in project starts in 2015. Nearly 85% of the activity will be generated by four sectors: Industrial Manufacturing, Metal & Mineral, Pharmaceuticals and Power.
In the Midwest more than $5.5 billion in project starts are scheduled for upcoming development. About two-thirds of the total investment is attributed to three industries: Oil & Gas Pipelines, Power and Industrial Manufacturing. This area includes Kansas, Minnesota, Missouri, Nebraska and the Dakotas.
More than $31 billion in project starts are scheduled for The Rocky Mountain Region( Arizona, Colorado, Idaho, Montana, New Mexico, Nevada Utah and Wyoming). The majority of starts will be generated by these industries: Power, Metals & Minerals and Oil & Gas Pipelines.
On the West Coast, Tesoro will proceed with a Mixed Xylene Project at the Anacortes Refinery valued at $400 million.
Residential construction of condominiums and apartment projects will continue leading the way in the vast U.S. residential construction sector. Boston, Chicago, Denver, Honolulu, Los Angeles, New York City and Seattle the cities experiencing the greatest amount of current activity.
The dramatic retreat in oil prices has been and will continue to exert negative pressures on the PVF markets for the near term. Several experts are prognosticating a $70 / $80 BBL price as early as mid-year due to the escalating crises exacerbating the supply of oil in the Middle East exemplified by the current degenerating events in Libya.
On the positive side of the equation natural gas production, LNG exportation, gas pipeline construction and looming gas fired combined cycle power plant construction are expanding markets in 2015 for the PVF industry.