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The sluggish PVF market is expected to continue well into the second quarter of the year as the negative effects of the depressed oil pricing hovering around $30/bbl continues to exert downward pressure on Capex spending. With Saudi Arabia and Iraq pumping at record rates, plus Iran coming into play with 500,000 bbl of additional production (300,000 for European markets). a further decline in capital spending can be expected.
Basic raw material costs for carbon steel seamless pipe, plate and rough forgings required for production of carbon steel butt welding fittings and forged steel flanges have continued to remain stable through the first quarter. Therefore, as the cost and the availability of these components of production continue to remain stable, the pricing of commodity butt welding fittings and forged steel flanges are expected to remain unchanged in the near term.
Please note: Continued monitoring of the markets is critical as uncertainty due to softness in the market and global events may cause unexpected pressure on current pricing structures.
Gulf Coast: Despite the downward trend in upstream oil exploration and production, the Gulf Coast region will continue to experience a plethora of industrial construction activity. Labor demand is expected to increase by 7 percent, driven primarily by major capital work in the petrochemical and LNG industries. Additional pressure on the demand for labor is an increase in maintenance turnaround activity in the Petroleum Refining and the Petrochemical Industries.
Over the last 12 months, improved margins have the refiners running hard to capture profits; pushing desperately needed unit repairs and overhauls to the threshold of failure. In addition, Tier 3 gasoline modifications and revamps during 2016 will require extended turnarounds that will impact second quarter activity and extend into the balance of 2016.
Northeast: The prevalence of natural gas will breath life into the construction industry in New York area due to the proven combined ycle technology. Construction is scheduled to start in March on The Cricket Valley Energy Center that will lead to the deployment of three 200-MW natural gas-fired combustion turbine engines. Altogether, the plant will generate 1,000-MW of natural gas-fired power. This project is expected to take three years to complete at a cost estimated at $1.4 billion.
Mid-Atlantic, Midwest and Gulf Coast: There are 15 natural gas pipelines project that are moving forward at an estimated value of $15 billion to move gas out of the Marcellus/Utica area to meet the market demand in the Mid-Atlantic, Midwest, Gulf Coast and other demand centers in the Northeast.
Southeast: The Southeast Market Pipelines facilities located in Alabama, Georgia and Florida that include 1,100 km of natural gas transmission pipeline, associated facilities and six new natural gas-fired compressor stations and modifications to existing compressor stations having final FERC/EIS study approval.
The SMP Project comprises proposed pipelines from Transcontinental Gas Pipe Line Co. and SabaL Trail Transmission. Each company has filed with FERC to construct, own, operate and maintain the interstate natural gas transmission pipelines and related facilities. Both Transco and Sabal Trail will be constructed in three phases beginning in approximately the second quarter 2016 through 2021.
Western: Hillsboro, Ore. has been selected by Genetech as the site for a $125 million bio therapeutic fill and finish unit addition project that will add a third aseptic fill/finish production suite within the company’s existing 300,000 square-foot plant.
Keep in mind that oil is a long-term investment. Credit Suisse’s Jason Gammel called the short-term outlook “bleak.” However, he is expecting to see Brent crude oil pricing to rise to near $60 bbl by the end of the year. U.S. production is expected to be reduced by 800,000 bbl in 2016 with the global supply/demand ratio moving closer toward balance. Although the extended period of plummeting oil prices have had a noticeable effect on the oil industry in general expenditures are not going away. There are many oilfield jobs that are still in demand. As current workers retire and leave the industry, job openings will continue to open up for new applicants and for workers who wish to rise up through the ranks. Drivers, operators, production foreman, drillers and field technicians are five oilfield jobs that are still in demand in 2016, they will continue to be in demand as long as oil companies continue to operate.
Natural gas prices are expected to rise slightly in the coming months as a national glut is drawn down, according to the U.S. Energy Information Administration. Prices have been low during the first few months of winter, since lower production volumes and cooler weather are anticipated to bring them up slightly in 2016. Production growth has slowed recently, to the point that the Energy Information Administration predicts that it will be outpaced by consumer demand in 2016, due to increases in industrial use in the power and chemical as well as in commercial heating and residential sectors.
The Obama administration’s proposal, that has just been announced, to tax oil produced and imported at a rate of $10.25 a barrel would be an additional burden on the working class as costs are always passed on to the consumer. Low oil pricing is a temporary phenomenon that is subject to global supply and demand swings as well as political influences. Our industry is preparing for the future and would be negatively impacted by an additional layer of a non-market related cost.