Offshore Pipeline Market

Natural gas is a naturally occurring hydrocarbon gas mixture consisting of methane, nitrogen, carbon dioxide, and other gases. Natural gas is formed from the remains of plants and animals buried below the thick ocean floors and the earth’s surface over millions of years ago, which are subjected to intense heat and pressure under the deposits of sedimentary rocks. Natural gas generally occurs and is extracted with oil from the reservoirs. Natural gas is the non-renewable fossil fuel energy source, which is widely used for cooking, heating, and electricity generation purposes in the form of liquefied natural gas (LNG). Moreover, natural gas can also be compressed and used as a fuel for vehicles in the form of compressed natural gas (CNG). The demand for natural gas increases with the growing use of natural gas in domestic, power generation, industrial, commercial buildings, transportation, manufacturing, and other applications for various processes. The increased use of natural gas has led to the exploration & production (E&P) of natural gas and its transportation through pipelines. Natural gas is transported through pipelines with the help of compressors, which create pressure difference within the pipelines so as to allow the flow of gas from an area of high pressure to an area of relatively low pressure.

The demand of natural gas is rising in Asia-Pacific owing to the increase in use of natural gas in various industries. According to the BP Statistical Review of World Energy 2019, natural gas production in Asia-Pacific grew from 607.5 billion cubic meter (bcm) in 2017 to 631.7 bcm in 2018, with an annual growth rate of 4.0%. Moreover, as per the International Energy Agency (IEA), the Asian market is going to be one of the prominent regional markets for natural gas. Additionally, in India, the Oil and Natural Gas Corporation (India) approved the phase three development of Mumbai High Field in 2014 to increase the production of natural gas to 5.253 bcm by 2030. Additionally, in India, in May 2016, the Ministry of Petroleum & Natural Gas announced the commencement of 36 offshore oil & gas fields as part of the Discovered Small Field (DSF) Bid Round – 2016, for boosting the domestic production of oil and gas in the country According to the BP Statistical Review of World Energy 2019, Indonesia has the third-largest natural gas reserves in Asia-Pacific. In Indonesia, the Ministry of Energy and Minerals approved the development plan for the Mako Gas field located in the Duyung PSC, Indonesia in 2019. Moreover, in June 2019, Inpex Corporation (Japan) signed a contract worth USD 20 billion with the Indonesian government for Abadi LNG project to produce approximately 9.5 million tons of LNG, annually. Moreover, in Australia, Chevron Corporation (US) announced the offshore development of Gorgon natural gas project, worth USD 18-20 billion. It is planned to be located on the northwest coast of Western Australia with the objective to produce 15.6 million tonne per annum of natural gas. Therefore, the transportation and production of natural gas is expected to increase the use of offshore pipelines. Hence, the increasing demand for natural gas in Asia-Pacific is expected to drive the growth of the global offshore pipeline market during forecast period.

Refined products include products such as gasoline, kerosene, and lubrication oils which are derived from crude oils through processes such as fractional distillation and catalytic cracking. Refining is one of the essential processes for the transformation of crude oils into various refined products. The refining processes of crude oil consists of the three starges, namely, separation, conversion, and treating. The demand for refined products are expected to increase with the demand of fuels in transportation, energy, manufacturing, and other industries. For instance, as per the World Oil Outlook 2017 report, the demand of oil and gas as primary energy fuels is expected to grow annually at 0.6% and 1.8%, respectively between 2015 and 2040. Similary, the global oil demand in the road transportation is expected to reach 48.3 million barrels per day (mb/d) by 2040. In India and other developing countries, the demand for refined products, such as oil and natural gas are expected to grow significantly. For instance, as per the Indian government, the demand of oil is projected to jump by 61% to reach 350 million tonnes of oil equivalent by 2030. Moreover, as per the Ministry of Petroleum and Natural Gas Annual Report 2016-2017, the Indian government planned to invest USD 723.81 million for the development of two gas pipeline projects in India. In addition to this, the development of City Gas Distribution project also leads to an increase in demand for natural gas, which is expected to increase the use of pipelines in refineries. The below graph depicts the global oil demand trend between 2017–2040 as per New Policies Scenario :

Various countries in the world including India, Germany, and Japan, are investing on the E&P of oil and gas to meet the growing demand for refined products. For instance, in 2018, Rosneft (Russia) announced to invest approximately USD 690 million for oil & gas E&P activities in Germany for the next five years. Moreover, in June 2019, W&T Offshore (US) announced an oilfield discovery in the Mississippi Canyon block in North America. Such discoveries are expected to increase the demand for refined products, which eventually raises the use of pipelines during the forecast period. Therefore, such developments in the oil & gas industry leading to the demand for refined products acts as an opportunity for the players in the market during the forecast period.

Geopolitical instability refers to the disturbances due to the influence of various geographic and political factors while geological challenge is the instability in the geology of a particular area or place including drastic environmental changes. These are the major concerns for the oil & gas industry operators. Rapid urbanization, climatic changes, internal conflicts, and changes in oil prices, demand & supply risks, and political extremism are some of the factors that usually lead to the conditions of geopolitical and geological instability in countries. Such conditions play an important role in the growth of the pipeline market as they help in diversifying pipeline supply routes, trading partners, and economic ties between the countries. Moreover, instability also results in cancellation, delay, interruption, financial loss in offshore pipeline projects, and also lead to on-hold projects. For instance, in 2016, Saipem (Italy) filed an arbitration claim to Gazprom (Russia) of worth approximately USD 823 million for the cancellation of natural gas pipeline project in the black sea. Furthermore, political instability leads to delay in the construction of the offshore oil & gas projects, which hampers the growth of the offshore pipeline market. For instance, Middle East to India Deepwater Pipeline project which was proposed for enabling the supply gas from Iran and Oman to India got delayed due to various challenges such as political and technological challenges. Moreover, the geological occurrences such as tsunamis and volcanoes create huge challenges for the installation and deployment of offshore pipelines. Such factors hinder the installation and working of the offshore pipelines. Therefore, the geopolitical and geological instability is expected to restrain the global offshore pipeline market growth.