iMetal

Higher commodity prices at the end of 2021 and into the new year helped drive expectations higher for increased activity in the offshore oil and gas engineering, procurement, and construction (EPC) sector.
Challenges have tempered that optimism according to a new report by Westwood Global Energy Group.
The energy market research and consultancy firm noted in its review of EPC activities in the first half of 2022 were a “mixed bag."
“Emboldened by Brent oil price averaging $70 per barrel in 2021 and $107 per barrel in the first half of 2022, there were high expectations for an influx of offshore EPC awards,” Westwood said in the report.
“However, despite an increase in early-stage engagement of the supply chain by E&Ps and a steady growth in the number of pre-sanction projects, the optimism for a bumper year has been somewhat tempered, with Westwood’s 2022 offshore EPC contract award value now estimated to close at $68 billion, 18% lower than our January 2022 outlook.”
Westwood cited delays in project sanctioning as the reason for the decline, as some operators remodel project economics due to supply chain inflationary pressures that could range between 10% to 15% for subsea equipment and production platforms.
“It’s been challenging for the supply chain to scale up quickly after being forced to downsize during the pandemic. This has led to limited participants in some EPC tenders, causing operators to continually extend bid deadline dates or retender for projects to increase competition, forcing a delay on the project-sanctioning timeline,” it said.