The Russian oil and gas EPC market is expected to grow at a CAGR of less than 1% during 2020 - 2025. Factors such as IMO regulation and global efforts to reduce the use of coal for power generation, the demand for natural gas and low sulfur fuel is expected to increase. This factor, in turn, is ex[ected to promulgate the increasing EPC contracts across the midstream and the downstream sectors. However, United States sanctions and restrictions on collaboration with Russia is likely to affect the country's oil and gas EPC market.
- The midstream segment dominated the market during 2019, due to heavy investments in building LNG infrastructure and gas transport pipelines.
- Shift of the E&P sector toward offshore deep and ultradeep areas is expected to be the major opportunity for the Russian oil and gas EPC market. Russia has been actively producing oil and gas from the Arctic shelf for quite some time, but with a decline in onshore hydrocarbon production, the national oil companies have no choice but to shift to complex and technologically challenging offshore deep-water and ultradeep water fields.
- Increasing investments in the petrochemical industry is expected to drive the market. Russia is planning to launch a raft of new projects over the next few years, aiming to utilize the potentials of the downstream sector and its rapid growth.
Key Market Trends
Midstream Segment to Dominate the Market
- Oil and gas pipelines, storage, and LNG and RLNG facilities are the major midstream infrastructures that require EPC services. The growing oil and gas production and export, and aging pipeline infrastructure drive the demand for new midstream infrastructure.
- Gas movement from Russia to Europe was estimated at around 193.8 billion cubic meter and 223 billion cubic meters total in 2018. This figure is estimated to rise, owing to factors, like an increase in the demand for energy in Europe and the subsequent increase of pipeline network by Russia.
- The country witnessed an increase in its LNG exports in the past few years, with a growth of about 266% from 6.8 billion cubic meters in 2009 to 24.9 billion cubic meters in 2018. The country currently has two LNG plants, Gazprom-led Sakhalin-2 on the Far East and Novatek’s Yamal LNG, on the Arctic Yamal peninsula.
- The “Power of Siberia” pipeline started operation in December 2019. The pipeline has a length of 8,100 km across Russia and China, aimed at supplying China a cleaner source of energy and make Russia independent of Europe for income from gas exports.
- Hence, the aforementioned factors are expected to contribute to the growth of the market during the forecast period.
Increasing Investments in Petrochemical Industry to Drive the Market
- In the latest world energy outlook, BP forecasted that the global crude oil and condensate demand may rise by less than 3 million barrel per day between 2019 and 2040, due to the increasing growth rate in the use of electric vehicles, among other factors. Hence, like other hydrocarbon-focused economies, Russia is also looking to push into petrochemical amid uncertain prospects for global crude oil demand.
- Moscow, the capital city of Russia, is also planning to take new measures to spur the petrochemical industry development, with a target of doubling production to around 20 million metric ton per year by 2030.
- ZapSibNefteKhim's entry into the market announced the beginning of rapid expansion in the Russian petrochemical industry. Further, several projects are already greenlit, which include a 420,000 ton per year ethylene plant in Novy Urengoy in western Siberia, which state-controlled gas firm Gazprom aims to commission in 2020.
- The Russian energy ministry, in March 2019, approved a new roadmap for developing petrochemical up until 2025, aimed at unlocking an extra USD 40 billion in investments and creating some 18,000 jobs. Hence, the increasing petrochemical infrastructure is expected to drive the Russian oil and gas EPC market during the forecast period.
The Russian oil and gas EPC market is fragmented, and it is dominated by companies, such as Technip FMC, Hyundai Heavy Industries Co. Ltd, Saipem SpA, and McDermott International Inc., among others.
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