Latest News

Investment in hydraulic components plagued by low oil prices

According to a recent report by IHS Technology, the global market for industrial hydraulic components, estimated to be worth just over $US7.5 billion in 2014, is undergoing a shakeup as investment in oil and gas exploration continues to fall.

Hydraulic power is a well-established technology and the market for components has historically grown in parallel with the general demand for industrial machines. 

Supply is dominated by a handful of large manufacturers, led by Bosch Rexroth from Germany and Parker Hannifin from the United States;  which together accounted for slightly more than 45 per cent of global component revenues in 2013, according to the new report entitled “Industrial & Mobile Hydraulic Components” from information and analytics provider HIS.

IHS reports oil and gas to be one of the largest stationary industrial markets for hydraulic equipment. In 2013, investment levels in this sector were robust, particularly in offshore and sub-sea extraction applications in areas including Brazil, the Middle East, Singapore, and, to a lesser extent, the Gulf of Mexico.

 In 2014, investment in the oil and gas sector was moderately high until the latter half of that year when oil prices took a dramatic plunge. The recent drop in oil price and the expectation by IHS for it to remain below $70 a barrel until at least 2016 will have a profound impact on investment for hydraulic components in this sector. 

The reduction in oil price has forced many large oil companies to scrap or postpone large exploration projects.

For example, Anglo-Dutch scrapped plans for one of the world’s biggest petrochemical plants, a US$6.5 billion project with Qatar Petroleum. UK-based Premier Oil postponed an exploratory $US2 billion project around the Falkland Islands. 

Norwegian oil major Statoil returned three exploration licenses. With oil prices expected to remain low, further exploratory projects are expected to be postponed or scrapped. Overall, hydraulic components sold in the oil and gas sector is forecast to decline 15.5% in 2015 and not begin growing again until 2017.

Although oil exploration has taken a hit, it is not all doom and gloom for hydraulics serving the oil and gas sector. Mid-stream and downstream operations will continue to sustain sales of machinery in this sector. 

The Middle East region, one of the largest producers of oil, will continue to invest in operations; and will require repair, maintenance and operations support from machinery manufacturers and component suppliers. Other oil producing regions including the United States and Northern Europe will look to streamline operations and focus on cutting costs in the long run. 

The IHS study “Industrial and Mobile Hydraulic Components – 2015” provides more a detailed forecast of different industries and regions. 

In conclusion, investment in hydraulic machinery used in exploration has fallen as oil prices remain low. This is forecast to continue over the medium-term future, as large oil and gas companies continue to cut costs. 

The report went on to conclude that machinery used in operations in the oil and gas sector will sustain some demand for hydraulic machinery from large installed base, especially in the Middle East.


Send this to a friend