NEWS RELEASE                                                                                         August 2018 

Rapidly Changing Market for Valves used in Oil and Gas Industry

A supplier of valves to the oil and gas industry has to assess the market almost as frequently as a day trader in stocks. Here are just some of the variables

  • Location of the customers: Presently U.S. tight oil and gas is where the action is. How long will this last? Some observers say that U.S. tight production will keep right on increasing. Others say the boom may only last another decade. The markets in many other countries are subject to political factors which keep on changing. The current U.S. confrontation with Iran increases the uncertainties.
  • Types of hydrocarbons: LNG, liquids derived from gas, and even syn gas from coal are all being pursued. China is a large and growing consumer of oil and gas. It has a big fracking initiative but is far behind its shale production targets. China has launched a campaign to reduce air pollution in 28 major northern cities, including Beijing and Tianjin with a massive gas pipeline. When launched in 2019, the first stage of the pipeline project will power Xiongan with imported LNG from Tianjin and China’s largest underground gas storage in central province Henan. Sinopec plans to deliver coal gas, coal bed methane and conventional gas to consumers in northern China. Coal gasification requires a large valve investment.
  • Processes: Fracking processes continue to evolve as do some other forms of primary production. Secondary production from water flooding is presently high on the radar screen for oil and gas companies in shale regions. CO2 from biomass combustion is getting attention for enhanced oil recovery because it would take CO2 out of the atmosphere. CO2 is being considered as a fracking liquid. If these technologies seem impractical remember that in 2008 only a handful of people could see the fracturing potential.
  • Customers: the producers are increasingly adopting IIoT and remote monitoring. This allows them to consider third parties for assistance in their valve purchasing and repair decisions. The number of large customers is increasing. The following nine companies spend more than $300 million per year for valves and service.
                   2019 Valve Purchases $ millions*
Company Headquarters Purchases
Sinopec China 728
China Nat. Petr. China 686
PetroChina China 589
Total SA France 339
Kuwait Petroleum Kuwait 403
Royal Dutch Shell Netherlands 424
ExxonMobil U.S. 430
BP UK 356
Saudi Aramco Saudi Arabia 717

* (does not include refinery purchases)

  • Competition: Mergers and divestitures continue to result in name changes e.g. Keystone to Tyco to Pentair to Emerson. New players are also having an impact. Sinopec is now not only one of the largest valve purchasers but also a supplier. The shale geography in China has presented unique challenges. Sinopec has custom designed pumps and valves along with drilling rigs and other equipment first for domestic use but also for export. The American Jereh subsidiary operating out of Houston supplies, plug, choke, check and safety relief valves.
  • Revenue potential: Valve suppliers can provide automation packages with remote monitoring and data analytics. As more oil and gas customers incorporate process management systems with cloud based software, there will be increased profit potential with these packages.

The McIlvaine N028 Industrial Valves: World Market provides forecasts which are continually updated.

N049 Oil, Gas, Shale and Refining Markets and Projects provides daily tracking of projects and maintains profiles of oil and gas companies.

N031 Industrial IOT and Remote O&M   provides analysis of the opportunity for valve suppliers to provide automation and data analytics packages.