Wednesday 20 July 2022

A review of offshore oil and gas (O&G) engineering, procurement and construction (EPC) activities in the first half of 2022 has been a mixed bag, emboldened by Brent oil price averaging $70/bbl in 2021 and $107/bbl in 1H 2022, there were high expectations for an influx of offshore EPC awards. 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 US$68 billion, 18% lower than our January 2022 outlook. This decline is due to delays in project sanctioning, 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. Furthermore, 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.

Full story here.