Declining oil and gas prices to impact world generators market

According to IHS, declining generator sales into the oil and gas industry in 2015 will place a significant burden on suppliers that will then look to other industries for growth.


According to IHS, declining generator sales into the oil and gas industry in 2015 will place a significant burden on suppliers that will then look to other industries for growth. Courtesy: IHSThe medium power generators market felt the greatest negative impact from the decline of oil and gas prices in late 2014. IHS predicts this will continue with a 5% decrease in 2015 oil and gas revenue, and recover in 2017 as oil and gas prices rise. The oil and gas industry made up roughly 30% of total revenues in 2014, with over 50% of those revenues attributed to upstream sales, according to IHS. Despite the greatest burden falling on medium power generators, the overall impact of oil and gas prices will result in direct and indirect fluctuations to the entire world market for generators, regardless of power rating.

The expectation is that oil prices will slowly recover over the next few years to levels prior to the price fall in 2014. The decrease in oil prices has had a major impact on project capital expenditure, which will be particularly noticeable over the next two years. Project delays will most likely postpone capital expenditure for generators until oil prices recover. Due to project cancellations, capital expenditure spending for generators may be completely unrealized.

In 2014, medium power generator sales into the oil and gas industry made up approximately one-third of world revenues and roughly one-quarter of units shipped in the medium power generators market. Therefore, any change in the oil and gas industry will have a significant impact on medium power generator sales.  Generator sales into the high power market will experience a markedly less profound impact because most, if not all, high power units are dedicated to power generation. Generator sales into the low power market will still feel the negative effects from a decrease in oil and gas capital expenditures. However, because low power generators are sold into a large number of industries, the impact will be diminished compared to that of the medium power market.

‏From a regional standpoint, improving global economic growth, particularly in EMEA and American emerging markets, will continue to support generator sales. Conversely, decreased growth in China and Brazil, combined with little demand from countries in Western Europe, will provide headwinds to global growth.
‏Based on supplier interviews, declining generator sales into the oil and gas industry in 2015 will place a significant burden on suppliers that will then look to other industries for growth. Looking forward,IHS forecasts a return to growth in generator sales in the low and medium markets from 2017 to 2019 as capital expenditures in the oil and gas industry return.

- Matt Tolley is an analyst for industrial automation at IHS Technology. IHS Technology is a CFE Media content partner. Edited by Joy Chang, digital project manager, CFE Media,

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