Low oil prices hurt valves and actuators market

Despite the various growth drivers, the valves and actuators market has to readjust to the new market conditions and the low oil prices

The oil and gas sector remains the largest revenue generator for the valves and actuators market.
The oil and gas sector remains the largest revenue generator for the valves and actuators market.

While valves and actuators are utilised in a variety of industries, the oil and gas sector remains the largest revenue generator for this market. Due to several factors, the sector is expected to see further development. This will be fuelled by the increased investment in pipeline installations and the rise in exploration and production (E&P) activities. Other factors that are expected to contribute to this growth include the growing energy demand and rising urbanisation. In addition, due to the improved health, safety, and environment (HSE) standards, the requirement for monitoring and controlling remote sites from centralised locations is a yet another growth driver.

When it comes to the upstream sector, valves located at the top of the well control the flow of crude oil or natural gas from high pressure injection systems to choke valves and blow-out preventers. In the midstream sector, pipelines require compressors along the way for the smooth transportation of oil and gas resources, where valves are required to protect the equipment while applying minimal restriction to the flow.

“General valves are used for isolation, block, throttling, bleed or control,” said Andrew Hoxley, global oil and gas industry manager, Pentair Valves & Controls. “Examples of uses are to isolate complete onshore facilities, mobile offshore production units, custody transfer, pumping and compressor stations, sections of pipelines, bypass systems and individual pressure vessels. Valves are also used for individual process equipment, such as compressors, pumps, control valves, gauges, and flowmeters.”

Controlling the flow

In some applications, it is only necessary to either open or shut a valve. Depending upon the valve design and the application, it may be convenient to operate it by hand. However, there are many applications in which it is impossible for a technician to physically operate the valve without some external assistance. The hand operator is thus replaced by an electric, pneumatic or hydraulic assisted actuator.

“Actuators should be used wherever a valve requires automated operation due to location access restrictions or where the valve contravenes safe operating standards for manual operation even when a gearbox is added,” Ben Townsend, product specialist at Sofis, told Oil & Gas Middle East.

A control valve is a valve combined with an actuator used to control fluid flow by adjusting the area of the flow passage as directed by an independent signal from a controller fed by pressure, temperature sensors and meters. This enables the direct control of flow rate and the consequential control of process quantities such as pressure, temperature and liquid level within the process system.

According to Saurabh Pathak, senior marketing manager – MEA, Flow Solutions, Emerson Automation Solutions, “The control valve manipulates a flowing fluid, such as gas, steam, water, or petroleum compounds, to compensate for the load disturbance and keep the regulated process variable as close as possible to the desired set point. Mainly, the control valve is designed to control the process variable to maintain it in the acceptable range.”

Growth prospects

On a global level, the industrial valves and actuators market is expected to grow steadily with a compound annual growth rate (CAGR) of around 6% by 2021, according to analysts at the global market research company Technavio.
The study, released early this year, revealed that certain geographical regions like Europe, the Middle East, and Africa will be some of the major revenue contributors to the market within the predicted period.

Similar trends were also predicted by earlier research. In September 2016, Transparency Market Research said that the opportunity in the global valves and actuators market stood at $74.37bn in 2015 and is anticipated to be worth $124.30bn by 2024.

The market, the study said, has been led by valves which account for a share of about 75%, while the actuators segment is expected to contribute with a CAGR of 5.89%. In terms of valve type, recent studies also showed that ball valves dominate the overall valve segment, accounting for 20% of revenue share in 2015, whereas pneumatic actuators take the lead on the actuators segment.

Meanwhile, the use of gate valves in the oil and gas industry is expected to experience significant growth, the research forecasted. The oil and gas application segment also emerged as the largest slice of the pie with a 22% revenue share.

Facing the downturn

However, the continued low oil prices and the reduction in capital expenditure (CAPEX) has remarkably impacted the valves and actuators industry. This, coupled with fierce competition, has intensified pressure on the manufacturers, creating the need to offer customised solutions based on the clients’ requirements. Meanwhile, multiple suppliers have started adopting the prevailing trend of mergers and acquisitions strategies.

Pathak agreed that there is a steep decline in the investment by National Oil Companies (NOC) and International Oil Companies (IOC) on major projects. Low oil and gas prices have also led to cuts in investments in the upstream and the transportation infrastructures, he said.

“Having said that,” he added, “there is an increased focus on the efficiency and reliability from NOCs and IOCs as they continue to invest in modernisation and automation of the facilities. It is also encouraging to see a focus on the environmental and safety concerns.”

“It is also worth noting that there’s an increased focus on asset optimisation and the industry focus has shifted on Shutdown, Turnaround & Overhauling (STOs) to ensure proper maintenance, increased reliability, reduced cost, maximising the potential of current production facilities,” he said.

Similar to Emerson, Sofis has also noticed the impact of the downturn on the valves and actuators market. According to Townsend, CAPEX budgets are inevitably reduced due to the macro environmental factors associated with low oil and gas prices. As a result, customers look for solutions that not only solve the budget issue but also offer more than the original concept.

Testing economic conditions

Despite it being the largest revenue stream to the valves and actuators market, the oil and gas sector presents suppliers with difficult operating conditions, creating a constant pressure to manufacture tougher, longer-lasting and better performing valves.

Regardless of exceptional temperature and pressure levels, valves and actuators are expected to operate efficiently. Not only are the conditions extreme but they are also diverse in nature, ranging from desert to deepwater sites.

In the upstream sector, offshore E&P operations have gone into deeper waters in search of untapped oil and gas reserves. Any shortcoming in the performance of the equipment in such conditions could lead to leakage costing operators millions of dollars in losses and damaging the fragile ecosystem of the sea.

“In oil and gas fields, the valves typically used for applications are Separator Level Control Valves, Automatic Recirculation and Compressor Anti-Surge,” explains Pathak. “It addresses some concerns like implosive force of cavitating or flashing water, erosive effect of concentrated sand driven by high-velocity water and outgassing. These applications also face challenges like high-pressure drop, erosion and corrosion.”

In midstream, isolation valves play a critical role in natural gas pipelines, which include the cryogenic service that compresses gas into liquid for the economical transport to distant markets. The most commonly used valve solutions in both the upstream and the midstream sectors include full-port gate and ball valves. Actuator or valve failure could cause a major life threatening event. Overpressure or excessive flow within an area would lead to the critical failure of a unit.

Regarding equipment failure, Hoxley claimed, “Pentair products are extremely reliable, and in critical services we maintain high Safety Integrity Levels (SIL). Future improvements will come from continuous monitoring and data collection through sensors around the final element. A key feature of Pentair’s Westlock EPIC Digital transmitter is that it enables the monitoring of the system continuously and has the capability to remotely partially stroke the valve to ensure system readiness. The natural next step would be to constantly monitor all ‘critical valves’ in a customer’s process system to check their readiness to operate and to self-diagnose when it requires maintenance.”

Townsend also explained that Sofis’ portable actuators have an extremely low failure rate. When failures do occur, he said, it is not always the fault of the product. For example, the site could lose its pneumatic capabilities. Regardless of the cause, manual override options with Sofis products are available to ensure a valve can still be operated.

Fierce competition

The Transparency Market Research report has found that there is fierce competition in this sector, which is mainly due to the presence of a large number of suppliers. According to the study, the ten leading suppliers accounted for 20% of the global market in 2015. This, the survey said, can be attributed to the fact that some of the major providers have been acquiring smaller vendors in order to gain a larger market share. An example of this is Schlumberger Limited which acquired Cameron International Corporation in a bid to expand the range of its products.

Suppliers are constantly evolving to keep up with this high level of competition. According to Hoxley, Pentair Valves & Controls focusses on research and product development. Similar to Pentair, Emerson has also been utilising all available resources to offer the best products to their clients. As for Sofis, the company offers full on and offsite training and have a worldwide agent and distributor network that can offer local customer assistance.

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