Oil and gas contracts market tumbles 37% in Q1 2024 as slow down fears loom

By Energy Connects

Jun 06, 2024

Analysts point to concerns over the global economic outlook as a key driver behind the slump.

The oil and gas contracts market experienced significant turbulence in the first quarter of 2024, according to latest report by leading data and analytics firm GlobalData.

The disclosed contract value plunged 37% compared to the previous quarter, dropping from $50.2 billion to $31.4 billion. This decline was accompanied by a decrease in overall contract volume, falling from 1,346 in Q4 2023 to 1,142 in Q1 2024.

Analysts point to concerns over the global economic outlook as a key driver behind the slump. "Many traditional oil and gas industry projects are getting delayed or postponed due to concerns over demand outlook in oil and gas consuming countries amid the looming recession and high inflation, which is clearly evidenced by the decrease in both contract value and volume." Pritam Kad, Oil and Gas Analyst at GlobalData, said. This sentiment is reflected in the decline of both contract value and volume.

The report also reveals insights into the types of contracts awarded during the quarter. Operation and Maintenance (O&M) dominated the landscape, accounting for 59% of all contracts. Procurement followed at 16%, while contracts encompassing multiple scopes like construction, design, and engineering came in third at 13%. Notably, offshore terrains captured the highest market share within the oil and gas contracts space.

Despite the overall decline, some bright spots emerged. Samsung Heavy Industries secured a significant $3.44 billion contract for the construction of 15 LNG carriers. Additionally, Tecnicas Reunidas and Sinopec Engineering Group landed a combined $3.3 billion contract from Saudi Aramco for an EPC (Engineering, Procurement, and Construction) project in Saudi Arabia.

The report also highlights a potential silver lining for producers. While demand concerns dampen project activity, oil prices are expected to remain favorable due to potential supply disruptions caused by geopolitical tensions. GlobalData suggests that this scenario might lead to delayed projects being pushed forward in the mid-term.

Overall, the report paints a picture of a cautious oil and gas contracts market navigating a challenging economic climate. While some large contracts were awarded, the overarching trend suggests a wait-and-see approach from industry players until the global economic picture becomes clearer.