Oil Price Fall will Impact Revenues for Flow Control and Treatment Equipment
Revenue forecasts for pumps, valves, instrumentation, filters, turbines, etc.
have to be reviewed due to the dramatic fall in world oil prices. Here are
aspects to be considered:
Chronology
·
Time from order date to revenue posting by flow equipment supplier.
Large capital equipment such as big pumps experience a multiyear revenue cycle,
so 2015 revenues are in part based on 2013/2014 orders.
·
Duration of oil prices at any one level:
o
OPEC policies:
Could be permanent dissolution of OPEC or temporary.
o
Chinese and world demand:
Chinese demand could slow down reducing oil consumption. However, lower prices
will boost expenditures in the rest of Asia and total demand could rise as in
the past. World GDP growth pegged at 3.6 percent next year.
o
Shale oil/gas cost vs. oil price:
Some shale gas will be economic at less than $40/barrel oil but at $60/barrel
oil possibly only two thirds of current production would be above break-even. At
the low price point for shale, production stops and the price of oil then rises.
This is one possible OPEC strategy.
o
CTG and CTL cost vs. oil:
The cost of these alternatives sets the price of oil. At low coal prices
synfuels are more attractive even with low oil prices.
Relationship to price of other fuels:
·
Natural Gas
In some regions the price of natural gas is pegged to oil. In the U.S. this is
not true. Natural gas prices are already low and may even increase this
winter.
·
Nuclear
Lower oil prices will further weaken the nuclear investment.
·
Coal
Coal prices have fallen by more than 30 percent making coal still the fuel of
choice in much of Asia. However, U.S. utilities assured of long-term low
gas prices would replace up to 100,000 MW of coal-fired boilers.
Measurement metric:
·
Dollars or world currencies
The oil price rise based on the increasing strength of the dollar has to be
discounted. For example, if oil costs 50 Euros/barrel and it takes two dollars
to equal one Euro then oil prices are $100/barrel. But at parity the price in
dollars is only $50.
Impact of oil prices on the world economy:
·
GDP and consumer expenditures and savings
Expenditures by consumers due to cheaper oil offset reduced purchases by oil
suppliers. So the net effect is positive.
·
Impact is unequal
Russia will be the most negatively impacted, but this could lead to instability
and then conflict throughout Europe.
These potential impacts have been factored into adjustments in future revenue
forecasts for pumps, valves, filters and instrumentation as follows:
McIlvaine Revenue Adjustments
For Changes In Oil Price From
$80/bbl - % Change From Present |
||||
Oil Price/bbl |
$60 |
$50 |
||
Industry |
2015 |
2016 |
2015 |
2016 |
Combined Cycle Gas Turbine |
1 |
3 |
1 |
5 |
Coal |
0 |
(4) |
(1) |
(7) |
Nuclear |
0 |
(2) |
0 |
(3) |
Oil and Gas Production |
(5) |
(10) |
(8) |
(15) |
LNG and Gas to Liquids |
(5) |
(15) |
(5) |
(30) |
Subsea Processing |
(5) |
(20) |
(7) |
(25) |
Shale Gas and Oil |
(10: |
(20) |
(10) |
(25) |
Chemical Plant |
2 |
8 |
3 |
10 |
Pharmaceuticals and Health Care |
1 |
6 |
2 |
8 |
Iron, Steel and Mining |
1 |
5 |
2 |
7 |
The main effect of steep reductions in the price of oil is a redistribution from
oil producers, who receive less for the effort of extraction, to consumers who
benefit from cheaper transportation and energy. This enables them to spend more
money on other goods and services or to boost savings. The expenditures by the
consumers exceed the reduction in expenditures by the producers creating a rise
in net world consumption.
There are no precise consequences at any price level. Some projects will
proceed at low prices and some will be uneconomical at relatively high prices.
Consumption of steel for automobiles will increase, but consumption for oil well
equipment will decrease. It is necessary to avoid false precision of the
type displayed by the child given an Indian arrowhead. When asked how old it
was, he replied: 201 years and one day. When queried about the precision
he explained that it was 200 years old when given to him and he had owned it for
one year and one day. False precision was on display during the last energy
crisis.
McIlvaine has been following energy since 1974. Here is the optimistic
outlook as contained in Exxon’s “The
Role of Synthetic Fuels in the United States Energy Future," which appeared in
the early summer of 1980. Synfuels were to be a 15 million barrel-per-day
answer to the nation's thirst for energy. Cracking rocks laced with oil would
provide 12 percent of our energy needs by the early part of the 21st century,
and 8 million barrels would come from oil shale in Colorado's Piceance Basin and
the Uintah Basin to the west. Another 7 million barrels would come from coal,
mostly from the Powder River Basin in Wyoming and Montana, the Dakotas, and the
Southern Rockies. As for workers, there would be one million people
employed by the synfuels industry in Western Colorado. Wyoming would house
nearly three times its current population.
The arc from excessive optimism to complete abandonment was only a few years.
Here it is chronicled in McIlvaine newsletters.
McIlvaine Coal Gasification and Liquefaction Newsletter
Issue 1- September 15, 1979 |
Carter announces huge synfuels
program with 2.5 million
barrels/day of petroleum
substitutes in just 12 years. |
Issue 10 - June 15, 1980 |
Exxon spending $ billions on oil
shale. |
Issue 12 - August 15, 1980 |
$25 billion energy security act
could lead to another $68
billion investment. |
Issue 22 - June 15, 1981 |
Fluor/Cathedral Bluffs oil shale
is $3 billion investment. |
Issue 34 - June 20 1982 |
Lower oil prices but synfuels
picture still bright. |
Issue 40 - December 20,
1982 |
Oil prices could remain
depressed for several years,
some synfuels projects
postponed. |
Issue 60 - September 20, 1984 |
House cuts $5 billion from SFC
budget. |
There is the potential that there could be a repetition of this experience where
the price of oil plummets and remains low for decades. Experience tells us
that we were overly optimistic about a quick rise in oil prices. We were also
optimistic about the willingness of the U.S. to pay for energy security. The
situation is different this time around since the shale oil and gas is a proven
technology with predictable costs. More important is that production can
be reduced or accelerated quickly. The problem with the earlier experience
was that billions of dollars and years of construction would have been needed to
start producing the product. The shale industry can produce at various levels
depending on the current price. So we are not likely to repeat the experience of
the 1980s. But the bottom line is that our precision is no better
than with determining the age of the arrowhead.
Revenue adjustments are being made to:
N028
Industrial Valves: World Market
N031 Air
and Water Monitoring: World Market
N024
Cartridge Filters: World Market
N049 Oil,
Gas, Shale and Refining Markets and Projects
N043
Fossil and Nuclear Power Generation: World Analysis and Forecast
Boom in Industrial Purchases of Pollution Control Equipment in the U.S.
Chemical plants, refineries, pulp mills and cement plants are expanding and
upgrading facilities in the U.S. They are also investing heavily to meet
the latest environmental regulations. These activities are continually
tracked in
N032 Industrial Emitters
published by the McIlvaine Company. (www.mcilvainecompany.com)
The shale boom has resulted in lower energy costs for U.S. industry. The
result has been fewer imports and greater exports of chemicals, cement, steel
and other products of heavy industry. The steep fall in oil prices over the last
few months has eliminated some of the doubts relative to the long-term
competitive position for the U.S. and will ensure a continuation of expansion
plans.
The American
Chemistry Council predicts that U.S. chemical
output will increase by 3.7 percent in 2015. Growth is expected to reach 3.9
percent in 2016, and the consensus of the ACC's year-end report is that U.S.
output will continue to expand well into the second half of the decade,
exceeding that of the overall U.S. economy.
The air toxic regulations affecting industrial boilers, cement plants and
incinerators will have a significant impact on 2015 outlays. Deadlines for
compliance were 2016 with the potential for extensions into 2017. The
extent of the outlays is exemplified by Archer Daniels Midland who is completing
a program to
install thermal treatment systems consisting of 34 RTO/RCOs and 6 flares.
Scrubber purchases will result in a 60 percent SO2 reduction on
5 boilers and 20 additional scrubbers have been purchased for other
processes. Eleven SNCR systems have been purchased for NOx
reduction.
One of the big challenges is to purify and move gas produced in the U.S. to
industrial plants. This is increasing the market for air pollution control
for the gas turbines used with pipeline compressors. There is also a need for
additional VOC recovery equipment.
The U.S. cement market grew close to 8 percent in 2014. The strong economy and
the MACT regulations will contribute to growth in pollution control outlays in
2015.
For more information on Industrial Emitters, click on:
http://home.mcilvainecompany.com/index.php/databases/2-uncategorised/93-n032
Headlines for Utility E-Alert –December 19, 2014
UTILITY E-ALERT
#1204 – December 19, 2014
Table of Contents
COAL – US
COAL – WORLD
GAS/OIL – US
·
Two New Power Plants approved for Minnesota
·
Moundsville Power plans 549 MW Combined Cycle Power Plant in West Virginia
·
Grand River Dam Authority to build 495 MW Power Plant at Grand River
·
Tucson Electric to acquire Part of Gila River Power Plant
·
Towantic Energy Center plans to Increase Power Production
·
GE Gas Turbines for Calpine’s 760 MW York 2 Energy Center
·
PSNM issues RfP for 150-200 MW Expansion at San Juan
GAS/OIL – WORLD
·
Mass Global, Iraqi Banks to fund $3 Billion Power Plant built by Turkey's Enka
in Iraq
·
Isolux and Samsung C&T to build 383 MW Bibiyana in Bangladesh
·
The Philippines’ Ilijan Power Plant to test firing Diesel
NUCLEAR
·
NY Court says Indian Point Nuclear Power Plant exempt from State Coastal
Protection Program
·
Takahama Power Plant in Japan could come back Online in 2015
·
India to Identify New Site for Russian Built Nuclear Power Plants
BUSINESS
·
Chinese Air and Water Monitoring Revenues to Exceed $5 Billion by 2019
·
URS AND ARVOS Group market SBS Injection along with LJUNGSTRÖM Air Preheater to
improve Power Plant Efficiency
·
Graymont to enter New Zealand Market
·
Metso to provide Automation to Power Plant in Hungary
·
SCR Coal-fired Catalyst Sales to exceed $1 Billion By 2017
·
K-Power Plans Power Improvements in Pakistan
·
Fuel Tech to provide ESP Retrofit to comply with MATS and SNCR Systems
·
Oil Price Fall will Impact Revenues for Flow Control and Treatment Equipment
HOT TOPIC HOUR
·
Boiler Feedwater Purification has to deal with varying Water Quality – Hot Topic
Hour December 18
·
Media Selection for Coal-fired Boilers will be the Hot Topic January 8, 2015
·
Upcoming Hot Topic Hours
For more information on the Utility Tracking System, click on:
http://home.mcilvainecompany.com/index.php/databases/2-uncategorised/89-42ei
Media Selection for Coal-fired Boilers will be the Hot Topic January 8, 2015
The webinar on January 8th will focus on media selection for
coal-fired boilers. It will be free of charge for filter equipment suppliers,
media specifiers and power plants. There will be a charge for filter element,
media and fiber producers.
This webinar will be part of a comprehensive initiative to help purchasers and
specifiers make the best media selections. There are many potential unique
determinations. For example, 6 fiber types x 4 media types x 6 plant specific
conditions x 6 gas conditions x 3 different element shapes x 4 major
type cleaning designs = 10,368 different determinations.
fiber |
pps |
p84 |
ptfe |
glass |
ceramic |
acrylic |
Media |
Non-woven |
Membrane
laminate |
Woven |
Sintered |
|
|
Plant conditions |
Emission
limit |
Area available |
Fan limits |
Mercury
removal |
SCR |
FGD |
Gas conditions |
Flyash load |
Sulfuric acid |
Sulfates |
Activated carbon |
Temperature |
Other acid gases |
Bag shape |
Tubular |
Pleated |
Cartridge |
|
|
|
Cleaning |
High volume, medium
pressure air |
High pressure air |
Reverse
air |
Shaker |
|
|
There are controversies over the maintenance of membranes, the efficiency of
non-wovens, the new 5 mg/Nm3 limits in China, installing elements in
an existing ESP, sulfuric acid corrosion, activated carbon bleed through with
absorbed mercury, the ability to handle heavy sulfate loads, the cost of pleated
elements and the influence of cleaning type on media selection.
The options as refined in the webinar will then be posted in Power Plant Air
Quality and will be continually available to power plants around the world. An
article with highlights will appear in Filtration News. Further review
will take place at the AFS Spring meeting.
Panelists will include individuals from Testori, Donaldson, Clear Edge and ETS.
Click here to view schedule and register
Hot Topic Hour Registration
On Thursdays at 10:00 a.m. Central time, McIlvaine hosts a 90 minute web meeting
on important energy and pollution control subjects. These Webinars are
free of charge to owner/operators of the plants. They are also free
to McIlvaine Subscribers of Power Plant Air Quality Decisions and Utility
Tracking System. The cost for others is
$300.00 per webinar.
See below for information on upcoming Hot Topic Hours. We welcome your
input relative to suggested additions.
DATE |
SUBJECT |
DESCRIPTION |
January 8, 2015 |
Fabric Selection for Hot Gas
Applications |
|
January 15, 2015 |
Valves for Gas Turbine and
Combined Cycle Plants |
|
January 22, 2015 |
FGD Components Including
Blowers/Compressors |
|
January 29, 2015 |
MATS Compliance Choices |
|
February 5, 2015 |
Gas Turbine Regulatory Drivers |
|
February 12, 2015 |
Coal Gasification Air Pollution
Control |
|
February 19, 2015 |
Mercury Measurement and Capture |
|
February 26, 2015 |
Power Plant Wastewater Treatment |
|
March 5, 2015 |
Dry Scrubbing and DSI |
Click here for the
Subscriber
and Power Plant or Cement Plant
Owner/Operator
Registration Form
Click here for the
Non-Subscribers
Registration Form
----------
You can register for our free McIlvaine Newsletters at:
http://home.mcilvainecompany.com/index.php?option=com_rsform&formId=5
Bob McIlvaine
President
847-784-0012 ext 112
rmcilvaine@mcilvainecompany.com
www.mcilvainecompany.com