The precipitous drop in oil prices starting at the end of 2014 has begun to have an impact on work in the oil and gas markets. While current projects are proceeding, a few jobs in the pipeline have been slowed or postponed. "The market is hurting on the upstream side, but downstream oil-and-gas work is continuing to be strong due to lower feedstock prices," says Vincze.
"In the past 12 months, there has been a complete change in the oil-and-gas market because of falling oil prices," says Graham Hill, executive vice president of global business development and strategy for KBR. He says that lower oil prices "look like a longer event than anyone anticipated."
The lower oil prices have left many design firms trying to cope with the market shift. "We had completed our company reorganization to implement strategies to deal with changing markets by December of last year, just as the prices began to fall. Some firms now are scrambling to do what we already accomplished at the end of last year," says Hill.
Not all firms are seeing major problems so far. "We have seen very few project postponements, and those that we have seen are mostly smaller projects," says Graves of Burns & McDonnell.
Further, the downstream market is thriving. "Downstream is very good for us," says Hill. He says KBR has opportunities throughout North America in ammonia, petrochemical and chemical plants.
Despite the significant reduction in oil prices, the oil-and-gas pipeline market continues to be robust. "Although the supply may be abundant, it's still necessary to get the product to market," says Nick DeNichilo, CEO of Hatch Mott McDonald. Lower prices also are convincing many independent power producers to switch to natural gas, increasing the need for delivery systems, he says. "Given the age of many pipelines, we are also being called upon to assist our clients with asset rehabilitation and replacement."
Firms in the oil-and-gas sector are optimistic that the market will turn around. "This has always been a long-term market," says Naylor of Amec Foster Wheeler. He says the market up until the oil-price crash in December was almost like a gold rush. "The market for oil and gas will return, but, once it does, it will be more measured, rather than the previous rush to develop projects."
Seeking Regulatory Certainty
The market for new powerplants continues to be uncertain as utilities await final decisions on environmental regulations. However, the price of gas as a fuel for powerplants remains very low in the U.S., and regulations for coal-fired plants are becoming increasingly expensive, causing some utilities to rethink their plans. "We expect gas prices to remain low for the next 10 years," says Dean Oskvig, CEO of Black & Veatch's energy business. "We do consulting over utilities' distressed assets." He says utilities are beginning to consider switching fuels and refiring boilers.
Oskvig also notes there is little pressure to expand capacity. "The drive for energy efficiency and conservation is blunting the growth in demand. So, the need for new plants is not urgent." However, he points out that there still are some new powerplants being built. Black & Veatch recently won a contract to design and build an 869-MW, combined-cycle plant in Oregon, Ohio, to supply power for the region's manufacturing resurgence, and two 1,000-MW, gas-fired combined-cycle plants in Texas.
One market in the power sector that continues to be strong is transmission and distribution. "T&D is our hottest market," says Graves. He expects Burns & McDonnell's work in T&D to grow by 10% to 15% this year.
Alternate energy also is providing T&D opportunities. "We are seeing a robust market, particularly in connecting renewable generating stations to the grid," says DeCosta of Commonwealth Associates. He says Commowealth now has a lot of new customers on the solar side.
The alternate-energy sector is heating up as investors rush to take advantage of federal wind-energy tax credits before they expire. However, Naylor believes the tax credit program will be extended through 2017, "although that is not definite."
Another potentially huge market for designers is from the so-called Disposal of Coal Combustion Residuals regulation, issued in December and published in the Federal Register on April 17. "This rule will provide a lot of work for our industry," says Graves. He says design firms working with electric utilities are getting flooded with requests for studies on coal-ash containment.
However, Graves says the utilities continue to face piecemeal regulations and are unable to make long-term plans without a clear signal from EPA on its plans. "The Federal Energy Regulatory Commission provided a clear regulatory path for interstate T&D, and now we are well on our way to creating a national grid. Until EPA can provide similar regulatory certainty, utilities will continue to wait before investing."
Design firms are beginning to take notice of the growing collection of data available to their clients. The challenge is to translate this data into something usable. "People are collecting data now just to collect it. But there is no way that data will sit idle," says Wager of Parsons. "Big data in retail is extremely useful in identifying consumer spending patterns, but in our industry, we are just beginning to figure out how we can use it."
Some design firms already are beginning to work with big data. Under the federal Moving Ahead for Progress in the 21st Century (MAP-21) transportation program, the Federal Highway Administration has been collecting highway safety data through the Strategic Highway Research Program 2 (SHRP-2). Vanasse Hangen Brustlin, for example, now is working with the Florida Dept. of Transportation to make sense of the data.
"Groups have been collecting data on automobile accidents to identify dangerous intersections and roads for years," says Kimberly Eccles, VHB's safety practice leader. But she says the wealth of data from SHRP-2 can help state and local agencies not just react to accidents, but also identify conditions that lead to accidents, such as traffic congestion, road design and even the weather. Further, real-time access to such data, collected by highway and first-responder agencies, can alert transportation agencies to adjust their signaling systems to change the flow of traffic to avoid or mitigate conditions that cause accidents.
VHB is working with the state of Florida to identify conditions that can lead to traffic accidents and implement strategies to limit their impact on traffic safety. "States have limited resources to expand or fix highways, so using pavement sensors to identify risk factors like traffic congestion and having the ability to adjust traffic signals to ease the congestion would go a long way to improve highway safety without a major outlay," says Frank Gross, VHB traffic safety engineer.