Historically low oil and gas prices are having vastly different effects on the diverse segments of the energy industry. Power-plant construction has been affected less than the oil and gas industry, where oil and gas price reductions spell opportunities for construction tied to lower feedstock costs. The oil price in January 2016 was 75% below its mid-2014 peak, sending labor streaming from the oil patch and shale beds as producers suffered a wave of bankruptcies. Downstream, on the other hand, the refinery-and-chemicals industry boomed as plants were built to gorge on cheap feedstock.
Construction of upstream oil and gas facilities has been sustained by momentum, says Sheila Moore, analyst at IHS Upstream Capital Cost Service. But that is beginning to change. “What we’ve seen are projects that were sanctioned before the downturn, or even in 2015 and 2014, [when] there was already money invested,” she says. “We’ve seen a lot of the orders in the yards for rigs and all the larger structures decrease significantly in the past year.” Employers have responded with cuts to benefits, including per diem, travel and certain training benefits. This year, companies may start reducing wages, she says. For engineering project management, “they’re doing more with less people, so they’re getting a reduction in costs by reducing the head count on projects.”