The oil and gas industry’s contract value dropped by nearly half in the first quarter of 2023, amid rising inflation and increased capital cost borrowing.
According to a report by GlobalData, the overall contract value decreased from $64.9bn in Q4 2022 to $34.01bn in Q1 2023. The number of contracts issued also decreased from 1,623 in Q4 2022 to 1,440 in Q1 2023.
The report states that the number of contracts saw a year-on-year decrease of 22% when compared with the same period in 2022.
While contract value saw a significant drop when compared to the previous quarter, when compared to the same period last year, it fell by 5%.
Europe reported a majority of the contracts issued, with 564, followed by North America with 379 and Asia with 261 during the quarter.The largest proportion of the contracts were awarded in the upstream sector (1,132), followed by midstream (215) and downstream (123).
According to the report authors: “Some of the top contractors were Yinson Holdings in the upstream sector, Hyundai Heavy Industries in the midstream sector, and Maire Tecnimont in the downstream/petrochemical sector”.
Yinson Holdings secured a 15-year contract extension worth $5.3bn for the Agogo Integrated West Hub development, located off the western coats of Angola. Additionally, a five-year contract worth $2.6 billion for integrated logistics services went to ADNOC Logistics & Services in Abu Dhabi, United Arab Emirates.
Pritam Kad, a GlobalData analyst states: “It appears the contract value momentum has slowed down due to high interest rates and a rising inflationary environment in the major economies. This could have potentially resulted in fewer high-value contracts during the quarter in the oil and gas space.”
GlobalData reports that operations and maintenance represented 57% of total contracts in Q1 2023, followed by procurement scope with 17%, in line with the same period in previous years. Contracts with multiple scopes accounted for 14%.