In my last column of 2009 on energyglobal.com*, I ended on a positive note cautiously claiming that all sectors across the energy supply chain were beginning to see signs of a recovery. This was based on third quarter 2009 data from the EIC Monitor, a quarterly index that tracks newly announced projects across the global energy supply chain.
However, our latest quarterly report (EIC Monitor Q4: October – December 2009) shows that we were right to be cautious. While there are modest improvements in total project value in the renewables, upstream and midstream sectors, the report reveals that the number of new projects is down across all sectors.
Overall in the last quarter of 2009, the total number and value of new projects were down on the previous quarter and similar to results from Q4 2008. In Q4 2009 there were 335 new projects across the global energy supply chain with a total value of US$ 313 billion, compared to 462 in Q3 2009 totalling US$ 360 billion and 340 new projects in Q4 2008 worth US$ 312 billion.
Let’s take a look at some of the sectors in more detail. There’s no doubt that renewable energy is the boom sector at present in the energy supply chain with signs of major investment beginning. These include the future Desertec solar power project in Algeria valued at US$ 50 billion and the Great Lakes offshore wind farm in Ontario, Canada, valued at US$ 20 billion.
Renewable energy projects represent the largest segment of new projects by value in the industry this quarter, and are up by 30% as compared to Q3 (although the number of new projects is down). Q4 saw 96 new projects in the renewables sector totalling US$ 119 billion, with a total capacity of 23 GWe. In comparison there were 109 new projects totalling US$ 92 billion, with a total capacity of 29 GWe in Q3 2009. And if you compare these figures from a year ago, it’s clear that this is a growth sector. In Q4 2008 there were 50 new projects totalling US$ 26 billion, with a total capacity of 10 GWe.
There are other reasons for optimism as well. With the consistent rise in oil and gas prices, the upstream sector is continuing to recover with the total value of new projects increasing by 27% on the previous quarter; US$ 35 billion in Q4 2009 as compared to US$ 27 billion in Q3 2009. Yet, the sector still has a way to go to hit the US$ 81 billon worth of new projects in Q4 2008.
The midstream sector also showed the strongest percentage growth this quarter, with an increase in the total value of new projects of 37% over the previous quarter; US$ 29 billion on Q4 2009 as compared to US$ 21 billion in Q3 2009. Much of the new projects come from Russia, including the East Siberian-Pacific Ocean oil pipeline phase 2 valued at US$ 11 billion and the proposed US$ 4 billion Pechora LNG plant.
That, I am afraid, is where the positive news stops, however. Power, for example, continues to provide a mixed bag of results. Whereas in Q3 2009, the sector enjoyed a surge in new projects up 49% in terms of value from Q2 2009, the last quarter of the year saw the value of projects down by over 40% and the number of projects down by 26%.
The downstream sector has also seen a decline with the value of new projects down by more than 30% on the previous quarter, from US$ 54 billion in Q3 2009 to US$ 36 billion in Q4 2009. Hot spots of downstream activity in countries such as China and Mexico have failed to arrest a decline from US$ 62 billion of new projects in Q4 2008.
So the picture is indeed mixed. While the figures represent a slightly disappointing ending to 2009, there are positive signs in sectors such as renewables, upstream and midstream. Hopefully, a strong global economic recovery in 2010 will see a bouncing back across the entire global energy supply chain.
*Mike Major writes a monthly comment on our website: www.energyglobal.com