Come learn how low crude prices are creating a business bonanza in downstream, and how midstream is growing as well.
If your not sure how the financial model works at a macro level in Oil & Gas, watch our short guest appearance where we walk you through the business of oil & gas by clicking here.
Our research to support this is based upon interviews with oil and gas business leaders. The slides shown in this video are courtesy of Industrial Info whose data is independent of our research, but comes to the same conclusions.
Hey, folks. Let’s learn a little bit more about the oil and gas industry.
All right. Today, we’re in beautiful downtown Houston at the NAPE event for 2015 and NAPE stands for North American Prospect Expo. And NAPE is an upstream event and if you read the news, if you’re paying attention to what’s going on, you know that upstream in the oil and gas is getting hammered pretty hard, but a lot of people think that’s the entire industry that’s being hurt and that’s simply not true.
So, even though upstream is getting hit pretty hard there’s other parts of the industry that actually benefit from this. So think about moving this crude oil around, regardless if you’re paying $10 or $100 a barrel, the cost of move is still the same. So, in the U.S. midstream is on a roar.
So in 2014 midstream had about $9 billion worth of Capital Expenditures. In 2015, that could be $10.2 billion and at 2016, it would be $24.4 billion dollars, so midstream is on a roar right now. There’s hundreds of jobs being created, there’s a lot of large CAPEX projects. So, if you’re trying to sell in the oil and gas industry, you may think about one that shift your focus from upstream to midstream.
And then let’s talk a little bit about downstream. Downstream is just crazy busy right now. A lot of CAPEX fund that’s being released because they didn’t expect the raw feedstock to be reduced this much. Think about it, if you manufacture cars, and somebody reduces the price of steel by 40%, your business would be on a roar and that’s what’s going on downstream because their raw feedstock is crude oil and natural gas.
So, in 2014 downstream in the U.S. and Canada spent about $22 billion. In 2015, that’s $27.3 billion were spent and 2016, we’re looking at $48.9 billion. It’s crazy. And downstream is not just stuff like fuel (thats what everybody thinks of). Downstream stuff like paints, rubbers, plastics, fertilizers, LNG, chemicals, ethylene, methanol, all is on a roar right now. And all that trickles down to manufacturing, things like ceramics, electronics, textile, and automotive, all will benefit from this increase in downstream activity.
And then, let’s look at labor. You hear about a lot of the layoffs going on in oil and gas industry, but you don’t hear about a lot of the hiring booms going on. So, in downstream the craft hours basically skilled laborer; welders, pipe fitters, you know, all that sort of stuff is on a roar. So, in 2014, we had 190 million man hours of craft labor going on.
In 2015 we’re going to need a 141 million man hours, in 2016 we’re going to need 164 man hours, that’s over 104,000 jobs being created for nothing because of the boom that’s going on in downstream. And in 2017 we’re up to 188 million man hours. That’s crazy, it’s only about 119 million man hours capacity. So, the oil and gas industry is fine. Yes, upstream has taken a bit of a hit, but the rest of the industry is very strong.
So, hopefully this helps. We will see you next time.