Although natural gas prices already increased this year more than many expected – largely due to weather-related demand and inventory draws – business opportunities for energy infrastructure projects that use natural gas as feedstock remain attractive. Engineering, procurement and construction (EPC) firms could be particularly well placed to benefit from a medium-term “mega cycle,” according to Sterne Agee.
“In total, North American proposals for Liquefied Natural Gas (LNG)/ Petrochemical development now total almost $250 billion. We expect contractors to benefit from the surge in shale gas-related activity in the U.S. with higher margins and stronger negotiation positions that reflect lower contractor risk through the upcoming cycle. Our count includes almost $200 billion in LNG plans, over $30 billion in ethane cracker projects, and almost $14 billion in other petrochemical projects like ammonia, urea, and nitrogen fertilizer. Although we do not expect all of these projects to move forward, we estimate that one-third could move forward supporting a mega cycle through 2018.” – Sterne Agee Chicago Bridge & Iron Flash Note