It’s no secret, manufacturing in the energy industry is largely reliant on the oil & gas sector. This sector has been hit hard with falling oil prices since 2014, leaving most progress in manufacturing at a standstill. At IMTS 2016 – the International Manufacturing Technology Show in September, many machine builders and designers said they have seen an uptick in the oil & gas industry, but there is a large shift to diversify plant operations to serve markets outside of energy.
A June article published in the New York Times notes 250,000 oil workers – roughly half in the United States – have lost their jobs in the oil & gas sector. And more than two-thirds of oil & gas rigs have been decommissioned – sharply cutting investment in exploration and production. The International Energy Agency (IEA) concludes that investment in the world’s oil & gas fields tumbled in 2015 and 2016 in the longest period of retrenchment in energy spending in almost half a century. Oil prices fell to less than $30 a barrel in 2016 from 2014’s peak above $114.
Though oil prices may never reach their 2014 levels, an uptick is on the horizon. Benchmark North Sea Brent crude oil spot prices averaged $46/barrel (b) in August, a $1/b increase from July. In addition, U.S. natural gas production have hit record levels for the fifth consecutive year and record consumption levels for the sixth consecutive year. And, new well oil production per rig (barrels/day) has increased from September to October in five of the seven major U.S. regions. Perhaps the oil & gas industry will never be as strong as in 2014, but it isn’t going anywhere. Manufacturers just need hang on until the per-barrel price is enough to justify more exploration, and we’re almost there.
Though renewable energy makes up the second smallest form of consumed energy in the U.S, wind energy is still the fastest growing new source of electricity in the country. Renewable energy is stimulating job growth, potentially offsetting what has been lost in the oil & gas industry. Wind energy represented 88,000 jobs at the beginning of 2016, an increase of 20% in a year and during 2015, more than 500 wind-related manufacturing facilities across 43 states produced a product for the U.S. wind industry. With that, 88% of the wind power capacity installed in the U.S. during 2015 used a turbine manufacturer with at least one U.S. manufacturing facility. Adding to this growth, today nearly 209,000 Americans work in solar – more than double the number in 2010 – at more than 8,000 companies.
An essential element for continual success in the renewable energy market is the ability to store energy generated to be used during non-peak hours. This market is booming, with an expected $250+ billion market value by 2040 (see page 16). In early October, energy storage powerhouse ABB partnered with the energy industry maintenance solution company, Aibel, to deliver offshore wind integration solutions. ABB will focus on its high-voltage direct current technology, while Aibel will take turnkey engineering, procurement, and construction responsibility for the design, construction, installation, and commissioning of the offshore platforms. I believe collaborations between energy storage companies and renewable energy manufacturers/installers will continue to take off in 2017 to ensure 24/7 power to the end user. This could provide even more jobs as energy storage companies work with manufacturers to develop and improve power generation technology.
The renewable energy revolution just might be the key to closing the gap of cyclical, manufacturing downturns in this industry. — Arielle