BAKU, Azerbaijan, Aug.11
By Leman Zeynalova - Trend:
Onshore pipeline projects are expected to be more expensive in coming years, Trend reports with reference to Rystad Energy.
The company expects 4-6 percent increase in the cost of abovementioned projects by late 2022 due to the price hike for labor, raw materials and transportation.
“Materials in particular – which account for 30-40 percent of the total cost for a pipeline – are expected to become 2-3 percent more expensive in the same period and may approach $1 million per kilometer in leading pipeline regions such as the US. A recent increase in steel demand has also led to higher iron ore prices, thus pushing up steel costs. Moving forward, the removal of tax rebates for line pipe in major export hubs like China could result in higher material costs, hence making Chinese exports more expensive. In addition, prices for other pipeline construction materials – such as valves and flanges – have also spiked. The price index for pipeline flanges and valves in the US, for instance, has grown by more than 30 percent since early 2020,” said Rystad Energy.
The company believes the anticipated rise in material costs will not be driven by an increase in general steel prices – as they are expected to slide next year – but instead by the present regulatory hurdles and a lull in pipeline development activity.
“This in turn could hinder operators from locking in long term agreements with steel suppliers as prices take a turn for the better. Additionally, the stronger than expected demand from other industries, combined with the slow pace of pipeline project sanctioning activity, could push pipeline operators to the back of the queue to secure large orders, thereby forcing them to pay a premium to procure the required quantities.”
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