The fuels that drive global process-instrumentation markets
An aging installed base, regulatory needs and an expansion in global infrastructure among factors impacting growth
By Kiran Patel, IHS
In 2012, the world market for process field-instrumentation devices, including flow-, level-, temperature- and pressure-measurement devices was worth slightly more than $10 billion. Over the next five years it should grow at a compound annual growth rate (CAGR) of 6.4%.
These devices are widely used within process industries, including the oil & gas, refining and petrochemical, power and energy, chemicals, water and wastewater sectors.
Generally, instrumentation market growth is heavily dependent upon process-industry performance. Current industry trends will provide significant opportunities to device makers as process industries will depend on increasing automation to meet growing global demand.
One continuing requirement for end-user industries is to deploy process instrumentation so as to increase speed and output, by means of higher efficiencies, greater accuracies, reduced downtime, enhanced fault-diagnostics, flexibility or higher quality.
To take one example, especially for companies in the food & beverage, pharmaceuticals and chemicals industries facing regulatory hurdles, monitoring of remote work sites can help with data management, while providing on-line access to real-time information.
These types of systems reduce the need for on-site visits, which can be a significant drain on resources. Employees, whether on the road or at the home office, have access to up-to-date information wherever they are able to connect to the Internet.
Within a process plant there is an ever-growing need for data collection, of course, but especially that which can then be translated into actionable operator instructions.
With the installation of pressure, temperature, flow and level instruments, an increased number of data points and processes are continuously monitored. Whether installed for health or safety reasons, or in pursuit of reduced downtime, these technologies must get beyond presenting ambiguous data of questionable relevancy.
Custody transfer of commodities in the oil & gas and other process industries is a critical application, and it is not unusual for instrumentation used to have an accuracy of about 0.1%. Coriolis flowmeters and radar level-measurement technology are commonly used within the custody-transfer markets for these reasons.
The oil and gas industry is the largest sector of the process instrumentation market, accounting for 25% of revenue in 2012. This sector is very process-intensive, with many applications in extraction, separation, treatment, environmental monitoring and distribution requiring level-measurement instrumentation.
As for so many sectors of the North American economy, the advent of shale oil and gas has proved a boon for process-instrumentation suppliers. Extracting hydrocarbons out of shale typically involves use of liquids at high pressures, high-pressure pumps and advanced instrumentation. Following fracturing, a well is drilled and then depressurized. The pressure differential created allows gas to flow out of the shale and into the well. The fracturing fluid returns to the surface as wastewater product.
Besides the work already done in the Americas, shale gas sources have been identified in China, Argentina, South Africa, Australia and other places.
While private-property rights allow quick exploitation of the resource in the United States, Europeans have not been able to overcome political and environmental concerns. However, recent news in the United Kingdom has suggested that shale gas extraction emissions have a low risk to public health. Ukraine has recently signed an agreement with production firm Chevron to use shale-gas reserves to cut its overall energy costs.
Contact-radar level-measurement technology, extremely relevant when there is a liquid-liquid interface, is often used for measuring the extracted liquid and ensuring no oil is disregarded alongside the contaminated water.
What’s there already
A large installed base of instrumentation is nearing the end of its lifecycle in developed regions of North America, Western Europe and Japan. Devices, many of the mechanical variety, will be replaced, presenting a significant opportunity to instrumentation vendors.
Besides instrumentation, workforces within these regions are also nearing retirement. Companies must choose between training new staff and outsourcing responsibility to an instrumentation vendor. With fewer people taking up apprenticeship schemes, the knowledge to operate and maintain these devices is not always being passed down.
Instrumentation vendors have benefited by selling optimization services as well as their newer, more-intuitive-to-understand technology. In the oil & gas industry for example, it is common that differential pressure devices are being replaced by Coriolis flowmeters.
With remote-diagnostics capabilities, many issues that cannot be repaired by staff can be serviced off-site by specialists, reducing any potential on-site downtime.
While growing numbers of wireless devices are available, many are found at less complex, less mission-critical applications, such as remote offshore oil platforms or pipelines. So far, fears on the determinism of wireless data acquisition have restricted its use.
Both security and reliability issues need to be addressed before wireless gains universal acceptance in industrial applications. The industry has at least 14 protocols at present, but most suppliers seem to be waiting for industry standardization, as it isn’t feasible to offer all the different wireless variants. Such a single standard is not forecast to emerge in the near future.
Outline of an industry
Most of the more than 500 different process instrumentation suppliers found worldwide offer only one or two technologies or service a distinct geographic region or industry sector. Only a handful of suppliers offer a full range of field devices.
The top five companies offering process instrumentation devices are Emerson Process Management, Endress & Hauser, Yokogawa, ABB and Siemens. These companies are prominent across the globe and provide a complete portfolio of measurement systems.
They also offer services and integration solutions for a range of industry sectors and geographic regions. These companies made numerous acquisitions to develop this position.
The past two years, the majority of acquisitions have either strengthened expertise in oil-and-gas or within emerging markets such as China or India. This brings additional technical expertise to an industry or overcomes cultural barriers when doing business in unfamiliar territory, as well as addressing low price points offered by local suppliers. Having a local presence can often be the difference in winning business in an emerging economy.
Over the next few years, particularly in China, it is expected numerous local suppliers will sell instrumentation at significantly lower prices — often at a third of the cost of western counterparts.
With the development of shale gas, as well as the continued growth of the emerging economies there will be plenty of opportunities for instrumentation suppliers to capitalize on the huge infrastructure investments being made globally. Although there may be significant pricing pressure from manufacturers in these geographic areas, it is the reliability and reputation of established companies that will allow them to succeed in winning business.
Kiran Patel is an analyst with HIS. He can be contacted at Kiran.Patel@IHS.com +44 (0) 1933 402255
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