Frost: Growing Need for Enhanced Quality Drives Pumps Market in Euro Oil, Gas Sector

March 26, 2008 // Published as a news service by IHS

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Rising global demand for oil and gas is driving significant demand for energy equipment, such as pumps, according to Frost & Sullivan.

With customers continually demanding pumps with longer life and improved quality and reliability, especially in a sector like oil and gas where safety is a key factor, higher quality pumps are witnessing promising growth as they maximize the efficiency of operations.

Recent analysis from Frost & Sullivan of the pumps market in the European oil and gas sector found revenues of $959.4 million in 2006, with estimates to reach $1217.3 million by 2013.

With customers demanding so much more from energy equipment, analysts said manufacturers are keenly developing intelligent pumping systems (IPS), which control and monitor pump performance.

"Industry participants are looking to cash in on the life cycle-costing strategy by convincing customers about 'high initial costs, but low maintenance costs' of their products, compared to the low quality products," said Frost & Sullivan senior research analyst Karthikeyan Balasubramaniyam.

"As customers are prepared to pay a premium price for high quality intelligent products to make the most of on the life cycle advantage, these participants can certainly progress in this market."

The market for retrofits is also expected to grow, analysts said, especially in Western and Central Europe, as companies look to improve the performance of existing equipment.

On the other hand, analysts said stiff competition from low cost manufacturers from Asia-Pacific - especially in the downstream sector - is challenging pump manufacturers catering to the European oil and gas sector to improve their production methods to counter pricing pressures.

Directives for energy efficiency and emissions are expected to become more stringent in the future, analysts said, and suppliers may find it difficult to comply with the various standards. This requires the equipment and components to satisfy basic criteria with respect to noise levels, emissions, hygiene, quality and reliability.

"To rise above these challenges, market participants must focus on improving the efficiency of production and quality by implementing proper methods, such as total quality management (TQM) and just in time (JIT), in order to produce effectively priced products," said Balasubramaniyam.

"They must also provide product differentiation features (such as price, customer service, delivery, quality) and pump intelligence (such as control and monitoring systems) to steer clear of overlapping product portfolios due to the limited technological advancements."

Analysts said it is also crucial to have a well-established network of distributors and contractors across geographic regions, as the pumps market in the European oil and gas sector is highly fragmented due to the presence of numerous manufacturers.

Source: Frost & Sullivan.