Andrew Proto looks at the current state of the market for compressors
Andrew Proto looks at the current state of the Middle East market for compressors
With revenues close to US $1bn in 2011, a rapid advancement in compressor technology is aligning in timely fashion with the Middle East’s burgeoning infrastructure demands.
According to the latest report by Frost & Sullivan, demand for new equipment will continue as facilities install new compressors with either high-speed direct-drive or variable frequency drive solutions to gain better efficiency.
With an upturn in the economy now being generally acknowledged, infrastructure demands are prompting the development of more roads, railways, ports and water pipelines. These projects, in turn, have expanded the market for various industrial-grade compressors such as centrifugal and positive displacement compressors.
Analysis from Frost & Sullivan revealed that the centrifugal compressors markets earned revenues of over $868.6 million in 2011 and estimates this to reach $1.3 billion in 2016. Meanwhile, the positive displacement compressors market earned revenues of $450.5 million in 2011, estimated to reach $669.5 million in 2016.
As Carl Briden, of Kaeser Kompressoren explains, there has been some improvement in the market for some years now.
“Market conditions have steadily improved since 2009 as confidence returns. Our increasing investment in producing even higher energy efficient products is also attracting new business.” However, he adds, that is not based solely on the UAE, and Dubai.
“The increase is coming from across the whole region, but notable increases are from Saudi Arabia, Egypt, the UAE, Sri Lanka and Bangladesh. There has also been a notable improvement in all GCC countries”.
From a product point of view, Briden cites regional demand for its industrial electric driven screw compressors as well as its diesel driven portable screw compressor which has seen steadily increasing demand, and has been doing so regularly for the last 15 years.
Away from the regional view, Frost & Sullivan identifies new opportunities for the compressor market.
According to Virein Kumar Yadlapalli, program manager, Industrial & Process Control Practice, Frost & Sullivan, while the investments in the oil and gas industry will continue to drive growth, the “massive investments planned for the non-oil & gas sectors is expected to be the key market driver for new demand.
Increased focus on the life-cycle cost of compressors, energy efficiency and energy audits, and the demand for high-quality air are other factors driving the compressors market.”
Increasing industrial investments in Iran and Iraq will further ensure substantial market growth.
In addition, Saudi Arabia being the largest Middle East market, offers further scope for centrifugal compressor manufacturers as it is focusing on diversifying its industries to reduce dependence on oil and gas revenues and create employment opportunities.
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Growth in non-oil and gas-based projects such as petrochemicals, power, desalination, water and wastewater, infrastructure, metals and mining, will raise the demand for positive displacement compressors.
Given the significant amount of energy that is consumed by compressors, Yadlapalli adds, the end users are increasingly focused on enforcing stricter energy efficient measures (thus reducing the total cost of ownership). “Hence, the major R&D focus for a compressor manufacturer is to improve the compressor design to achieve better efficiency.”
As with all sectors, the global slowdown took its toll on the compressor market, but not in such a transparent way as reduced sales. Moreso the subtle shift in sourcing of products.
Yadlapalli explains: “The major industries (Oil and Gas, and PCF) in the Middle East have never squared off on reliability of the equipment (irrespective of the economic slowdown). While cost has always been a key criterion during the vendor evaluation process, the technical superiority of the product was always given preference (over marginal cost premium). However, with the increasing acceptance of equipment (reliable) manufactured in cost-effective countries, the end users have aggressively sought cost competitive options,” he said.
For ABB, it considers the process industries and original equipment manufacturers (OEM) in particular, in the southern Gulf region as the main drivers for compressors, with variable speed drives the most efficient way to control compressors.
More particular, the main customers, according to a contact at ABB is chemical, oil & gas industries (COG), metals, food and beverage and metals, with demand particularly strong from the COG industry.
“In the place where users of natural gas are concentrated, they lie far from the gas fields and processing plants. In the past, compressors driven by gas turbines were used in the larger production facilities to transport the gas through the pipelines to the users.”
The greater emphasis on more efficient and productive technologies has not alleviated environmental concerns. In fact, it remains a contentious issue, which will not go away, prompting firms such as ABB to adapt.
“In recent years, an increasing number of gas turbine drives have been replaced with electric variable speed drives, as in comparison they offer significant advantages (over the former),” said the contact. “Besides the lower investment costs, electric variable speed drives are more efficient than gas turbines and require only a fraction of the maintenance. Apart from the obvious maintenance costs reduction, this results in a higher uptime.
“Other factors that influence the decision in favour of electric drives are the desire to benefit from the high reliability and excellent control properties of the electronically adjustable AC drives as well as the need to avoid CO2 and NOx emissions. In light of global warming and the Kyoto protocol, the reduction of CO2 emissions will gain even more importance in the future,” he added.
Kauser meanwhile, says that, while the oil & gas sector remains strong, the compressed air is a utility, which is used in every type of industry and has witnessed a healthy spread of business across all market sectors.
“We have supplied to almost every industry sector in healthy numbers in recent years,” said Biden. As a result, the regional head office of Kauser Kompressoren will shortly be moving to a new state-of-the-art facility designed to further enhance the technical support to our network of dealers across the Middle East.
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“This facility will help further with the training that all our sales and service technicians already received at our head office in Coburg, Germany,” he adds.
This approach tallies with findings from Frost & Sullivan in its latest report, which states that to boost revenues, suppliers must establish a strong local presence and sales and service setup.
Compressor suppliers need to foster healthy relations with their end-users to ensure the latter is aware of new technologies and their benefits, especially of energy efficiency. Further, they can leverage diverse forums to interact with clients and familiarise them with
“Our team of highly experienced engineers within the R&D Centre at Kauser HQ in Germany ensure we always lead the market in looking at ways to further improve reliability and energy efficiency across our product portfolio.
Our customers expect Kaeser to lead the way with innovation, which we continually strive to do. Even during the economic slowdown, our global organisation has expanded and continues to do so,” said Briden.
Continued R&D means the firm has introduced a number of new technologies. Kaeser recently introduced the very latest IE4 standard electric motors in its newest range of industrial screw compressors, which is an industry first. By way of contrast, in the EU, the use of premium efficiency IE3 motors will become obligatory for drives from 7.5-375 kW from January 1, 2015.
“As a leading global manufacturer we are acutely aware of the need to focus on the impact our products have on the environment,” said Briden.
There is a downside to the consistent evolution of products, according to Frost & Sullivan. While older compressor technologies remain popular, end users are reluctant to adopt new equipment due to concerns regarding product reliability and operability in local conditions.
As a result they prefer to continue operations with the older compressor technologies, which are less efficient.
“Ensuring (end user) willingness to adopt newer technologies has always been a challenge to the equipment suppliers in the region,” says Yadlapalli.
“Traditionally, the end users in the Middle East are wary of migrating to the next level of technology and have showcased an inherent preference for proven technologies. This is largely attributed to apprehensions regarding product reliability (new technology) and its operability in local conditions.”
Furthermore, reduced demand for oil and gas from key export markets such as the US and China owing to the weak global economy has also slowed down market investments. Volatile raw material prices affect manufacturers’ profit margins.
The global slowdown also placed the Middle East economy under huge stress, resulting in declining demand for oil from its major export destination, Europe. Whilst the outlook is far improved, the discernible drop in investments in the oil and gas industry is palpable, which in turn affects the positive displacement compressors market.
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Compressor types in depth
There are four main types of compressors used in the Middle East: reciprocating, rotary screw, centrifugal and axial flow.
Reciprocating - is a positive-displacement compressor that uses pistons driven by a crankshaft to deliver gases at high pressure. The intake gas enters the suction manifold, then flows into the compression cylinder where it gets compressed by a piston driven in a reciprocating motion via a crankshaft, and is then discharged. Applications include oil refineries, gas pipelines, natural gas processing plants.
Rotary screw – is a type of gas compressor, which uses rotary type positive displacement mechanism. They are commonly used to replace piston compressors where large volumes of high pressure air are needed, either for large industrial applications or to operate high-power air tools such as jackhammers. They come in two types – oil-free and oil-flood. Typically used for general industrial application.
Centrifugal (radial) are a sub-class of dynamic axisymmetric work-absorbing turbomachinery. The idealised compressive dynamic turbo machine achieves a pressure rise by adding kinetic energy/velocity to a continuous flow of fluid through the rotor of impeller. This energy is then converted to increase in potential energy/static pressure by slowing the flow through a diffuser. Applications include pipeline compressors of natural gas to move the gas from the production site to the consumer.
Axial - are rotating, airfoil-based compressors in which the working fluid principally flows parallel to the axis of rotation. This is in contrast with other rotating compressors such as centrifugal, axi-centrifugal and mixed-flow compressors where the air may enter axially but will have a significant radial component on exit. These are widely used in gas turbines such as jet engines. They are also used in industrial applications such as large volume air separation plants, blast furnace air and propane dehydrogenation.