Maintenance, repair and overhaul (MRO) services catering to the oil & gas refinery market will be adversely impacted by the Coronavirus 2019 (COVID-19) induced economics slump, alongside the oversupply of oil and lack of storage capacities 2016 to 2024 (the study period of this research). This market is currently (2019) valued at $15.40 billion and is expected to expand at a CAGR of 0.23% and reach $15.05 billion in 2024. With refineries focusing on bringing in higher efficiencies in fuel production, the onus is on ensuring well-maintained facilities. This in turn is expected to increase the importance of turnaround maintenance (TAM) services for refineries. Furthermore, the market is expected to witness an increase in the time between shutdown, turnaround and outage (STO) events from 3-5 years to 8-10 years, driven by improved life of assets due to effective maintenance services. Refining margins have been depreciating over the years, bringing down profits. Additionally, refineries are increasingly focused on reducing both their capital and operational expenditures. Therefore, in order to lower the operating expenses in the long term, refineries are focusing on improving asset reliability both from the equipment and process point of view.

Key regions expected to witness growth in MRO revenues are the Middle East & Africa (MEA), North America, and Asia-Pacific (APAC). These regions will witness, refinery expansions and greenfield refinery projects in upcoming months. As refineries and refinery projects restart in MEA and APAC, the MRO services market in these regions will witness further growth.

Regulatory mandates and directives that place higher emphasis on reduced emissions/cleaner emissions will also drive the requirement for MRO services, across regions. The drastic COVID-19 related economic downturn had led to reduced capacity utilization at refineries, which has resulted in a significant slump in their spend on MRO services. However, the rise in service-based business models has ensured continued higher demand for asset management related MRO services. As refining margins continue falling, maintenance services will be geared towards innovative, cost-effective, and time saving methodologies.

The demand for inventory management is expected to be fueled largely by end-use industries such as process industries that continuous operations of critical applications. This coupled with the supply uncertainties experiences (of late) for key spare parts for critical applications, has the potential to disrupt plant uptime. Optimizing lifecycle cost is driving the need to focus on solution-based services. MRO service providers are redefining MRO services, by integrating big data, analytics, and cloud capabilities to devise solution-based services. MRO services being a mature market, the service providers are largely differentiated by price and product ranges. However, the success of MRO services providers in the future will require an integrated approach that focuses on consistent performance and reliability. With end users increasingly looking at optimizing an efficient operational expenditure strategy and cutting down their capital expenditures, their focus is on enhancing core competencies. This in turn is fueling the need for reliable partners to outsource non-core competencies. This is a major driver for outcome-based service models.

Continuation of COVID-19 induced economic slowdown is expected to have a significant impact on the capacity utilization of refineries. It may result in shutdown of these facilities, which in turn will reduce their maintenance related spend and lead to increased outsourcing of non-core competencies. However, increasing adoption of asset management solutions by MRO services will drive asset lifecycle extensions and in reduce the frequency of maintenance, repair, and upgrades. This is expected to lower MRO service revenues. Considering the greater focus of end users on integrated solutions-based approaches, MRO services will witness further consolidation with the market leaders acquiring specialized maintenance service providers and, technology based-asset management service providers, in a bid to increase their relative market shares and improve margins.

Author: Avinash Kumar