A pressure vessel is a closed container designed to hold gases or liquids at a pressure substantially different from the ambient pressure. In the Oil & Gas industry, a pressure vessel is used as a recipient in which physical and chemical processes take place, often at elevated temperatures and pressures.Columns are similar in construction, albeit used for a different purpose. Distillation columns are used for separate feed stream or streams into multiple streams based on the boiling points of feed components. Due to their similar method of construction, pressure vessels and columns are usually purchased from the same manufacturers.
A pressure vessel can be of any shape, but the cylindrical shape (horizontal or vertical) is the most common, due to ease of manufacturing and handling requirements. Construction of a pressure vessel involves a shell (forged or plate-rolled) with welded heads on the ends. Thickness is the most critical dimension for the integrity of a pressure vessel and is determined at the design phase considering the operating pressure and temperature. The material is selected based on a number of considerations such as strength (based on dimensions, temperature and pressure rating), cost, corrosion resistance and machinability.
Application of pressure vessels in the Oil & Gas indudstry ( upstream)
- Pressure Vessels in Oil & Gas
- Pressure Vessels / Tanks
- Steam Drums
- Heat Exchangers
- Gas Exchangers
In the Oil & Gas industry, carbon steel and stainless steel are the two most commonly used materials for construction. In addition to the external body, a pressure vessel often needs other components to become functional, such as vessel internals, distillation trays etc. These components are extremely specialized and manufacturing them requires capabilities that are very different from those needed for fabricating pressure vessels and provided by specialized suppliers.
Pressure vessels are classified based on the wall thickness, small and medium-sized pressure vessels (<150 mm wall thickness) and heavy wall pressure vessel (>150 mm wall thickness). The market is segmented around these two categories of pressure vessels. Although most pressure vessels are typically less than 150 mm in thickness, certainly specialized vessels, such as reactors for refineries, can have thicknesses exceeding 200 mm.
Supply & Demand Dynamics
The main drivers for pressure vessels demand are the oil & gas and the chemicals industries. Other big drivers for pressure vessels demand is in power plants and desalination projects. Boilers used in power generation are the largest segment in the market outside of oil & gas and represent circa 30% of the entire market. This segment is expected to continue to grow, in particular in Asia Pacific. Separators used in the petrochemical segment are another large end-market for pressure vessels. Asia Pacific is the largest market and represents around 35% (Grandview research).
Vessel sales growth has idled as Oil & Gas production companies reduce their capital spending, which has caused a decline in Pressure Vessel sales to the upstream oil & gas industry.
|Larson & Toubro||India|
|Japan Steel Works||Japan|
Cost & Price Analysis
Raw materials and labor are the main cost drivers for pressure vessels, accounting for 90% of the total cost. Price is a key criterion when selecting manufacturers, especially for small and medium-sized pressure vessels. Korean manufacturers have local availability of raw materials which gives them a significant advantage when it comes to pricing. On the labor front, Indian and Chinese manufacturers enjoy an advantage. In the Middle East manufacturers have a loyal customer base, but face cost issues due to lower availability of raw material and skilled labor. Evolving manufacturing technology continues to expand the frontiers of the size, weight, and thickness of vessels.
Prices are most likely set to increase over the next two years as bidding keeps price movements in line with growth in labor and specialty steel costs. Overall prices have remained essentially flat, as weak demand and falling costs for steel offset the influence of higher labor cost. The highly-competitive nature of the market for pressure vessels leaves the buyer with some leverage to bring unit prices down when sourcing of vessels is alone. The largest potential for cost reduction and applying margin pressure on suppliers is through economics of scale by ordering more units or bundling multiple types of equipment together.
Availability: Average lead times for pressure vessels are generally high between 18 - 26 weeks for Small and Medium Sized Vessels and 60 weeks and more for the Heavy Wall Pressure Vessels.
Quality: High pressure and temperature, combined with the variety of chemicals handled in pressure vessels, make these some of the most critical equipment in the industry. Thus, a key objective for this category is to maintain reliability and availability at the highest levels.
Small and Medium Sized Pressure Vessels: A large number of manufacturers exist globally, and the low cost-base of Asia based manufacturers threatens to lower margins. The ease of developing the know-how of manufacturing these vessels has intensified competition. There is very little spend on spare parts bought from pressure vessel manufacturers, and generally no existing contractual commitments, therefore, switching costs are relatively low.
Volume Forecasting: Take a 2 - 3 year view of demand needs in order to develop a comprehensive schedule that allows for effective supply planning for the long lead items. This will enable your “preferred manufacturers” to plan capacity expansions in line with requirements.
Supplier Development: Encourage the development of local manufacturers by improving their access to rolled carbon steel sheets, which are the primary raw material for pressure vessels
Pricing: Volume based price reductions can be negotiated as a part of a frame agreement. Additional pricing levers such as “early payment discount” could also be explored.