A pump is a machine used to move liquid through a piping system and to raise the pressure of the liquid. A pump can be further defined as a machine that uses several energy transformations to increase the pressure of a liquid. Pumps can be classified according to their function, their conditions of service, materials of construction, etc. The pump industry trade association is the Hydraulic Institute, which has classified pumps as shown below:
- Positive Displacement
- Piston Plunger
- Single Rotar
- Flex. Member
- Multi Rotar
- Axial Flow
- Single Stage
- Multi Stage
- Mixed Flow Radial Flow
- Single Stage
- Double Stage
- Single Stage
- Multi Stage
- Special Effect
- Hydraulic Ram
- Electro Magnetic
- Gas Lift
- Reversible Centrifugal
There are two broad classes of pumps:
In a kinetic pump, energy is continuously added to the liquid to increase its velocity. When the liquid velocity is subsequently reduced, this produces a pressure increase. Although there are several special pumps that fall into this classification, for the most part this classification consists of centrifugal pumps. A centrifugal pump stripped of all nonessential details, consists of an impeller attached to and rotating with the shaft, and a casing that encloses the impeller. Liquid is forced into the inlet side of the pump casing atmospheric pressure or some upstream pressure. As the impeller rotates, liquid moves towards the discharge side of the pump. This creates a void or reduced pressure area at the impeller inlet. The pressure at the pump casing inlet, which is higher than this reduced pressure at the impeller inlet, forces additional liquid into the impeller to fill the void. Centrifugal pumps usually have fewer moving pumps, have no check valves associated with the pumps, produce minimal pressure pulsations, do not have rubbing contact with the pump rotor, and are not subject to the fatigue loading of bearings and seals that the periodic aspect of positive displacement pumps produce.
In a positive displacement pump, energy is periodically added to the liquid by the direct application of a force to one or more movable volumes of liquid. This causes an increase in pressure up to the value required to move the liquid through ports in the discharge line. The important points here are that the energy addition is periodic (i.e. not continuous) and that there is a direct application of force to the liquid.
The preference for a centrifugal pump over a positive displacement pump is not always the case, and, in fact, there are certain applications criteria that demand the use of a positive displacement pump. The following are some key application criteria that would lead to the selection of a positive displacement pump over a centrifugal pump:
- High viscosity
- High pressure
- Low flow
- High efficiency
- Low velocity
- Low shear
- Fragile solids handling capability
- Sealless pumping
- Accurate, repeatable flow measurement
- Constant flow/variable system pressure
- Two-phase flow
The ability to pump viscous liquids is one of the most important attributes of positive displacement pumps.
Risks & Opportunities
- Capacity is likely to overtake demand in 2017, as major pump manufacturers are reluctant to add additional capacity, fearing the current decline in oil prices will be prolonged and that economic instability could lead to a drop in orders. This will pull down utilization rates, and as a result manufacturers will be willing to make concessions to gain orders.
- Test manufacturers lead times to gauge their price flexibility. If a manufacturer is quoting a short lead time, they are likely to have enough spare capacity and to be keen to fill it, and with a large order, be willing to offer discounts. Lead times are dependent upon the size of the project and its complexity.
- Highly engineered pumps with complex mechanical sealing systems and large motors have longer lead times when compared to centrifugal ANSI pumps or hydraulic pumps. One of the major factors affecting lead times is the quality of the castings supplied by foundries and the delay in delivery times by sub-suppliers such as motor manufacturers. The closure of a number of foundries in Europe due to a reduction in margins has further affected the lead times of manufacturers. It's a buyers market so avoid entering into long-term contracts based on current prices. If buying pumps manufactured in developing countries, e.g. China, institute quality surveillance measures to ensure that the work is being performed to specification. Current feedback is that quality is not reliable unless the buyer maintains a presence.
- With an increased focus on climate change consider opening discussions with manufacturers on energy efficiency improvements that could reduce costs and enable you to benefit from the positive publicity resulting from such an effort.
- A good specification helps to ensure that every pump is sized correctly to meet the job in hand. Pump manufacturers are increasingly realising that a typical real-world pump sees many different flow conditions over its lifetime or even in the course of a working day. The solution is to redesign the pump to give a flatter efficiency curve, even if this means some reduction in performance at the best efficiency point.
Supply & Demand Dynamics
Pumps are basic components used in a wide variety of process, utility and construction related settings. As a result, demand for pumps is determined by a broad array of variables, most of which are beyond the direct control of pump manufacturers. The demand for pumps tends to be highly cyclical and dependent upon the general economic conditions, which are related to energy prices stimulating capital investment. Primarily, customers are upstream and downstream oil and gas. In addition, a host of other microeconomic variables affect pump supply and demand. These include alternative energy utilisation and pricing patterns, developments in fluid handling pumps and related process control technologies, environmental regulations and various others.
Pump manufacturers, like any other supplier of equipment, typically have a backlog of orders to work through at the time an economic downturn is recognised. At the other extreme, energy-based industries tend to defer capital spending during economic recoveries until their own markets have picked up, slack capacity has been absorbed and available evidence points to the likelihood of a sustained expansion.
Trends in production and consumption of oil and gas are therefore important in determining the potential demand for pumps. Oil and gas is an important process industry in its own right, and a major application for pumps. The development of refining operations will result in increased demand for pumps in the downstream sector of the Middle East. Saudi Arabia is a significant growth area for the pump market in the oil and gas industry, along with Iraq and Iran.
The most commonly used pumps in the oil and gas industry are centrifugal pumps, many being engineered according to customer specifications. There is an increase in the adoption of positive displacement pumps due to the higher viscosity of crude oil. This makes positive displacement pumps, particularly progressive cavity pumps, ideal in this market. Multi-phase applications across the world are also likely to result in increased demand for positive displacement pumps, particularly twin screw pumps.
Centrifugal pumps take around 73% of the market, while positive displacement pumps account for 27%. The biggest growth among pump types is expected to be in seal-less magnetically coupled and canned-motor pumps, most of which are centrifugal. Tightening regulations on fugitive emissions in Europe, USA and Japan, will increase sales of seal-less pumps by 10% during the next five-year period.
Around 800 firms manufacture fluid handling pump products throughout the world, but only about 50 or so are considered significant from a global perspective, and virtually all of these are headquartered in developed countries. Concentration is low to moderate for all pump categories with positive displacement being the most concentrated. Centrifugal pumps have a balanced list of top suppliers and a long list of smaller players capable of providing price competition.
Top Suppliers all types of pumps
Key markets in the Middle East are in Saudi Arabia, Iraq and Iran where there are large oil and gas projects, both greenfield and brownfield. Key challenges are cost-competitiveness and a consolidated customer base. Asia Pacific, Eastern Europe and Latin America are main production facilities as they provide skilled labour, low cost raw material and low production costs, allowing them to remain price competitive. Oil companies in the Middle East generally prefer in-house maintenance, whereas end users in Europe and North America generally have partnerships with service companies.
Threat of New Entrants
- Brand Identity, Experience and track record
- Standards and Regulations,
- Capital requirements
Bargaining Power of Seller
- Number of Suppliers and Size
- Importance of volume to supplier
- Cost of changing (after sales)
Rivalry Among Existing Competitors
- Number of competitors
- Quality and price differences
- Low customer loyalty
- Number of buyers, size of order
- Low loyalty
- Low switching costs
- Cheaper alternatives
- Cost of change
Pumps are positioned in the LEVERAGE segment of the portfolio matrix. Pumps can easily be purchased from different suppliers. Purchasing approaches to consider here include using your full purchasing power, substituting products or suppliers, and placing high-volume orders.
Cost & Price Analysis
Given the non-differentiated nature of a broad segment of the pump product continuum, pricing is a critical determinant of demand and is usually the dominant purchasing criterion. A number of factors enter into the costs of pumps. These include trends in local inflation, pricing patterns for other industrial products (especially related or competitive products), intensity of local demand, local availability of supplies, raw material prices (steel, alloys, plastics, etc.) and any number of others.
But because these elements are so widely traded and because so many of the major pump producers have international production and marketing operations, pump prices tend to coalesce at or near a global standard for any given product type and level of quality. As the global economy slowly recovers and projects in oil and gas are revived after the economic downturn and fall in oil prices, the majority of pump manufacturers are expected to increase pump prices to boost their margins.
Below are appoximate breakdown of costs for pumps.
Value Chain Analysis
EPCs are the most important element in the value chain and have become more important over the years as oil and gas companies outsource their activities. This is due to minimize risk, avoid distraction from core activities and also because the increasing complexity of projects has led to a situation where many oil and gas companies do not have the skills in-house. Direct sales are still an important portion of the market, with some lower complexity projects managed by the oil and gas companies themselves. Distributor sales make up a small portion of the market, mainly for spares. Most end users in the Middle East have in-house service capability, but the trend is towards establishing partnerships with service companies.
Bottlenecks in the value chain are typically:
- Availability of Quality raw material
- Quality of the Casting
- Motor, Seal delivery time
- Factory Capacity
Total Cost of Ownership
- Materials are the biggest contributor to the overall cost of the pump. The price of castings and the motor account for 75% of the costs of a centrifugal pump. The use of materials such as duplex and super duplex, have been steadily increasing over the past several years till 2016, when prices fell sharply. The increase in the overall cost of the pump coupled with high price sensitivity in the market has led to significant pressure on the margins of pump manufacturers in 2017 and 2018.
- For standard run-of-the-mill pumps, the biggest single challenge to manufacturers is to cut the total cost of ownership over a pump's lifetime. There are many ways to achieve this, but typical approaches are compliance with international standards; reducing spares inventories, rationalizing pump families and using common parts across a range of pumps; designing for greater reliability and easier servicing; improving energy efficiency; and more involvement with the customer in specifying, installing and operating pumps.
- For the end user, the benefit is a reduction in the estimated 85% of the pump's lifetime cost that is spent on operation and maintenance (the initial purchase price accounts for around 5%, and installation for a further 10%). For manufacturers, the payback is increased market share and customer loyalty.
- Just as important is the rationalization of complete pump ranges and an increase in the versatility of individual designs. Thicker shafts, better mechanical seals and ceramic bearings are typical of the measures being used to increase pump reliability, both in normal operation and under abnormal conditions such as dry running. Many pump manufacturers are now also offer electronic monitoring systems that detect dry running and shut down the pump before the bearings can be damaged. Another reliability strategy that also cuts capital and installation costs is to do away with maintenance-hungry external cooling and lubricating systems. Alternatives to cooling water and lubricating oil include product-lubricated ceramic bearings, and air cooling for high-temperature pumps. Overall cost savings for a single pump can be as high as $10,000/year.
EPC contractors form a significant part of the value chain due to the complexity of projects in the oil and gas industry. The primary reason for the predominance of EPCs is the vast scale of projects in the oil and gas industry. Direct sales also has a significant portion of the value chain due to the highly engineered nature of the pumps used within the oil and gas industry.
The biggest potential for cost savings comes from buying and installing only enough pumping capacity to meet an asset's needs. This means installing the correct number of units as well as sizing individual pumps correctly. Pump manufacturers have realized that by helping companies save money, they can generate loyalty and guarantee future sales.
An oil company or contractor may specify, say, three operating pumps plus a spare, when two somewhat larger pumps and a spare would do the job. The latter costs less than the former, but more importantly the cost of installation and maintenance over the lifetime of the pumps is considerably lower. Individual pumps are also commonly oversized because extra capacity creeps into each stage of the engineering design process. First, the client adds a safety factor of 15% to the calculated design flow-rate. Next, they add a further 20% to cover future expansion.
Finally, after the pump manufacturer has supplied the next-largest pump size, the asset ends up with a pump that is considerably oversized from the moment it is installed. Over-sizing leads to a drop in the pump's efficiency. It is also likely to increase vibration and shorten the life of seals and bearings, if the pump has not been specifically designed to span a wide range of flow rates. As a result, manufacturers are making efforts to become more closely involved in their customers' processes for specifying pumps. This partnering approach can cut both maintenance and capital costs.
- Basic pump technology is well established and understood, and the industry is generally not considered technology-intensive. Innovation does occur, however, it is primarily on an evolutionary rather than revolutionary basis, with incremental increases in the durability, performance, environmental soundness and overall quality of pumps. Thus, most innovation occurs along such parameters as materials of construction (specialty metal alloys, polymers, composites, etc.), product design (e.g. portable/downsized and environmentally friendly pumps) and productivity enhancement (for example, variable speed pumps that can enhance energy efficiency).
- The majority of pump failures are caused by erosion and corrosion, a major focus of product innovation in the pump industry over years, this has led to the development of stronger, longer lasting and more corrosion and wear-resistant pump materials. Traditionally, pumps have been constructed from common metals and alloys such as cast iron and carbon steel. But demands for higher quality and longer lasting pumps have resulted in increased use of specialty metal alloys like titanium, zirconium, nickel-based, as well as non-metallic materials such as rubber, plastics, advanced composites and high technology ceramics and glass. These materials are better suited for handling acids and other hazardous materials, as well as viscous or high-temperature liquids.
- In additional, elastomers both natural and manmade are increasingly used as pump lining materials, which offer superior resistance to corrosive substances.
- Pump manufactures have also sought innovations in designs and performance as a means of differentiating their offerings to maximize competitiveness in mature, cyclical markets. Performance innovations that have occurred include variable speed, magnetic drive, canned motor and self-lubricating pumps. Variable speed pumps are based upon advanced electronic technology, utilising a sensor that sends signals to a microchip located in the pump motor when the flow rated needs to be adjusted. By varying the speed flow according to on-stream flow requirements as opposed to allowing the pump to run at single speed, energy efficiency is substantially enhanced, by as much as 40 per cent.
- Magnetic drive and canned motor pumps are sealless industrial types, which can be used in place of pumps with packing or mechanical seals to eliminate leaks and reduce costs.