Engineering, procurement, and construction (EPC) and process technology licensing companies are an integral part of the oil and gas and chemical industries. These players help upstream, midstream, LNG, refining, and chemical and petrochemical operators conceptualize, evaluate, design and develop, construct, commission, and optimize a wide range of capital projects and operating assets.
EPC companies and process technology licensing firms face a wide range of challenges. These challenges impact their ability to deliver successful projects and navigate the evolving landscape of the oil, gas, and chemical industries. Five key challenges impacting this sector include the following:
- Capital spending dependency: EPC and technology licensing companies closely follow the capital spending plans of operating companies. Their fortunes are tied to these investment decisions, which can be volatile due to market conditions and economic fluctuations.
- Overcapacity and fragmentation: The EPC sector suffers from overcapacity and fragmentation. The proliferation of Asian players with access to cost-effective local talent has led to intense competition. As a result, pricing discipline and contracting rigor have eroded as companies prioritize winning contracts.
- Commoditization of technologies: As patents on key technologies expire, process technology licensors face challenges from me-too competitors. The commoditization of intellectual property impacts their differentiation and competitive edge.
- Modularization, standardization, and digitalization: Operating companies demand modularization, standardization, and digitalization to optimize project execution. These trends impact the scope, budget, and delivery of capital projects. EPCs and licensors must adapt to these changing requirements.
- Energy Transition and decarbonization: The shift toward energy transition, decarbonization, and environmental, social, and governance (ESG) goals has prompted EPCs and licensors to explore new areas. Projects related to carbon capture and storage (CCS/CCUS), biofuels, hydrogen, energy storage, and renewable power require specialized expertise.
In summary, EPCs and process technology licensors face multifaceted challenges, but they also have opportunities to innovate, collaborate, and adapt to industry shifts. Integrating technology, improving collaboration, and focusing on quality deliverables are essential for success in this dynamic landscape.
How ADI helps EPC and licensing companies
Despite these challenges, EPCs and licensors can thrive by employing various strategies. By addressing these challenges and utilizing these strategies, EPCs and licensors can secure growth, profitability, and market share in the ever-evolving industrial landscape. A few approaches are listed below, and ADI Analytics can help EPCs and process technology licensors with each of these strategies:
- Market research: Conduct in-depth research to understand market trends, competitor activity, and regulatory landscapes.
- Market exploration: Identify high-growth markets in adjacent sectors or geographically.
- Innovation: Develop cutting-edge technologies that address industry needs and improve efficiency.
- Strategic partnerships: Collaborate with competitors or customers/operators to share resources and expertise.
- Customer segmentation: Identify customer segments with high project spending potential and specific technology needs.
- Customer focus: Conduct voice-of-customer research to understand client needs and tailor offerings accordingly.
- Operational excellence: Optimize project execution and cost structures to maximize profitability.
- Aftermarket services: Expand into aftermarket services like maintenance, training, and optimization solutions to tap into operational expense budgets of operators.
Relevant examples
A few examples of our work in the EPC and licensing are presented here. Please contact us to learn more about how ADI can help you.
Growth and M&A strategy
- Supported a major EPC merger by identifying best practices for post-merger organizational design through primary research and analysis of past mergers and experiences of key competitors.
- Developed a growth strategy for a Middle Eastern EPC by identifying over 30 high-potential markets in adjacent sectors. A rigorous screening process was established based on factors like growth rate, market size, key customer alignment, competitive landscape, and client fit.
Transaction due diligence
- Led the due diligence process for a leading process technology licensor, evaluating a niche licensor in the gas processing market. This included assessing market size and share, customer satisfaction, and growth potential.
- Performed due diligence for a private equity investor on a prominent catalyst and process technology vendor.
- Spearheaded due diligence for a private equity firm considering a specialty EPC focused on electric vehicle charging and power supply infrastructure.
Market research
- ADI Analytics assessed the electric vehicle supply equipment (EVSE) market for a client.
- Developed in-depth market research to guide an Asian EPC's sales efforts. This involved prioritizing 20 global refining independents based on capital spending budgets, historical spending patterns, regional presence, asset configurations, policy impacts, and analysis of executive investor guidance.
- Supported a modular process unit fabricator by analyzing and modeling the market opportunity for modularization, standardized unit offerings, and offshore fabrication.
- Estimated and forecasted capital spending for a large power and electricity EPC, covering oil & gas, chemicals & petrochemicals, and sub-segments, for a 10-year horizon to support their diversification strategy.
Voice-of-customer
- Conducted a global survey of ~100 licensees of a refining process technology to assess customer satisfaction, pain points, unmet needs, and growth opportunities for the licensor.
- Completed a voice-of-customer research project by interviewing ~40 operational leaders at refining and petrochemical plants globally to identify market opportunities for third-party technical services offered by a leading EPC.
- Led a voice-of-customer study to test market demand for a new hypercompressor plunger reconditioning facility on the U.S. Gulf Coast for a compressor service provider.
Contracting intelligence
- Evaluated offshore brownfield asset development contracts to develop best practices and competitive insights on evolving contractual structures for a leading offshore EPC firm.
- Segmented the total addressable market for the pipeline, gas processing, NGL fractionation, Permian exports, and midstream EPC market by type of contracting structure (e.g., lump sum vs reimbursable).
Competitive intelligence
- Benchmarked a U.S. Gulf Coast EPC specializing in electrical systems for offshore platforms against competitors across 25 key metrics. Customer feedback was used to define core strengths and capabilities, enabling the development of focused service offerings.
- Assessed the competitive landscape for process technology offerings to support an Asian EPC's entry into the U.S. chemicals and petrochemicals markets.
Technology assessment
- Benchmarked the cost and economic viability of various natural gas monetization options for a large EPC to inform their strategic planning efforts.
- Evaluated small-scale LNG technologies and their long-term market share and other aspects for a specialized EPC to develop targeted offerings.
Access our thinking
ADI is a thought leader in the EPC and licensing industry. Access our latest thinking including blog posts, white papers, conference presentations, and videos on the ADI insights section.
