A valve is a mechanical device used to control the flow of fluids and pressure in a piping system. Valves are used extensively in the oil & gas industry, across the entire value chain. Major functions of the valve are:
- Starting/stopping flow
- Regulating flow volume
- Controlling flow direction & preventing reverse flow
- Controlling pressure
The working principle of the valve is based on adjusting the position of the closure member inside the body of the valve. This adjustment may be done manually or automatically, depending on the application and valve design. Valve body is a major component of the valve, as it holds all the parts together. Valve bodies could be made of various grades of materials and can be cast or forged, largely driven by application requirements. Other parts include: valve bonnet, trim, disk, seat and stem.
Valves come in a wide variety of designs for different applications. Some examples of valve types are Ball, Gate, Choke, Butterfly, Check, Globe, Plug and Needle valves. Valves could also be manual and automatic. Manual Valves are operated by means of a manually controlled handwheel/wrench or an on/off the actuator. Ball, Gate, Globe, Butterfly and Plug valves are all examples of manual valves. Automatic Valves are operated automatically by means of valve design and fluid conditions. An example is a Check Valve that opens with the forward flow and closes with reverse flow.
In the upstream segment, valves are used to control the flow of oil, gas and water in a piping system. Blow-out preventers and Xmass trees include valves as well. In downstream applications, valves are used for distillation, hydrotreating, catalytic reforming, fluidized catalytic cracking and gas plants.
Valves are typically classified based on their mechanical design. Some common valve designs are:
- Ball Valve: A valve with a ball-shaped disk with a hole through it, which controls the flow. Ball valves are extensively used in pipelines and as shutoff valves in refineries and petrochemical plants.
- Gate Valve: A valve that opens and closes by means of a wedge or parallel-sided slab situated between two fixed seating surfaces. Gate valves are often used when a straight-line flow with minimum restriction is desired. Generally, when in use, gate valves are either fully closed or fully open.
- Butterfly Valve: A valve consisting of a disc which is positioned in the centre of the pipe. Rotating the disc by 90° opens and closes the valve. Butterfly valves have an additional mechanism whereby the hand-wheel is connected to the rotating disc via gears, using the principle of a gearbox.
- Globe Valve: A valve consisting of a flat disc or conical plug sealing on a seat which is usually parallel to the flow axis. Due to their flow profile, globe valves are often used for applications in refineries and petrochemical plants requiring to start, stop and regulate flow.
- Plug Valve: A valve with cylindrical or conically-tapered "plugs" which can be rotated 90Â° to turn the Valve on or off. Plug valves are mostly used for on / off cases, such as shutoff valves. Plug valves are similar to Ball valves in the way it operates.
- Needle Valve: A valve having a small port and a tapered, needlepoint plug. These types of valves allow precise and accurate regulation of flow and typically used in flow metering applications.
- Double-block-and-bleed (DBB) Valve: According to API 6D the meaning of double block-and-bleed valve is defined as “single valve with two seating surfaces that, in the closed position, provides a seal against pressure from both ends of the valve, with a means of venting/bleeding the cavity between the seating surfaces.”
- Check Valve: A valve that allows fluid to flow through it in one direction only. Check valves are typically used in applications requiring prevention of backflow and mainly used in refineries and petrochemical plants.
- Shutdown Valve (ESDV or SDV): Sometimes referred to as ESDV( emergency shutdown valve), is a ball valve with an actuation mechanism that stops the liquids flow in the piping system. The actuation mechanism could be hydraulic, electric, pneumatic or a combination thereof
- Control Valves - control valves are used to regulate the flow of liquids in a piping system, based on commands and signals sent by central control systems. The role of control valves is very critical, in particular in process plants, whereby the are many different processes happening simultaneously and the output and predictability of each individual process are highly critical, to ensure desired operating capabilities ere achieved.
Among the various types of valves, ball valves are the most widely used. The oil & gas sector remains a major user of the ball, gate, globe and check valves, which are utilized in most refineries and pipelines.
Risks & Opportunities
Risks & Opportunities
- 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.
- On average, it takes 4 weeks for testing and packaging, 4 weeks for machining, 8-10 weeks for raw materials and 2-4 weeks for engineering making a minimum lead time of 18 - 20 weeks of lead time, given there are no backlogs. Shall you see lead times faster than 18 - 20 weeks for made-to-order valves, you should raise a red flag and question how this is achieved.
- Working with smaller manufacturers in Italy and France, who has control over a large portion of the value chain and has many processes in-house, represents a significant opportunity for better prices and faster lead times.
Supply & Demand Dynamics
Supply & Demand Dynamics
Major worldwide demand drivers for valves are:
- Oil & Gas pipelines & transmission infrastructure
- Demand for petrochemical products in Africa (paints, polymers, plastics additives)
- Municipal, chemical and mining industries in the Asia Pacific
- New and more rigorous emission regulations
Asia Pacific, Europe, and North America are the largest markets by size.
In the Middle East, the drive to become a provider of final products and extract the maximum value from the hydrocarbon cycle should result in the increased demand for valves, as more refineries, pipelines and process facilities are required. In addition, manufacturing, process industries, and desalination plants would provide a boost to the demand for valves in the Middle East, as well.
Suppliers from Europe and the United States are the major players, with growing competition emerging markets such as India and China. The market is fragmented with the top 10 manufacturers accounting for around 50% of the cumulative market share. Major suppliers operating on a global scale are Pentair, Flowserve, Emerson, FMC, Crane Co, Cameroon, Kitz, AVK Group, Walworth and ITT Industries.
Italy and France are known as a global hub of valve manufacturing with a number of family-owned and smaller-sized manufacturers, such as Galperti, Dafram, ZaVeRo, Erreesse, Della Foglia, Boney Forge, SRI, Valvitalia and many more.
Lead times to manufacture valves vary from as low as 16 weeks to 70 weeks and largely depend on manufacture, type, size and class of valve and materials used. E.g. a standard 10" ball valve may take 18 weeks to manufacture, but a large size valve with Inconel and control system, , may take 70 weeks.
Cost & Price Analysis
Cost & Price Analysis
Industry net margins average at around 20% in high times and circa 4% during a lower oil price environment. As raw materials prices decline, margins witnessed a noticeable recovery in 2017 and 2018. Prices and lead time are stable and expected to stay as is till the end of 2020, although exotic products expected to go up, due to escalation of Nickel prices, by almost 30% in the last 6 months.
Major cost drivers are as below. The direct cost of materials constitutes up to 50% of the cost of valves, on average.
- Steel and metal prices directly impact the cost basis. In particular, carbon steel, stainless steel, corrosion resistance alloys ( CRA) and nickel.
- Manufacturing process robust manufacturing processes and forging is a significant cost driver ( the most important cost driver), in particular for higher-end equipment, HP/HT and sour applications.
- Capacity utilization. this element, being a variable cost, is a significant cost contributor.
- Painting and Coating - Painting and Coating materials could be a significant cost contributor and heavily driven by commodity prices.
Total Cost of Ownership
Total Cost of Ownership
The procurement of valves is always driven by technical requirements that are regulated by common standards. All manufacturers are obliged to comply with the standards. Hence, the manufacturing process is very prescriptive. What that means is most of the valves could be treated as commodities, unless special applications and engineered valves are required.
By large, valves are procured as part of bigger projects, which are delivered by an EPC company on a turnkey/lump sum basis. Yet, with more mature assets a larger number of valves is bought directly by oil companies. Although valves are classified by standards, many operators tend to go beyond the industry standards and over-specify the requirements, which is not always justifiable and additional costs that could have been avoided.
Important factors to consider when looking at the total cost of ownership:
- Suppliers track record and traceability of materials, equipment and manufacturing process is of utmost importance
- Evaluate your existing stock of what could be refurbished and reused
- Access to the local manufacturing facility to reduce shipping costs, which are significant due to the weight of the valves