The Southwest Market Region Beats 2006 Forecast and Sets the Stage for Even Stronger Spending in 2007

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Researched by Industrial Info Resources (Sugar Land, Texas). The Southwest market region is home to more Refining, Oil & Gas and Petrochemical Industry than any other region in the United States. At this time last year, Industrial Info reported over 600 capital and maintenance projects planned for 2006 in the region with a total investment value (TIV) of over $26 billion. With the year three quarters complete, a closer look reveals that spending has so far outpaced the original forecast with an estimated $28.2 billion. This increase comes even after measuring project cancellations and factoring in Gap Measurement in forecast versus actual spending. Gap Measurement refers to a method of benchmarking active capital projects and capital spending forecasts against projects that have been cancelled, delayed or put on hold on a monthly basis.

Click on the image at right to view a graph showing the Gap measurement analysis through 3Q06 for the Southwest market region.

Considering the strength of the Southwest market region this year, and the confidence in the overall U.S. economy, spending for the upcoming year is overwhelmingly positive for the region. Industrial Info is currently tracking over 740 capital and maintenance projects planned to kick off in the region during 2007 with a substantial increase in the TIV at over $47 billion. The dramatic increase in total spending next year can partly be attributed to nearly a dozen projects valued at or more than one billion dollars each that are forecast to begin construction in 2007. Another fifteen projects are each valued at $400 million or more. These huge projects, combined with the increase in overall project activity, set the stage for equipment and service providers plus engineering firms to enjoy great opportunities in the upcoming year.

The Power Industry makes up nearly half of the spending forecast with $20.6 billion for the construction of several major unit additions in Texas and Oklahoma. The single largest project is a grassroot coal gasification plant in Louisiana tagged at nearly $5 billion. Beyond this huge project, spending in the Alternative Fuels Industry within the region will reach an all-time high with over $700 million invested in ethanol, biodiesel and related product aimed at replacing or supplementing conventional fuels.

The drop in the cost of crude over the last few months is expected be sustained over the winter months and the inevitable increase next spring won’t likely create any significant upset. Most producers were successful in passing along the increased cost of energy and feedstock related to the volatile cost of crude oil with price increases over the past year. A significant level of optimism exist among most plant owners in the region that next year will be another strong year of investments as planning for 2007 capital and maintenance budgets intensify.

Industrial Info Resources (IIR) is a Marketing Information Service company that has been doing business for over 23 years. IIR is respected as the leader in providing comprehensive market intelligence pertaining to the industrial processing, heavy manufacturing, and energy-related industries throughout the world.