US gas-turbine orders in 2014 20% of global total; best year for nation since 2002

Mark Axford, the Houston-based consultant considered by many to be the leading independent expert on gas-turbine (GT) markets, predicted US orders for GTs would drop by 10% in 2015 from the slightly more than 10 GW purchased in 2014. Worldwide, he expects orders will be up 10% from the nearly 52 GW booked last year. The Eurozone’s lingering recession is a significant factor in the downward pressure on international orders (less than 200 MW in 2014).

Axford 1-3The Axford Report presented at each WTUI meeting is highly regarded by conference attendees and always attracts a large audience. Axford’s perspective and data help guide business decisions made by the 200 equipment and services providers that regularly participate in the world’s largest meeting dedicated to GE aero engines in land and marine applications.

The market analyst began by comparing his 2014 predictions to actuals. His AxSpectations were US orders would be up by 15% over 2013, worldwide down by 5%. The market surge he predicted for 2013 showed up in 2014 with orders from America up by 75% year over year; however, GT orders globally were down by 15%. “I got the direction right but the magnitude wrong. . .this is never easy,” Axford said. The US “fraction of the action” was 20% of world orders, the most since 2002 when it was 26%.

Geographically, 30% of 2014 orders were from Asia, 27% from the Middle East, and 24% from North America (Fig 1). No surprise with Asia and the Middle East leading the purchasing activity, even with a nearly 5 GW drop in orders from China to 3000 MW in 2014. Africa, which finished third in 2013 sales with a 20% market share, dropped back to fifth place last year with slightly more than 6% of the order book. Recall that Algeria purchased lion’s share of Africa’s GT capacity in 2013, ordering 9800 MW. Last year, it bought 1745 MW.

OEM market share. Globally in 2014, 78% of the units larger than 10 MW were ordered from GE and Siemens, with the split in round numbers at 49/29 favoring the former. GE’s share was its best competitive performance since 2002. Mitsubishi-Hitachi was third with a 12% market share.

Axford breaks out the aero stats for WTUI attendees. In North America, 2014 orders totaled 938 MW, he told the group, with 91% of the order book going to GE. More than half of the total was purchased by the oil and gas industry (horsepower of mechanical-drive units was converted to megawatts for the purposes of this analysis). Worldwide, aero orders in 2014 totaled nearly 6800 MW, down from 8000 MW a year earlier (Fig 2). GE garnered 72% of the total aero business globally.

Axford 2, 3

Fig 3 illustrates that aero orders outside North America were dominated by sales of LM2500 and LM6000 engines. Those models also were favored by North American customers. Global sales of the popular LM6000 totaled 35 engines in 2014; four will be installed in North America. Egypt led all customers with 14 orders; it also ordered 20 TM2500s. More than 1000 LM6000s have been ordered since 1990; peak year was 2000, when nearly 175 were bought.

Sales of the LMS100 dropped to two units in 2014—one for service in America, the other in Argentina. Fleet now totals 64 machines (45 in the US) on order, being installed, or operating. Base rating for this model is now 110 MW, was 100 MW. Industry sources have told the editors that the premium price for the LMS100 might make it unattractive to at least some international prospects.

Aeros versus frames. Fig 4 shows that the split between aeros and frames has remained relatively constant for the last several years, with the latter capturing 84% to 88% of the business. But aeros are the clear choice among users for gas turbines rated between 18 and 65 MW, which includes all the LM engines supported by WTUI (Fig 5).

Axford 4, 5

In North America, frame orders totaled more than 11,000 MW, split about 800 MW each for Canada and Mexico and balance US. GE booked 55% of the business, Mitsubishi-Hitachi 23%, and Siemens 19%. Nearly 80% of the orders are for GTs larger than 175 MW installed in combined cycles.

Simple cycle versus combined cycle. More than three-quarters of the gas turbines ordered last year for US service will serve in combined cycles, the balance in simple-cycle applications. This is significantly higher than the 64% averaged over the last six years, based on Axford’s numbers.

Going back further in time, the market split was closer to 50/50, the consultant said. Perhaps the ability of the latest combined cycles to start faster because of equipment design improvements and better startup procedures make owner/operators more inclined to cycle these units and compete against simple-cycle engines for some business that in the past was almost exclusively theirs.

Economic climate, observations. Axford closes his annual presentations with a look at economic and market trends. Here are some takeaways from the 2015 Western Turbine meeting:

      • Euro was $1.38 during the 2014 WTUI meeting, $1.05 this year. A falling Euro boosts the US economy in general but hurts exports of machinery—like LM6000s.

      • Oil prices fell 60% in the nine months before the 25th anniversary conference. Axford quoted a news source as saying wells are being drilled but not completed; also, reserves remain very significant. He doesn’t expect to see US crude prices above about $60/bbl in 2015.

      • Europe still is in recession. Power demand is soft and orders for GTs will reflect that in 2015. Germany is retiring nuclear generating stations and adding low-cost coal-fired units—go figure.

      • Canada is being clobbered by falling oil prices, and currency valued at 78 US cents per Canadian dollar (March 2015).

      • In Mexico, energy reforms are working but the pace of change has slowed with the decline in oil and gas prices. The peso is off by about 15% with respect to the US dollar since July 2014.

      • In Asia, LNG prices, linked to crude are down sharply: $19 million Btu in 2014, about $11 today. This will stimulate GT orders.

      • In Africa, Nigeria has huge potential if the independent power movement is successful.

      • US exports of LNG are expected to raise the prices of domestic gas supply by 15-25 cents/million Btu.

      • If the Siberian pipeline to China happens, it will require the equivalent of 4 GW of GT additions for compression service. While the selling price of the gas has not been announced, most experts predict about $10/million Btu.

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