If the Covid-19 pandemic has done anything – other than the overall disruption of the global capital projects industry – it has introduced a brand-new playing field.According to Nekkhil Mishra, regional director Emea at Independent Project Analysis (IPA), the pandemic made investments in renewables relatively more attractive than traditional oil and gas relatively overnight.“The investment market has f lipped,” he said during a recent webinar. “Renewables are now safe and boring, while oil and gas projects are more high risk.”Whilst the trend was toward renewables it was important to point out, he said, that these projects had light industrial trends. “In other words, the projects tend to be smaller, more dispersed and less engineering intensive. They also have a much lower return on investment.”He said while current sources of energy would be around for quite a while and investment in oil and gas would continue, it would be significantly less than what had been seen in the past.“We are seeing some spending in certain parts of the world, but overall there is delayed capital investment, especially around major expansions and greenfield projects.”He said with the focus on renewables, now more than ever uncertainty would prevail. “The transitions that are taking place require a lot of government support and legislation and the jury is still out on how quickly this will transpire. We do know that new companies and new markets are an inevitable outcome of the lower complexity projects that we will be seeing.”Mishra said this was because as the complexity level of projects dropped so did the entry level, making it probable that new players would be entering the market.“Going forward the competitive advantage might no longer be in superior project execution, but rather in the supply chain, manufacturing or in the business model itself.”According to Mishra, project authorisations had plateaued in the past four years. “We have seen the biggest focus has been on cost. In the supply chain, it would have been felt. There has been a single-minded focus to reduce cost, and a lot of benchmarking has been introduced to ensure that the scopes are correct and targets are met from the get-go.”Mishra said in light of the ongoing pandemic the focus for projects going forward would remain on cost, but in light of lower productivity being experienced around the world, this would be even more challenging now than has been the case.“Few companies have gotten better at delivering low cost, but the challenges we now face make it even harder. There is going to be more competition than ever before and the supply disruptions and delays are still far from over.”
