Engineering Stocks to Play Oil Prices (Barrons - Chennai Engineering Colleges)

We believe the investment cycle remains intact. In our initial Under Construction report, we analyze U.S. petrochemical development where we expect over $20 billion to be invested between 2012 and 2017.

Chennai Engineering Colleges

Almost 20 million tonnes (metric tons) of U.S. capacity additions by major petrochemical manufacturers have been announced equating to around 70% growth in U.S. capacity over the next five years. We estimate 85% of additions could go on line between 2016 and 2017. In turn, we expect front-end engineering services between 2012 and 2014 should afford multiple engineering-and-construction (E&C) opportunities for higher-margin work followed by higher-revenue engineering, procurement and construction awards between 2014 and 2016.

Graduate Engineering

In addition to direct petrochemical investment, we expect E&C companies to benefit from billions of dollars invested in ancillary gas pipeline, processing and storage infrastructure that should be necessary to transport feedstock from abundant natural-gas regions to petrochemicals facilities. Although infrastructure should be developed simultaneously, we expect gas infrastructure construction activity to accelerate between 2012 and 2017.

U.S. natural-gas prices continue to fall while crude prices remain at investible levels. Both petrochemical and natural-gas export development announcements have accelerated as global natural-gas prices remain well above U.S. natural-gas prices. The crude oil-to-gas ratio remains at all-time highs exceeding 40-1, considerably higher than the 7-1 ratio considered favorable for U.S. petrochemical investment. First mover advantages and reasonable prices for input materials such as aluminum and steel should accommodate the approval of final investment decisions.