EPC (Engineering, Procurement, and Construction) Market

Engineering, Procurement, and Construction Market Outlook (2022 to 2032)

The global EPC (engineering, procurement, and construction) market is projected at US$ 792.7billion in 2022 and is expected to expand at a CAGR of 5.7% to reach US$ 1.380billion by the end of 2032.

The North American region leads and accounts for over one-third of the global EPC market share.

Report Attributes	Details
EPC Market Size (2021A)	US$ 750Billion
Estimated Market Value (2022E)	US$ 792.7Billion
Forecasted Market Value (2032F)	US$ 1,380Billion
Global Market Growth Rate (2022 to 2032)	~5.7% CAGR
North America Market Share (2021)	~34%
East Asia Market Growth Rate (2022 to 2032)	~6.7% CAGR
United States Market Growth Rate (2022 to 2032)	~5.2% CAGR
Key Companies Profiled	Bechtel; Hyundai Engineering & Construction; Fluor; Technip FMC; Saipem; Bilfinger; Petrofac; Técnicas Reunidas; KBR; Samsung Engineering; SK Engineering & construction; Daewoo Engineering & Construction Co., Ltd.; Daelim Industrial; GS Engineering & Construction Corporation; Wood, Plc

EPC Engagement with Enterprises Offers Higher Cost-efficiency

EPC firms are responsible for the design, procurement, and construction of projects as requested by the client. These firms are also responsible for commissioning and providing ready-to-use projects to owners or clients by a dedicated deadline and at an agreed price.

These firms are comprised of engineers and employees specialized in a dedicated sector who offer appropriate solutions regarding the establishment of a project in a cost-effective way. Clients are benefited from avoiding losses that occur with the price variation of raw materials or any other uncertainties (natural & artificial) while building a project by appointing an EPC firm. This factor will potentially stimulate the demand for EPC firms worldwide.

• Short Term (2022 to 2025): Post-COVID-19, the EPC market is expected to gain momentum in revenue growth as many infrastructure and facility development projects have resumed at a significant pace.
• Medium Term (2025 to 2028): Favourable government norms towards reduction of carbon emissions, increasing production of renewable energy, and expansion of oil & gas plants are projected to boost EPC market growth in the mid-term.
• Long Term (2028 to 2032): With a lot of old infrastructures, demand for redevelopment projects is expected to be high in the future. Increasing urbanization and the need for standardized infrastructure for the population will drive EPC market growth in the long-term period.

Over the 2017 to 2021 period, the global EPC market expanded at a CAGR of 4.2%, as per the study by Fact.MR, a market research and competitive intelligence provider. Demand for EPC is projected to exhibit growth at 5.7% CAGR between 2022 and 2032.

Market share analysis of EPC services based on end-use industry and region. Under the end-use industry segment, power & energy leads with 21% market share in 2022.

Infrastructure Development to Drive Demand for EPC Contractors

Infrastructure projects that are critical to development require immense capital investments, resources, and time. Owing to this, many organizations appoint an EPC firm while taking on a large project.

These firms offer turnkey solutions to customers through collaborating at all stages of the project to ensure meeting client goals and satisfaction. With the substantial rise in infrastructure development worldwide, demand for EPC services is expected to rise during the forecast period (2022 to 2032).

• As per the World Economic Outlook, by the International Monetary Fund (IMF), infrastructure project development across the globe was around 2,500 (two thousand five hundred different projects) which is an increase of 5.5% from 2019. Out of these projects, half were classed as sustainable infrastructure projects, including the development of renewable energy plants.

EPC firms use their resources, experience, and industry knowledge to provide optimum services for client projects. This is an ideal option for a client to have a single relationship and a single point of responsibility to manage a site/infrastructure construction.

Integration of Advanced Technology for Project Execution

High level of engineering expertise along with sophisticated supply chain and capital management phases to handle turnkey engineering projects and deliver complicated production units is essential for EPC contractors. Clients demand strict adherence to deadlines and quality standards, regardless of any limitations on the backend.

As a result, EPC services are increasingly incorporating skid-mounted plants and technologies, remote plant management and operation, automation, and digitalization. Engineering resources, materials, and labour requirements can be precisely anticipated with the help of automation, which can be accurate to around 95% of the final design.

AI-driven intelligent automation, AR, and VR for better safety and communication, as well as IoT-enabled monitoring and maintenance to offer efficient engineering and design services, is been adopted by EPC contractors, which is driving overall market growth.

Shrinking Profit Margins of EPC Firms

The decline in profit margins is a major factor hampering market growth. Aggressive bidding to gain projects and high raw material & labour costs are resulting in a downward shift in operating profits of engineering, procurement, and construction firms. Globally, EPC firms have observed a gradual decline of an average of 15% in profit margins over the last few years.

Also, delays in project execution during the COVID-19 pandemic resulted in operating losses for EPC firms. These factors have resulted in a decline in profit margins and created a challenging scenario for EPC firms across the world.

Dearth of Skilled Employees in the Construction Sector

Engineering and construction industries are highly reliant on labor for project execution. Shortage of labor in these industries is expected to hamper market growth. Also, it has been observed that age is an emerging threat to the construction industry.

More than one-third of the construction workforce in the United States is expected to retire over the next decade. It has become a challenging scenario to bridge the gap between these increasing retirements of old experienced workers with the introduction of young fresh talent. Owing to this, the growth of the EPC market is projected to get hampered to some extent over the years ahead.

Country-wise Insights

Why is Demand for EPC Services Increasing in the United States?

The United States EPC services market is projected to expand at a CAGR of 5.2% from 2022 to 2032.

An increase in infrastructure development in the United States is driving market growth. With the increase in infrastructure development, demand for engineering, procurement, and construction services is expected to gain popularity to oversee projects and evaluate progress based on performance and accomplish project development with precision and accuracy.

• The United States spends around 2.3% of its GDP on infrastructure development every year.

In addition, the United States tops the list of oil-producing nations in the world.

• As per the U.S. Energy Information Administration (EPA), the United States accounts for 20% share of global oil production.

The oil & gas industry needs upstream, midstream, and downstream oil extraction plants. EPC companies efficiently help in designing, constructing, and installing facilities that are required for oil extraction and production.

Which Factors are Contributing to India’s EPC Market Growth?

India is projected to be a lucrative market during the forecast period due to a significant rise in urbanization and increasing electricity demand. As several power projects are in the pipeline, demand for EPC firms will have potential growth opportunities over the coming years.

• India is anticipating a total investment of US$ 500 billion in the renewable sector to attain its target of 450 GW of capacity by 2030, as per the Institute for Energy Economics and Financial Analysis.

India has been the fastest developing chemical sector in recent years. Chemical companies require EPC companies to execute projects in an efficient way to attract value to the investments made by companies and establish energy-efficient plants to attain competitive energy consumption in comparison to international standards.

Category-wise Insights

Power & Energy Sector to Be Leading End-use Industry

Factors such as increasing energy consumption coupled with the growing development of power generation facilities are driving the demand for engineering, procurement, and construction firms worldwide. Energy consumption is growing every year with an average of 1%-2% globally. Production facilities are expected to expand in the near future to cater to the global demand for power and energy.

In addition, government initiatives to enhance the production of renewable energy, coupled with the establishment of new facilities & plants with new & efficient technologies such as supercritical and ultra-supercritical coal power plants, will drive the demand for EPC services in the power and energy sector.

Road & Bridge Development to Push Earnings of EPC Providers

Roads and bridges are complex to design and demand expertise in engineering work. Also, the procurement of specific equipment and machinery is essential to make roads and bridges. Therefore, governments across the world hire EPC contractors to execute the high-end design and construction of roads and bridges cost-effectively.

Rising government investments in the development of roads & bridges will drive target market growth.

• In India, the government aims to construct 65,000 km of national highways worth US$ 741.51 billion by 2022.
• Similarly, to encourage infrastructure development and to replace deteriorated roads, bridges, and rail infrastructure, the U.S. government enacted the Bipartisan Infrastructure Act.

Competitive Landscape

Prominent EPC service providers are Bechtel, Hyundai Engineering & Construction, Fluor, Technip FMC, Saipem, Bilfinger, Petrofac, Técnicas Reunidas, KBR, Samsung Engineering, SK Engineering & Construction, Daewoo Engineering & Construction Co., Ltd., Daelim Industrial, GS Engineering & Construction Corporation, and Wood, Plc.

The engineering, procurement, and construction market is highly competitive with the presence of several established companies. Companies are aggressively securing contracts and offering EPC services to establish plants and production facilities in different industry verticals.

For instance:

• In May 2022, Tata power solar, a wholly-owned subsidiary of Tata Power, secured a single solar EPC contract of 1 GW from SJVN Ltd. The project is aimed at the reduction of 2,287,128 kg of carbon emissions and will generate around 2,500 million units of energy annually.
• In January 2021, Larsen and Toubro (L&T) secured an EPC contract for a 200 MW of grid-connected solar power project in Gujarat, India, through an e-reverse auction initiated by NTPC Limited.
• In June 2022, Cal Solar Inc. announced the launch of EPC services to provide services to Bechtel, Hyundaolar, and energy development companies by leveraging its team of in-house engineers, estimators, and state-wide installation crew.

Fact.MR has provided detailed information about EPC service providers positioned across regions, revenue growth, and service offering expansion, in the recently published report.

Segmentation of EPC Industry Survey

• By End-use Industry :

  • Power
  • Oil & Gas
  • Energy
  • Roads & Bridges
  • Railways
  • Ports, Airports, and Inland Water Transport
  • Building Construction
  • Telecom
  • Utilities
  • Others (Not Covered Elsewhere)

• By Region :

  • North America
  • Latin America
  • Europe
  • East Asia
  • South Asia & Oceania
  • Middle East & Africa