Market Insights - Global Vapor Recovery Units Market
A vapor recovery unit (VRU) is a device used for recovery of vapors such as gasoline, natural gas, and other fuels so that they can reused for industrial applications. Vapor recovery units are majorly used in upstream and downstream processes in chemical process industry. Vapor recovery unit uses different methods such as condensation, absorption, adsorption, and membrane separation for vapor recovery. In condensation process, vapors are condensed by lowering temperature. Furthermore, in the U.S., the Environmental Protection Agency (EPA) mandates operators to carry out vapor removal process to control harmful air emissions in natural gas processing plants, natural gas wells, and hydrocarbon storage facilities.
The global vapor recovery units market accounted US$ 520.9 Mn in terms of value and 10,210.8 Units in terms of volume in 2019.
Market Dynamics- Drivers
- Strict regulatory policies regarding VOC emission are expected to drive growth of the global vapor recovery units market during the forecast period
Various industries are responsible for the emission of volatile organic compounds that are mixed with air in the environment. These compounds are hazardous air pollutants that can damage the ecosystem. Government agencies in various countries have implemented stringent environmental legislations, in order to reduce harmful effects of VOC emissions. These regulatory policies have mandated crude oil production companies and petroleum industry to install vapor recovery units in each plants. For instance, in May 2016 U.S. Environmental Protection Agency (EPA) introduced a set of standards to reduce VOC, methane and toxic air emissions in the oil and natural gas industry. According to the new standards, methane emissions in the oil & gas industry in the country need to be reduced by 40-45% by 2025 as compared to levels in 2012.
- Economic and environmental advantages offered by vapor recovery units are expected to propel the global vapor recovery units market growth over the forecast period
Crude oil tanks contain light hydrocarbons such as methane, natural gas liquids, and hazardous air pollutants (HAP) and some inert gases. During storage, these hydrocarbons vaporized and get collected in storage space. These vapors are vented into the atmosphere as and when liquid level in the tank fluctuates. Vapor recovery units are installed to collect and store these vaporized hydrocarbons. These hydrocarbons can be further used and sold as fuel in onsite operations. This all results in significant cost savings and reduction in methane emission. According to results of an independent research study, at least 11 facilities in the U.S. have installed eductor vapor recovery units. Key benefits of these units are as follows:
- Emission reduction of 280 Mn Mmscfy (Million standard cubic feet per year) of methane, 21,600 tonnes per year of VOC and 1,700 tonnes per year of HAP (hazardous air pollutants)
- Improved recovery value of natural gas with economic value of US$ 6.3 Mn per year
- Economic value of recovered natural gas is expected to be US$ 41 Mn – US$ 120 Mn per year
North America region dominated the global vapor recovery units market in 2018, accounting for 37.9% share in terms of volume, followed by Europe, MEA, Asia Pacific, and Latin America, respectively.
Source: Coherent Market Insights
Market Dynamics- Restraints
- Mechanical failure and operational risks related to VRU are expected to restrain growth of the global vapor recovery units market during the forecast period
Vapor recovery units are a meticulous machine and challenging to operate. Any mechanical breakdown in complex vapor recovery unit could lead to emission of potentially hazardous gases such as methane. Moreover, operational risk associated with VRU is significantly high as failure in functioning can result in additional economic losses for crude oil producer. Furthermore, adverse changes in climatic conditions near crude oil extraction plants would hamper the smooth functioning of VRU. For instance, in 2011, Irving Oil Ltd. installed a vapor recovery unit at the East Saint John terminal, which was designed to reduce air pollutants and VOC emissions from its oil storage tank. However, within months after commencing operation it showed mechanical issues. In fact, the situation worsened in winter. The unit was offline 78% of the time in the first three months of 2015, which was 1.1X as of 2014.
- High initial investment and low ROI are expected to hinder the global vapor recovery units market growth over the forecast period
Initial investment for installation of vapor recovery unit is around US$ 500,000 per unit. The cost may fluctuate due to client specifications. Therefore, modified vapor recovery units can significantly vary from the standard unit. Vapor recovery units that are used in marine loading application are more expensive than those used in truck loading applications. Therefore, high capital investment is expected to hinder the market growth.
- Development of unconventional energy sources is expected to pose lucrative business opportunity
Development of unconventional energy sources namely shale oil, coal bed methane, and oil sands are presenting new growth opportunities for vapor recovery unit manufacturers. Oil & gas producers are increasingly adopting high-end technologies such as membrane-separated vapor recover units, in order to optimize the production process. Following are some of the major investments made by oil & gas companies. In June 2016, Iran's Machine Making Company signed a US$ 550 Mn contract with China's largest heavy industry enterprise to build oil terminal with a capacity of 30 million barrels on Qeshm Island, in the southern Persian Gulf. Furthermore, in June 2016, Ghana National Petroleum Corporation announced installation of two import LNG terminals, as the country has planned to start importing LNG in early 2017.
- Rapid installation of VRUs on gas stations in Asia Pacific region is expected to present growth market opportunity for marketers
New stringent regulations regarding reduction of VOC emission have compelled petrol pump owners to install vapor recovery units. For instance in 2004, in China, the Air Pollution Control (Petrol Filling Stations) (Vapor Recovery) Regulation was amended to require petrol filling stations to install a system to recover petrol vapor emitted during vehicle refueling (Phase II vapor recovery system). Furthermore, the amended regulation came into effect on March 31, 2005.
Source: Coherent Market Insights
Global upstream based vapor recovery units market was valued at US$ 428.2 Mn in 2018 and is forecasted to reach a value of US$ 540.7 Mn by 2027 at a CAGR of 2.8% between 2017 and 2027.
- Growing preference for membrane separation technology instead of condensation technology
Condensation of vapors is one of the most basic process available for vapor recovery though it requires high maintenance and high costs of nitrogen. Due to this, major players in the market are rapidly shifting towards adsorption and absorption techniques, in order to avoid high capital cost and provide vapor recovery rate. Moreover, membrane separation technique is another novel technology with high efficiency and high vapor recovery rate as compared to other technologies.
- Mergers and acquisitions among key players
Key companies in the market are focused on merger and acquisition activities, in order gain competitive edge in the market. For instance, in February 2014, Regal Beloit Corporation acquired Hy-Bon Engineering Company, Inc.—one of the leading players in the vapor recovery units market—for US$ 78 Mn. The company provides vapor recovery units for oil and gas applications.
In Global Vapor Recovery Units market, by process segment, the upstream sub-segment dominated the global market in 2018, accounting for 84.5% share in terms of value, followed by downstream, respectively.
Source: Coherent Market Insights
Key players involved in the global vapor recovery units market are John Zink Company, LLC, Hy-Bon/EDI, Whirlwind Methane Recovery Systems LLC, Petrogas Systems, Accel Compression Inc., PSG Dover, Wintek Corporation, AEREON Inc., and Cimarron Energy Inc.
- Major market players are focused on mergers and acquisitions, in order to enhance their market presence. For instance, in July 2019, Cimarron Energy Inc. acquired Hy-Bon/EDI to strengthen its market position.
- Key companies in the market are involved in strategic collaborations, in order to gain competitive edge in the market. For instance, in January 2017, Aeron Inc. collaborated with Honeywell to leverage Honeywell’s Industrial Internet of Things (IIoT) ecosystem for oil & gas industry.