Personal Protective Equipment Market in Russia

Aparna Balasubramanian
Research Analyst – Chemicals, Materials and Food, Frost & Sullivan

With increasing importance of occupational health and safety across the world, employers of diverse industrial businesses lay huge emphasis on ensuring the safety of employees in workplaces, by providing appropriate Personal Protective Equipment (PPE). PPE comprises various types of safety equipment that protect workers from health hazards at workplaces and can be classified into different types based on the type of protection offered.

The growth of the PPE market relies heavily on employment growth, which is dependent on activities in industries such as manufacturing, mining, construction, utilities and oil and gas.

The Russian market accounted for a share of 5.3% of the global PPE market in 2012. Developed regions such as North America and Western Europe are expected to experience moderate growth. However, due to huge industrial investments, increasing awareness and end-user compliance for PPE usage, Russia is expected to drive growth in the global PPE market. Due to the country’s high growth potential, it is largely attracting attention from global PPE manufacturers.

Russian Oil and Gas Industry – An Overview
Russia is the largest producer of natural gas and one of the two largest oil producers in the world. The western Siberian region accounts for major oil production in Russia and fields in this region are operated by Russian oil firms. The two largest oil fields in West Siberia were Samotlor Bothof, in production since 1969, and North Priobskoye, in production since 2000. Other oil fields in the eastern region and in the Russian Arctic region hold huge untapped potential and are actively being explored by leading international oil companies.

Russia also ranks high in shale and other tight oil resources, but they remain largely unaddressed, as high taxes decrease profitability. Oil giants are now increasingly showing interests in capitalising on these new market opportunities.

PPE Regulatory Structure
Prior to separation of Russia from other Former Soviet Union (FSU) states, worker safety was formalised by GOST (Gosudarstvennyy Standart). These standards maintained by Euro-Asian Council for Standardisation (EACS). GOST standards are common for all CIS states and Russian specific standards are indicated by GOST-R.

With increasing globalisation of the oil and gas industry, the PPE customers in the industry are in many cases, international oil giants. The differences between the EN regulations and GOST standards remain unclear to PPE suppliers and customers in most cases.  There has been a movement towards harmonisation of EN standards with the Russian GOST ones, a step that will favour both oil and gas customers and PPE manufacturers. However, it is a cumbersome process and the timeframe for such an effort to materialise cannot be determined. This harmonisation would certainly widen global trade channels for PPE in Russia, offering opportunities for global PPE producers.

Opportunities for PPE Market
Oil and gas industry is among the most safety-conscious end-user industries of PPE. Due to the high safety concerns involved in upstream as well as downstream activities, this industry, globally, remains a large end user of PPE. The needs for different types of PPE in the oil and gas industry are summarized in the table below.

Due to the high risks associated with oil and gas operations, workers are at high risks of injuries and accidents. In the event of an accident, costs associated with litigation and employee compensation costs are especially high within this industry. Moreover, the loss of productivity resulting from lost working days, weighs heavily on overall company production. Thus, complying with safety regulations and issuing the appropriate PPE to the employees is considered a wise investment within the oil and gas industry, resulting in high usage of PPE.

Unlike other industry verticals, oil and gas exposes the workers to several unique risks, driving the need for high-quality specialized protective equipment. PPE products for oil and gas industry need to be highly durable and strong. Being waterproof and corrosion resistant is crucial to meet the needs of offshore environments, which is applicable to fall protection products, protective footwear, respiratory protection products, protective gloves, protective clothing, and gas detectors. Occupational threats such as exposure to hydrogen sulphide (H2S) gas determine product specializations for respiratory protection and gas detection equipment.

Oil and gas industry is among the largest end users of PPE in Russia and accounts for 25.0 % of the total Russian PPE market. The upstream oil and gas sector (exploration, drilling, construction and production) generated the highest revenue for all PPE markets, due to extensive investment on oil and gas extraction in the region. Production was the biggest activity in 2012, generating 42.6% of the oil and gas PPE market revenue. Except for fall protection equipment, which finds high demand in the construction activity, production and drilling were identified to be the main source of revenues for most PPE markets.

Oil extraction has been continuing for decades and most of the easily accessible oil fields have been exploited to run near full capacities.  The industry is continuing to explore in untapped regions such as the continental shelf in the Arctic zone, remote regions in western and eastern Siberia and the Black Sea. In view of accessing such difficult oil fields, the industry is likely to expose workers to life-threatening risks. Thus, such a trend necessitates the use of sophisticated PPE, thereby increasing market potential in the oil and gas industry. Moreover, the scarcity of easily accessible oil fuels innovations in developing newer drilling technologies which increases employment opportunities, thereby having a direct positive impact on the oil and gas PPE market.

PPE Customer Base – Distribution Structure
The PPE customer base in the Russian oil and gas industry is a mix of direct company employees and contract employees. Contract employees are mainly from service-providing companies such as drilling contractors or are construction workers.

With increasing globalization of the oil and gas industry, the share of contract employment in the total industry employment has been on a steady rise. In 2012, contract employment accounted roughly about 72.0 % and direct company employment accounted for about 28.0 % of the total oil and gas industry employment in Russia. Distributors play a main role in the oil and gas PPE market and a broad distribution network is considered to be a key competitive factor in the market.

Market Structure – Current Scenario
The PPE market in the FSU oil and gas industry was valued at $ 562.8 million in 2012 and Russia is estimated to account for approximately 72.0% share of the total market. Gas detectors, protective footwear and protective clothing are the largest PPE markets in Russian oil and gas industry.

Gas detectors are one of the most crucial protective devices pertaining to the oil and gas industry, as constant monitoring of hydrocarbon and hydrogen sulphide emissions is critical. Fixed gas detectors are generally used in a specific area or are connected to a system that allows continuous reading of a specific area or points within a larger area. Portable instruments are built to be transportable, rugged, and of the appropriate size to be taken into a limited workspace. They are typically used in confined space and for personal protection applications. Gas detectors market is by far the biggest PPE market in Russia due to high costs and good compliance.

Protective footwear is one of the most largely used PPE in the oil and gas industry and observes very high end user compliance, thereby making it the second largest PPE market within the industry. Ankle protection and hardened metallic toe caps are important features demanded by the oil and gas industry.
Body protection becomes very crucial in all sectors of the oil and gas industry and protective clothing that provides flame resistance, high-visibility and anti-static protection find demand in the industry. While the upstream sector uses non-disposable protective clothing, the downstream sector uses disposable garments made of Polyvinyl Chloride (PVC) and neoprene for particle protection applications.

Respiratory protection is highly important in the oil and gas industry because even a small leak of hydrogen sulphide (H2S) can damage workers’ health and large leaks can often be fatal. Moreover, low oxygen levels in confined spaces can quickly lead to unconsciousness and death.

Above the Neck protection includes head, hearing and eye protection. Head protection segment observes very high end user compliance in product usage, as it is a statutory policy among the companies to equip any worker on an offshore activity with head protection. Head protection is also one of the widely used PPE in the downstream oil and gas sector, as refineries have high compliance standards and maintain large stocks for use by office professionals and incoming visitors. Eye protection is used in oil and gas industry while working with chemicals or handling drilling equipment. Frequent eye hazards include exposure to gases, vapours, mist, particles, fumes, and ultraviolet rays. The oil and gas industry exposes the workers to high noise environments, especially in drilling activities which necessitates the use of appropriate hearing protection.

Protective gloves and fall protection are relatively smaller PPE markets in the Russian oil and gas industry and offer good scope for growth. Although many specialized oil and gas products are available in the protective gloves market, the industry mostly uses regular industrial gloves that come at relatively lower prices. Production and drilling sectors exhibit reasonable market penetration of high-quality products, while adoption still remains low in other sectors.

Fall protection equipment includes accessories worn by people working at a height, either to protect themselves from falling or to minimise the impact in the event of a fall. Construction workers engaged in upstream operations, pipe fitters, and other skilled workers in midstream transportation operations are exposed to personal injury from working at a height while on a site. Lower end-user compliance hinders market growth in the short term, but offers untapped market potential.

Future of the Russian Oil and Gas PPE Market – The Way Forward
The Russian oil and gas PPE market was estimated to be $405.3 million in 2012. Sakhalin Island, located off Russia’s eastern shore, has seen huge investments from ExxonMobil, Shell, and BP. Sakhalin-1 project, led by Exxonmobil, ranks as one of the largest single foreign direct investment projects in Russia and includes the Chayvo, Odoptu, and Arkutun-Dagi fields. Together they contain an estimated reserve of 2.3 billion barrels of oil.  Production at the Odoptu field began in September 2010, which brought about huge employment opportunities, thereby driving oil and gas PPE
market sales.

The first developmental phase of Arkutun-Dagi field is planned to commence in 2014 and huge growth is expected in the short to long term of the forecast period. Statoil and Rosneft have announced a joint venture on exploring for shale oil in the Samara region. Six exploration wells are about to be drilled between 2016 and 2021. British Petroleum (BP) has also expressed interests on tapping some of Russia’s shale reserves through exploration or production ventures with Rosneft. These developments are likely to positively impact the PPE market in Russia.

Safety awareness and end-user compliance for PPE usage is expected to constantly rise. Some major Russian companies have started to adopt OHSAS 18001, an international occupational health and safety management system specification. This is an indication of the companies’ commitment to improving health and safety conditions for its employees and is likely to boost the oil and gas PPE market.

Although huge emphasis is laid globally, on moving to alternative renewable sources of energy such as wind energy and biofuels, the day-to-day dependency on oil is likely to continue for many more years. Rising public affordability of cars is also likely to drive the demand for oil. Russia, being the traditional work horse of global oil and gas industry, thus continues to hold tremendous growth opportunities for the PPE market.