OCI NV and the Abu Dhabi National Oil Co. (Adnoc) today announced plans to merge their respective fertilizer operat… https://t.co/uJ2vo2AGQA
Engineering and construction (E&C): The industry now and going forward
The engineering and construction (E&C) industry has been largely affected by the changing energy and petrochemical landscape. In the last decade, the industry saw a proliferation of projects in the United States as domestic and foreign investors rushed to monetize cheap shale gas via LNG, petrochemical, and fertilizer projects. However, the low oil price in the last two years has led numerous investors, often integrated energy and petrochemical producers, to cut back on capital spending, shrinking the workload for many engineering firms. The low price has also eroded the profitability of new coal-to-chemical projects in China, causing slowing investments and a slippage in schedules on some ongoing projects there. Investors worldwide are also reexamining the economics of methanol-to-olefin plants. Currently, the American Chemistry Council (ACC) is tracking $170 billion of chemical projects in the United States, but some of these will likely be delayed or canceled.
Some industry experts believe that the next wave of projects in the United States will be different. Wolfgang Brand, Linde vice president/business development and sales, petrochemical plants, says that "the next wave of cracker projects will be flatter and take longer [to come to fruition]. We are involved in a couple of project developments but do not expect the same concurrent timing of all projects as in recent years." Stan Knez, president/onshore process technology at Technip (Paris, France), adds that the next wave will be more erratic and not as broad-based.
A number of E&C firms have reacted by reducing staffing levels, divesting assets, and diversifying portfolios, including Technip, which launched a restructuring program in July 2015 that included reducing the company's workforce approximately 6,000 and streamlining activities to focus on core businesses.
Knez says that Technip has been involved in a number of opportunities that have been delayed, canceled, or recycled for cost improvements. Linde is also undergoing a similar situation, suspending or terminating at least half of its projects that are currently undergoing development.
Going forward, most E&C firms expect the United States to continue providing the biggest opportunities, thanks to technological advances in shale gas production. Although the country is the largest construction market for petrochemicals, the lifting of sanctions on Iran last year has opened up huge opportunities for E&C firms there.
Jing Chen is the Associate Editor, IHS Chemical Week
Posted 4 January 2017
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