Global construction shifts to specialty projects

05 August 2008 22:31  [Source: ICIS news]

NEW YORK (ICIS news)--The global engineering and construction (E&C) market is shifting from commodity chemicals to specialties, driven by rising capital costs for large-scale petrochemical complexes and the general investment cycle, E&C firms said on Tuesday.

 

A lively investment market is expected in the near- to medium-term as more commodity chemical manufacturers move into specialty and specialized markets, including pharmaceutical feedstocks, said Andy Allen at Foster Wheeler’s global engineering and construction group.

 

Allen, who heads the group’s petrochemicals, chemicals and polymers unit at Clinton, New Jersey, noted that China and India are very active and “the Middle East is at last making the step into higher added-value chemicals”.

 

Specialty chemical operations have additional appeal to Middle East producers, he said, in part because they are more labour intensive and require less operational capital than world-scale petrochemical facilities.

 

Large projects are disadvantaged because the costs of construction materials such as concrete and steel are rising, according to several E&C firms.

 

Indeed, high cost estimates for full-scale petrochemical projects have forced cancellation of some, said Peter Oosterveer, senior vice president for chemicals at Houston, Texas-based E&C firm Fluor.

 

“We have seen projects shelved after the initial design phase because of rising costs,” said Oosterveer.

 

In addition, both contractors and project operators are facing shortages in skilled personnel - a shortage that apparently will get worse.

 

“The manpower skill shortage will worsen in future as many experts are nearing retirement and the industry is not able to fill the gap,” said Tim Challand, president of technology for Houston, Texas-based KBR.

 

The challenge for owners and contractors is to develop more innovative models for project execution to manage this situation, said Jim McGrath, president of global business development for Norway-based Aker Solutions’ process and construction business area.

 

“The market is very heated, but we are being very selective about the work we are bidding for,” said McGrath.

 

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For more analysis and insight on engineering and construction (E&C), look for the 18 August 2008 issue of ICIS Chemical Business magazine

By: Ivan Lerner
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