04 June 2012 00:00 [Source: ICB]
The purchase of Stone & Webster gives Technip access to a broad portfolio of technologies
France's Technip expects to capture more ethylene technology and construction contracts globally following its purchase, agreed last week, of most of technology and design engineering provider Stone & Webster.
Chemical engineering sector sees M&A action
Shaw had been trying to sell the business, which it acquired in 2000 after Stone & Webster filed for bankruptcy protection, since October last year.
It said at the time that it had not been successful in growing the loss-making operation either organically or by acquisition and that the business might be better placed in a firm more closely involved in chemicals.
Nevertheless, Shaw has won contracts in the past six months to provide technology and other services for US shale-gas based olefins projects. It struck a deal last year to provide technology and then front end engineering and design (FEED) for Chevron Phillips Chemical's grassroots 1.5m tonne/year ethylene plant in Baytown, Texas.
Earlier this month it was awarded a technology and engineering contract for a new Ultra Selective Conversion furnace for Eastman Chemical's ethylene plant in Longview, also in Texas.
The flexibility of the Shaw (Stone & Webster) technology was seen as key to securing the deal.
"Shale gas developments, which are making available local feedstock at lower prices, are driving increased activity in this business across the US," president of Shaw's Energy & Chemicals Group, James Glass, said at the time.
Technip is acquiring an engineering business whose technology has been used in more than 120 of the 260 ethylene plants worldwide.
Chevron Phillips Chemical, for instance has used Stone & Webster technology at its plants in Texas and at the Saudi Chevron Phillips joint venture in Saudi Arabia. Stone & Webster technology and services were supplied to the firm's Q-Chem venture with Qatar Petrochemical Company (QAPCO) units in Messaieed, Qatar. The French oil and gas project management, engineering and construction contractor is paying about €225m ($280m) for the Stone & Webster process technologies and associated oil and gas engineering capabilities of the Shaw Group.
LICENSED TO BILL
The businesses generate revenues from technology licensing, process design engineering, early-stage and front end engineering, project management consulting (PMC) and the supply of equipment.
Technip says that the acquisition roughly doubles the revenues it already generates from this type of work to an expected €400m.
The combined businesses are expected to produce margins above those generated in Technip's onshore and offshore segments, as well as to offer growth.
The acquisition includes a significant US presence that is likely to help Technip take greater advantage of shale gas development. Technip says its execution capabilities in the US and the UK, including PMC particularly will be reinforced.
The deal certainly adds to Technip's skills and capabilities as it includes not only ethylene and polyolefins technologies but also residual fluid catalytic cracking (residual FCC) and deep catalytic cracking (DCC) know-how.
The DCC technology is Sinopec's but is licensed outside China by Stone & Webster. The world's largest DCC unit, 4.6m tonnes/year, at the Petro Rabigh refinery and petrochemical complex in Saudi Arabia is used for the production of ethylene and propylene.
Shaw has inked a deal with IRPC in Thailand for a 30,000 bbl/day DCC unit in the Thai company's 215,000 bbl/day refinery in Rayong, Thailand.
The upgrade is expected to maximize the production of polymer-grade propylene and the recovery of polymer-grade ethylene at the site for use in downstream units.
Technip also becomes the exclusive co-developer of Sasol's Fischer-Tropsch reactor technology which is currently being used in the Sasol gas to liquids (GTL) plant in Qatar. Sasol plans to build further units in Uzbekistan, Nigeria and the US.
Its acquisition excludes Shaw's Energy & Chemicals Group sites in Toronto, Canada and Baton Rouge, in the US and, the French company says, all legacy engineering, procurement and construction (EPC) contracts retained by Shaw. The deal is expected to close in the second half of 2012.
A BROAD SET OF SKILLS
The company believes it can benefit from marrying the Stone & Webster process technology and associated oil and gas engineering expertise with its own high-end engineering and design capabilities and its full project management and execution (EPC) skills to present a wider offer to clients.
"This broad range of skills is pretty unique in our industry," Technip chairman and CEO Thierry Pilenko, said, adding that the acquisition of these downstream technologies and engineering resources fits perfectly with Technip's strategy to differentiate itself through technology.
"Technip becomes a major technology provider to downstream markets, adding value to its onshore/offshore segment. In addition we gain access to promising growth areas, including US petrochemical investments driven by low price shale gas."
He said Stone & Webster - with a staff of 1,200 - would help the company continue to broaden its offering of products, services and technologies.
And while the US shale boom is clearly important, the demand for more olefins worldwide is also seen as a major driver for the business as is, more generally, the rush for gas.
Stone & Webster has a global footprint and the combined businesses are likely to be able to capture new business in Asia and elsewhere as well as in North America - and to be involved in project discussions at an early stage.
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