Market outlook: Fluor expects 4-6 crackers to be built in the US, leading to a peak of 35,000 workers in the US Gufl Coast

14 December 2012 10:00  [Source: ICB]

Between four to six world-scale crackers are likely to be built in the US in the coming years, leading to as many as 35,000 skilled craft labourers working in the US Gulf coast alone by 2015, said the head of US-based engineering and construction firm Fluor's energy and chemicals business.

Driven by the shale gas boom in the US and the resulting low cost of natural gas liquids (NGLs) such as ethane, seven companies have announced detailed plans to build new world-scale crackers. Many others have said they would look to build new crackers.

Chemical plant Rex Features

Rex Features

Fluor uses numerous approaches to meet its manpower requirements

The planned new crackers and expansions of existing facilities amount to an additional 11.9m tonnes/year of ethylene capacity, or about 38% of the current total in the US, according to ICIS data.

"Looking at the engineering, procurement and construction [EPC] aspects, the construction part will be biggest challenge in terms of securing enough skilled labour," said Peter Oosterveer, group president, Fluor's energy & chemicals business. "We can easily see a peak of 35,000 skilled craft labourers and that will be a challenge. But we believe we can secure substantial craft resources."

OFFSITE FABRICATION

One way to alleviate the labour strain is to fabricate components off site, a capability Fluor has developed and expanded in the past few years, said Oosterveer.

"We can modulise these complex components complete with piping and instruments anywhere - from Mexico, the Philippines, to Canada and the US," he said. "This would take the strain away from the peak level of craft resources in the US, reducing dependency on local resources."

This offsite modulisation of the construction process will be a major factor in taming cost inflation in the construction phase, he said.

"The cost inflation is not going to be as bad as it was in 2007 and 2008, when all the sectors - upstream, downstream, chemicals and offshore - were undergoing an up-cycle," said Oosterveer. The president sees the craft labour force dedicated to chemical plant construction in the US Gulf Coast peaking in early 2015.

Most petrochemical companies are in the early part of the front-end engineering design (FEED) phase with respect to their crackers, a process that takes 10-16 months, noted Oosterveer. The earlier feasibility studies, which typically take six to eight months, have largely been completed for most companies.

Most cracker construction would begin in early 2014, with a peak in labour in early 2015.

PROCUREMENT PRIORITIES

There will also be a constraint on engineered equipment such as vessels and compressors, so the procurement process is likely to begin even before the FEED phase is complete, he said. "Clients all want to be first, so there is pressure on petrochemical companies to get to the market as soon as they can. And the market for equipment is going to heat up," Oosterveer said. "Many will order long-lead equipment before the end of their FEED and final investment decision."

Fluor is working with companies such as Dow Chemical and Shell on US petrochemical projects, said Oosterveer.

Peter Oosterveer

 Oosterveer: the future looks busy

Fluor has already completed the FEED for Dow's propane dehydrogenation (PDH) plant to produce propylene in Freeport, Texas, scheduled to come on line in mid-2015. The facility will have capacity of 750,000 tonnes/year. In September it announced it won the contract for the project's engineering, procurement and construction management (EPCM) services.

"PDH appears to be the preferred route to make propylene, so we expect to see a few more of these facilities being built - from both pure-play chemical companies and [oil and gas] integrated companies," said Oosterveer.

Fluor is also in discussions with Dow on its planned new world-scale cracker and derivative projects in Freeport. "With our track record in the US and in chemicals, we see the shale gas impact on chemicals as very exciting for our business," said Oosterveer. "We have resources worldwide and can move the work to the people rather than the other way around, mitigating the ups and downs in engineering and construction costs," he added.

In April, Fluor was chosen as Germany-based BASF's engineering partner for chemical projects across North America.

Fluor will provide BASF with FEED and project management services, as well as detailed EPC management services. The company was selected by BASF in mid-2011 as its engineering partner in Asia and Europe.

LATIN AMERICA

Fluor also sees a growing opportunity in Latin America petrochemical projects. In Mexico, the company has a joint venture called ICA Fluor which is part of a consortium of engineering and construction firms with the $2.7bn EPC contract for Mexico's Ethylene XXI project being built by Braskem Idesa.

The EPC contract was awarded to a joint venture made up of Odebrecht (40%), Technip (40%) and ICA Fluor (20%). The 1.05m tonne/year cracker and downstream units are expected to be completed by July 2015.

Planned downstream production includes two high density polyethylene (HDPE) plants with capacities of 350,000 tonnes/year and 400,000 tonnes/year and one 300,000 tonne/year low density polyethylene (LDPE) plant.

In Brazil, Fluor announced the formation of a new joint venture this summer called CFPS Engenharia e Projetos with Brazilian construction firm Construcap. "Opportunities are plentiful in Brazil but its is a very competitive environment," said Oosterveer.

EUROPE AND MIDDLE EAST

Fluor is also building its presence in Europe and the Middle East. In November, UK-based energy and petrochemical company Shell awarded Fluor a five-year enterprise framework agreement for engineering and project management services for its downstream, and potentially, upstream onshore projects in Europe, Africa and the Middle East.

Fluor's oil and gas business segment, which includes chemical projects, continues to grow. Project backlog at the end of the third quarter of 2012 was $19.2bn - up 31% from $14.6bn at the end of the third quarter of 2011.


By: Joseph Chang
+1 713 525 2653



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