By Ben DuBose
HOUSTON -- Earlier this week, we caught up with Peter
Oosterveer, president of the energy and chemicals
(E&C) segment for Fluor, along with E&C vice president
The pair spoke in a 30-minute interview at the St. Regis
Houston hotel, where Fluor held its annual November media
Topics discussed included company business as well as
industry topics such as shale gas, crude oil prices and their
downstream and contractor effects.
Highlights of their observations are as follows:
1.) Fluor is becoming much more bullish and comfortable
in North America. The trend began in 2010 and
2011, said Oosterveer, and has continued into 2012.
Were not just listening to what other people have
to say, but judging by the amount of work we have to do right
now, he said. If all goes well, assuming nothing
disastrous happens, were seeing real opportunities."
With most North American projects, Fluor is in the front-end
engineering and design (FEED) phase. Those typically
reach a decision point where clients either say yes or
no, Oosterveer said. Looking at way these things
shape up, its starting to look more and more promising.
Thats different than a year ago.
2.) Outlook improves for completed US ethylene
crackers. About a year ago, Oosterveer said he expected
2 or 3 new ethane-based crackers to actually be
constructed by the end of the decade. Now? That would
probably on the low side, he said. I would not be
surprised if its more like five.
Fluor is presently working on three US cracker projects and
tracking several others, he said. They could still fail,
but thats not our feel.
McSorley believes several of the major projects on the US
Gulf Coast will be approved into the engineering, procurement
and construction (EPC) phase in the next
12 months. Some of them will be approved or at least on
the verge of, he said. The construction capacity could start to
get very strained.
3.) Canada more likely than US to become major LNG
exporter. On the gas side, Canadas British
Columbia province may soon become a hotbed for LNG export
activity to Asia. I think the chances that Canadians are
going to export LNG are bigger than the US, said
Oosterveer. Though one US export permit (Sabine Pass LNG) has
been granted, Oosterveer believes Canada will have the greater
export presence because for them, politically, it is much
more acceptable than the US. For the US, it is much more
important to be used for domestic consumption, he said.
McSorley expects the uncertainty over the numerous proposed
LNG export projects in the US to be sorted out within a year or
so. Economic studies will get done, and well find
out whether itll be British Columbia or Gulf Coast,
McSorley said. The companies like ExxonMobil and Shell,
they need to be able to make their plans and move on.
4.) US Democrats begin to see the light on energy
development. The recent re-election of President Barack
Obama wasnt particularly surprising or critical to Fluor
because the company didnt see an enormous difference in
the policies of Obama and Republican challenger Mitt
Obviously Republicans are more bullish on energy, but
dont think its drastic, said McSorley.
Things may take a little bit longer to get permitted or
things of that nature, but I believe the Democrats are seeing
the light that [domestic production] is something that needs to
happen in terms of energy security and jobs. Would things maybe
move faster on Republican side? Yeah. But I dont see a
huge dramatic difference between the two. Were not hung
up at Fluor on the election.
McSorley added that Fluor was most concerned with the
permitting process for an individual facility. Do they
have any risks that are abnormal compared to other facilities and how do we help them
get through it? Thats what were more focused on
from a regulatory standpoint.
5.) Europe searches for alternative to Russian gas
supply. With production stagnant in Western
Europe, the Europeans are now very dependent on Russian gas,
said Oosterveer. And that gas is not cheap, to say the
least. I think Europeans are looking at opportunities to get
gas from anywhere in world for cheaper, because they dont
want to be held hostage by the Russians every winter.
Oosterveer noted some developments on shale gas in Europe,
mostly in Poland, but not nearly as much as in the US. As a
result, he said its not necessarily going to solve
the need to try and get cheaper gas. The US has the
potential to export some less expensive gas to Europe, he
added, but cautioned that its at least five or six years
6.) Can China follow US lead on shale
development? Shale gas in the US is starting to become
more known and accepted, according to the Fluor
executives. Acceptance of fracking is increasing,
said Oosterveer. The industry is taking away public
Like the US, other locations such as Latin America and China
have large shale reserves. However, questions remain on
prospects for development. I think the US has strong
infrastructure in place to export, said Oosterveer.
China has gas, but in a region where they dont have
a lot of water. They have to build that infrastructure.
Its hard to know what the landscape will look in
10 years, but I certainly subscribe to the notion that gas is
king for the foreseeable future, he said.
7.) Long-term fate of Australia LNG
projects tied to North American
export decisions. At present, Fluor is working on
several LNG export projects in Australia, with most tied up in
long-term shipping commitments to China, Japan or Korea.
However, rising local costs are becoming an issue. It is
an expensive place to do work, said Oosterveer. It
is a challenge.
Going forward, the question of whether Australias LNG
industry will develop further may depend on decisions made in
North America, where costs are lower. Once the current facilities are built, they have
long-term agreements, said McSorley. Theyre
fine. But will there be more? Thatll be a
8.) Crude prices likely to hover between $80/bbl and
$120/bbl for next two years. Anything below
$80/bbl I would say is highly unlikely, said Oosterveer.
I think weve found some stability.
9.) Demand outlook for China and India. The outlook for
Chinese economic growth has dropped slightly from the 8-9%/year
rates seen in recent years, Oosterveer noted. Our outlook
is a little more modest than a year ago, he said.
We would be pleased with 7%/year growth.
India, meanwhile, is a different story
altogether, he said. The potential is clearly
there, but the way to control and influence their economy is
just not like it is in China. The Chinese move fast, while India doesnt go that fast.
Its not to say we dont expect growth, but probably
wont be as sustained and as high as China over the next
10 to 15 years.
10.) Producers, contractors turn to formal
partnerships. Fluor has seen an increase in umbrella
agreements in recent years, culminating with a new downstream pact with Shell for Europe, the
Middle East and Africa. The company has a similar agreement in
three regions with BASF, a global services pact with Dow
Chemical, and informal relationships with Chevron and
When you look at demographics in the engineering
industry, particularly in the Western world, it can be
troublesome, said Oosterveer. You have people that
came into industry 30-plus years ago, soon to be retired.
Clients look at capital investment and say they have a problem,
unless we can form alliances and partnerships with people like
Fluor and join forces. Theyre looking for a presence in
11.) Chemicals and upstream lead company
business. Fluor has four business lines, according to
the executives. Those are upstream, downstream, chemicals and
offshore. Were pretty bullish about all four, but
in the short-term, were most optimistic on upstream,
and pipelines, and petrochemicals, driven largely by
the US, said Oosterveer.
He did note, however, that opportunities are starting to
pick up for downstream refiners. It seems like refiners
are starting to make money again, which is a good thing for
them, he said. We have been watching refining opportunities in a number
of places in the world, but they will be in different places -
like China, Argentina and Colombia. We still see opportunities
for refineries, but in new locations.
12.) New joint ventures add to project capability. For
years, Fluor has had a successful and established venture in
Mexico named ICA Fluor Daniel, and it is seeking to expand that
concept to other markets. In recent months, the company has
launched joint ventures in the Philippines and Brazil. It brings you instant
relationships and a localized presence, Oosterveer
Over the next year, the company expects to add to its
workforce and potentially to its regionalized services.
Its very possible that we might have new capability
somewhere else in the world, he said.
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