This year was better than 2009 for the companies that design, equip and build major projects for the worldwide oil and natural-gas industry, and all indications are that 2011 will bring further improvement, though the boom times of a few years ago have yet to return.

 KBR is providing design and procurement for a deepwater offshore facility in the Caspian Sea.
Photo: Courtesy of KBR
KBR is providing design and procurement for a deepwater offshore facility in the Caspian Sea.

While the U.S. economy remains in the doldrums, the economies of most developing countries are recovering and gradually resuming strong growth. International oil and gas demand is rising, oil prices have stabilized at levels that support the development of new projects, and new gas discoveries are spurring work in several regions.

In its “World Oil Outlook 2010,” issued in November, the Organization of the Petroleum Exporting Countries is increasingly optimistic about demand growth. OPEC says it now expects worldwide oil demand to grow from 85.5 million barrels per day in 2010 to 86.6 mbd in 2011 and up to 89.9 mbd in 2014.

That growth rate is stronger than what OPEC had forecast a year ago, and virtually all the demand growth is expected to occur in developing countries, led by China.

“Due to unexpectedly low oil prices in late 2008 and early 2009 as the global economic downturn took hold, OPEC member countries had no choice but to delay a number of their planned investment projects,” Fuad Siala, a senior adviser to OPEC, said in November. However, he noted that most of those projects have resumed or been rescheduled.

The U.S. Energy Information Agency, meanwhile, said in its “International Energy Outlook 2010” report that worldwide natural-gas demand will rise by an average of 1.8% per year for the foreseeable future, with three-quarters of the growth coming from developing countries. Those expectations, as well as expansion plans by energy giants in non-OPEC countries like Russia, Australia and Kazakhstan, are giving engineering and construction executives some hope.

“We have a good market now. It’s not a great market, but it’s better than it [has] been in the past,” says Roy Oelking, president of the oil-and-gas division at Houston-based KBR. “We have good projects that we are executing and good prospects” for securing additional work in 2011.

Oelking says that ongoing and prospective projects include onshore work in Asia and Eastern Europe, shallow-water projects in the Caspian Sea and off western Australia, and deepwater projects in the Gulf of Mexico and off the west coast of Africa.

Interest in natural-gas development and gas pipelines is particularly strong now, says Kerry Erington, senior vice president and director of oil and gas services for the energy division of Overland Park, Kan.-based Black & Veatch. He points to several ongoing multibillion-dollar gas-field development initiatives in the Middle East and says Australia is receiving “a huge amount of attention” from energy companies for its vast reserves of both natural gas and coal-seam methane.

Black & Veatch’s current gas-related projects overseas include the design and construction—with Wilmington, N.C.-based Chemtex—of a 700 ton per day liquefied-natural-gas facility for China Natural Gas Co. Ltd. in Guangyuan, China.

Michael Pears, senior vice president of sales and strategic planning for energy and chemicals at Fluor Corp., Irving, Texas, also sees reasons for optimism. “In 2011 we see some excellent opportunities in the upstream market, both onshore and offshore,” says Pears. Pears notes, however, that competition for design and construction work in the oil-and-gas industry is “very fierce. … The market has been moving from reimbursable, lower-risk contracts to higher-risk, lump-sum … and we see a lot of Asian contractors chasing the lump-sum work.”

Garry Higdem, president of the energy division at Engelwood, Colo.-based CH2M Hill, says that, despite improvements over the past two years, “it’s still nothing like the very robust market in 2005, 2006 and 2007,” when firms were flush with oil and gas work.