Massive Gigaprograms Come with Layers of New Risk
The big are getting bigger. Growing economies around the world and unforeseen global events—from financial shifts to earthquakes—are generating such huge demands, particularly in natural resource development, that owners and contractors are pushing out construction at record size and speed, participants say.
Even long-term industry veterans think the trend is unprecedented. “The growth in the southern hemisphere is more than I've ever seen before at any one time,” says Bill Dudley, president and chief operating officer of Bechtel Group Inc.
Australia's still untapped resource reserves have made it a hot spot for an array of giant projects now under way or soon to develop in oil and gas expansion and mine development. Boosting supply of liquefied natural gas (LNG) to feed China's seemingly insatiable appetite for resources and other countries' needs has pushed more projects well into the double-digit billions of dollars.
India is seen as a larger LNG consumer, as is Japan, and possibly other countries, in the wake of the quake-generated Fukushima disaster in March that has begun to alter nations' reliance on nuclear power.
Giant jobs include the Chevron-led Gorgon LNG project at $37 billion and set to grow, and the Browse LNG site, being eyed at $40 billion. Both are located off Australia's western coast in areas of major natural gas finds. The multi-facility Gorgon program could eventually produce nearly 25 million tons of LNG annually and is set to include what the oil company says will be a world leader in carbon sequestration, able to inject underground about 3.4 million tons of carbon dioxide per year. A KBR-led joint venture is now doing major work there.
Other gas and mining projects are fast moving into the double-digit group. A recent article in Forbes magazine claims that energy firms have identified enough natural gas near Australia for $200 billion of LNG development. “Looking at LNG awards in particular, there are many developments, particularly in Australia, which are accelerating,” Credit Suisse construction sector analyst Jamie Cook told investors in June.
She sees 2011 and 2012 as key years for front-end engineering and design (FEED) work that industry participants hope will generate larger-scale and more lucrative engineer-procure-construct (EPC) contracts. Fluor CEO David Seaton announced a “historic” $40-billion backlog Aug. 5, noting that the firm is working on 25 oil and gas FEEDs worth in excess of $30 billion.
Major projects are growing in other places as well, from Canada to Peru to Mongolia. The $6-billion Oyu Tolgoi mine in Mongolia's Gobi Desert, about 80 kilometers from China, is touted as the world's largest undeveloped copper-gold project, with a current work force of more than 14,000, according to Ivanhoe Mines, which is developing the project with mining firm Rio Tinto. The project, which is co-owned by the Mongol government, is pushing to start commercial production in 2013. The Fluor-managed construction program now is at one-third completion, says Ivanhoe. About 100,000 cu meters of concrete had gone into building its concentrator complex by early May.
Infrastructure programs, such as Abu Dhabi's estimated $30-billion transportation buildup, also are in the giant project mix. Firms have even coined a new term for the category: gigaprojects. “We are moving into a world where the frontiers of scale and complexity will no longer be characterized by megaprojects and megaprograms but increasingly by what I call gigaprograms,” says Robert Prieto, senior vice president in Fluor Corp.'s industrial and infrastructure group. “We see new sets of non-linear scaling effects as we move from the hundreds of millions to the tens of billions. Gigaprograms require you to think about things differently.”