With limited prospects for a rebound in oil and gas prices in the near future, contractors in the sector say many clients are reducing capital expenditures and keeping budgets tight.
In 2014, the top 20 ENR-ranked contractors in the petroleum sector reported combined revenues of $54.1 billion. Last year, that tally dropped to $49.2 billion, a 9% reduction.
“Clients are reducing capital plans, and that will persist for some time,” says Jim Brittain, president of Americas energy and chemicals at Fluor. “We are having a lot of conversations about what their challenges are. Clients are looking for our ideas to help them to move projects forward, but they need better solutions to lower the capital costs.”
Despite a reduction in the number of proposed liquefied-natural-gas plants in recent years, some facilities are moving ahead. In February, Fluor was awarded a construction management contract by Sunoco Logistics for the Mariner East 2 project at its Marcus Hook Industrial Complex, located on the Delaware River in Pennsylvania. The facility is expected to provide an additional 275,000 barrels per day of natural-gas liquids for local, domestic and international distribution.
“There were plans for LNG facilities up and down the East Coast, but that kind of conversation has abated considerably,” Brittain says.
Bechtel also is banking on LNG plants to keep revenues flowing, including its work on Cheniere Energy’s liquefaction projects near Corpus Christi, Texas. Bechtel inked the $9.5-billion deal in 2013 and began work last year on the second of up to three LNG trains.
“It’s a very dynamic market right now,” says Ed Gore, manager of procurement at Bechtel. “Customers are pushing costs pretty hard, and at the same time you have a big backlog of work still being worked off. We’re busy with projects in the construction phase.” Gore says the remaining proposed LNG plants, as well as associated pipeline work, are prime targets for Bechtel. “The projects that have been announced will have complex pipeline projects associated with them,” he says. “If you watch the LNG plants that get close to FID [final investment decision], there’s a pipeline somewhere in there for someone to work on.” Bechtel is marketing its ability to be a “one-stop shop” for these projects, building both the plant and the pipelines, he adds.
At a time when budgets are tight, Burns & McDonnell also is pushing value to customers. Hoyt Brown, national business manager for terminals and pipelines, says his firm is willing to keep prices low to maintain its position in the market. “We’ve had to tighten our belts in the past two years,” he says. “We’re doing more for less because that’s what you need to do in this market. We’ve tightened up some margins, and we’re trying to be good partners with our clients.”
Rather than narrow its scope, Brown says Burns & McDonnell has expanded the range of opportunities it pursues. While some oil and gas contractors have shed staff, Burns & McDonnell has hired talent to bolster its in-house capabilities. The firm also is pursuing more operations-and-maintenance, pipeline compliance and leak-detection jobs. “It’s a lot of little work, but it adds up to a nice program,” he says.