Jacobs says clients unfazed by Keystone XL delay

Tue Nov 22, 2011 12:50pm EST

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(Reuters) - Jacobs Engineering Group Inc, a leading contractor in Canada's oil sands, sees the Keystone XL delay as a political decision, not technical, and expects the $7 billion pipeline will eventually be approved.

Chief Executive Craig Martin said he believes Jacobs clients in Canada will keep investing despite the setback for their ambitions to send more crude to Texas refineries.

"They're really starting to get what I would characterize as an Exxon-like attitude," Martin told analysts at a meeting in New York that was webcast. "They're in it for the long term," he said.

The U.S. State Department ordered that a new route be found for Keystone XL, delaying the project by more than a year.

Nebraska and TransCanada Corp agreed last week to find a new route for the pipeline, which would transport 700,000 barrels of crude daily, to steer clear of environmentally sensitive lands.

Martin said the delay might even create opportunities to build upgrades to partly refine more oil sands crude in Canada, where the major producers include Suncor Energy Inc, Canadian Natural Resources Ltd and Cenovus Energy Inc.

As head of the second-largest publicly traded U.S. engineering group, after Fluor Corp, Martin said his strategy for competing with big rivals is to bid for any type of work, from a $50,000 project to one worth $5 million.

"We're willing to get in on the junky, dirty part of the food chain of projects," he said, adding that this ultimately could lead to winning the big deals.

He said this had played out well in Saudi Arabia, where it was awarded a five-year deal from Aramco for general engineering and project management services (GES+), putting it among only a handful of eligible companies.

Pasadena, California-based Jacobs also has its eyes on securing more work in mining, which is seeing a boom in activity that led KBR Inc to create a new division to compete better with Fluor.

Martin said the $75 billion in anticipated investment in U.S. shale gas presented plenty of opportunities for Jacobs in its oil and gas division, as well as in chemicals because cheap natural gas was leading to a rebirth of the U.S. ethylene industry.

Jacobs, after making 65 acquisitions in the past 17 years, would also continue to hunt for deals, he said.

Asked about the European and U.S. debt struggles and the potential economic crisis, Martin said it was more "storm than substance" and was unlikely to have a major impact on Jacobs.

"I think the economies in Europe and the U.S. are going to be weak, and they're going to be weak for a decade. That doesn't mean we can't grow our business," he said. "Absent a big bust, we can continue to motor on."

In fact, looking at the local side of the economic crunch, Martin said Jacobs could provide more outsourced services for cash-strapped U.S. states and municipalities, having become a leader in Britain at such arrangements over the past decade.

(Reporting by Braden Reddall in San Francisco; Editing by John Wallace and Tim Dobbyn)

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