U.S. shale-petrochemical boom gaining steam: Fluor

HOUSTON Tue May 15, 2012 7:56am EDT

HOUSTON (Reuters) - Engineering company Fluor Corp (FLR.N) sees no signs that a shale gas-driven boom in U.S. petrochemicals will slow down, said CEO David Seaton, who now believes many of the nine proposed U.S. plants under study will get built.

Hiring enough workers to do it will be the trick. A global wave of capital investment was already leading to early signs of labor, equipment and raw material shortages, as companies gear up for stronger economic growth by mid-decade, Seaton said.

"I don't think we're returning to how hot it was in the 2007-08 time frame, but I do see escalation in the cost of commodities and fabricated equipment as we end this year, as we get into the next," Seaton told the Reuters Global Energy & Environment Summit on Monday.

Another pinch point will be construction labor, already spotted in Australia and soon to emerge in the Canadian oil sands and potentially the United States. "The 'craft' side's going to be a problem," he said.

In the U.S. chemical market, Seaton identified something in the order of nine plants under discussion, driven by cheap shale gas as a feedstock. "Going back probably six months, I was pretty skeptical that more than one or two would be built," he said, but he now saw four or five based on early Fluor studies.

Yet on the question of U.S. liquefied natural gas exports, Seaton ran against the grain of current industry chatter. He believed a gas-to-liquids plant probably made more sense because LNG export economics could be severely altered by a doubling in U.S. natural gas prices from current levels.

"When you get up to the $5-6 (per million British thermal units) range, is it competitive with base-load plants in Qatar, Australia and the like?" Seaton wondered.

Australian LNG work is part of what has driven Fluor's backlog of projects to a record as of last quarter, when it also earned better-than-expected profits.

LITTLE NUKES

Last October, Fluor bought NuScale, an Oregon company focused on a new design of small-scale nuclear plants deemed to be safer and cheaper.

Fluor is awaiting U.S. Department of Energy approval to bring in investors, and Seaton expects a first plant could be built by the end of this decade.

More such "niche" deals could come from Fluor toward the end of this year and into 2013, he told the Reuters Houston bureau by phone. "We've proven to the marketplace that we can grow quite well organically, but I would like to kind of increase that growth trajectory with a little bit of acquisitive growth."

Seaton does not, however, believe Fluor needs to do any deals to compete strongly in offshore oil and gas construction, in which the Irving, Texas-based company is doing front-end work in the Gulf of Mexico, as well as in the Middle East and Asia.

He was recently named chairman in addition to his CEO title, after Fluor split the two roles two years ago, which Seaton said was done to give the board some time to make up its mind. "The only reason they separated this time was to make sure that the board was comfortable with me in that capacity," he said.

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(Reporting by Braden Reddall and Chris Baltimore, with additional reporting by Kristen Hays, Patricia Kranz, and Michael Erman; Editing by David Gregorio and M.D. Golan)

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