Oil and Gas

Fluor says cheap shale gas a hurdle for US nuclear

* International nuclear power prospects remain strong

* Any Fluor acquisitions unlikely to be “front page” news

* Rival KBR vows to deploy cash or return it to investors

SAN FRANCISCO, Sept 28 (Reuters) - Fluor Corp FLR.N, the largest publicly traded U.S. engineering company, said low natural gas prices resulting from a glut of shale production were holding back the development of U.S. nuclear power.

Extensive drilling in shale rock has unlocked a massive amount of U.S. natural gas, weighing down prices despite a bounce in other commodity prices in the past year.

Fluor Chief Executive Alan Boeckmann said on Tuesday that as long as there was no extra cost paid for carbon emissions in the United States, the economics of building plants to burn cheap natural gas would remain better than that of nuclear.

He also talked of “fairly severe” downward pricing pressure in oil, gas and petrochemicals work due to Asian competition, though mining remained a strong area for new project awards.

Nuclear power’s prospects outside the United States were also strong, but in Fluor’s home market the business had hit a “bump in the road,” Boeckmann said.

“The emergence of the tremendous volumes of shale gas which have kept prices low -- and looks like it will keep them low for a very long time in the future -- really has started to knock the legs out from under the U.S. nuclear industry,” he told the D.A. Davidson & Co Engineering and Construction Conference in San Francisco.

The nuclear power cycle, from the generation and handling of the fuel to power plant construction, remains a target area for acquisitions for Fluor, along with offshore oil and gas and global infrastructure, Boeckmann said.

But he explained that the size of any acquisition would not be “front page” news, saying it would likely range from, say, $80 million to between $600 million and $700 million.

Bill Utt, CEO of rival KBR Inc KBR.N, is also keen to deploy some of its cash pile given the negligible rates of return the money earns due to rock-bottom interest rates.

“We’re not going to high-five around KBR about that,” Utt told the conference, promising to return cash to shareholders if the company could not find a better use for it. (Reporting by Braden Reddall; Editing by Derek Caney)