Process plans unlimited
15 Aug 2007
Patrick Raleigh interviews Foster Wheeler executives on the technologies and commercial trends behind the current wave of investment in new process facilities in the Middle East, China and other global regions
Foster Wheeler's Global Engineering & Construction (E&C) Group is one of only a few players able to compete in the rarefied global business of delivering technically complex, mega-scale process plants around the world today.
The Global E&C Group comprises four operating units; UK-based Foster Wheeler Energy Ltd (FWEL) and three other units headquartered in Houston, Milan and Singapore.
FWEL is focused principally on projects in the upstream oil & gas, liquefied natural gas (LNG), petrochemicals, refining and pharmaceuticals sectors, as well as emerging markets such as gas-to-liquid (GTL), coal-to-liquid (CTL) and carbon capture and storage (CCS).
Under-pinning FWEL's capabilities is a huge process engineering resource that carries out the study and process design phase, or FEED (front-end engineering and design). The UK operation includes around 400 degree-qualified chartered chemical engineers. The acid test for the company, however, is during the engineering, procurement and construction (EPC) activities, which are often carried out in the more remote and challenging environments of the world.
"This is an exciting time for us," commented Steve Davies, chairman and chief executive of FWEL, in an interview at the company's Reading headquarters.
Reviewing the global process market, Davies said the company has a very strong focus on serving clients in its core markets. At the same time, he added, "it is important that we also have an eye on the future, positioning ourselves to compete strongly in emerging technologies."
Meanwhile, FWEL's major customers are currently being challenged to adapt their upstream, midstream, and downstream refining and chemicals portfolios in response to the commercial and environmental pressures that are reshaping the process market landscape.
Davies cites "one or two" international oil companies (IOCs) as "probably leading the pack" in this regard, for instance, through their development of a renewables focus:
"We're also seeing these companies adjusting their business stream - possibly divesting parts of their chemicals activities and even some of their refineries. They are moving in a different direction to most IOCs."
For its part, FWEL has responded to such trends by developing a Mid-Stream operating group, which unites its LNG, GTL, CTL, gasification, and CCS expertise. One of the main goals is to enhance FWEL's established capability in these key sectors through leveraging its experience in more traditional technologies.
"There are a lot of similarities in the project work that FWEL carries out across its mid-stream business," explains Andy Hemingway, who heads the group.
"These projects are all big, they are all complicated and they all need quite a degree of integration and optimisation to make them fly economically. The more you can get the Capex and Opex of these facilities down, the more chance you have of the projects going ahead. This also needs to be coupled with innovative execution strategies to reduce time to market," he said.
For example, GTL typically involves gas treatment, Fischer-Tropsch units to convert the gas to a liquid and a refinery section to produce finished products, said Hemingway. "That's a series of units with, for example, a lot of heat sources and sinks that you can integrate to reduce the overall size and cost of the facilities and also bring down the operating costs."
According to Davies, LNG and GTL projects are the "big elephants" in the market.
Very few E&C construction contractors are accepted by customers as having the capabilities to deliver these projects. On the other hand, he said, very few of these multi-billion dollar projects are sanctioned each year.
FWEL is established in the LNG liquefaction business having last year completed the EPC phase of Qalhat LNG in Oman — Foster Wheeler previously having completed the two trains for Oman LNG, and having recently completed the FEED for Nigeria LNG's SevenPlus project. Producing 8.5 million tonnes of LNG per annum from a single train, the two eventual, planned trains will be the largest in the world.
Davies went on to highlight how FWEL developed a pioneering approach to deliver the North West Shelf Train V project, which involved adding 4.2 million tonnes of extra capacity to the Woodside-operated LNG facility at Karratha, Western Australia.
Due to overheating in the construction market in Australia at the time, FWEL opted to build the facility in 75 huge modules at a yard in Batam, Indonesia and ship them to the Australian site.
This 'modularisation' approach had never been implemented on an LNG project anywhere in the world, said Davies, noting that the last module had just recently been shipped to Karratha. "It is an innovative strategy, and we wouldn't want to contemplate what the schedule or the cost would have been in today's market had we not adopted that approach at Karratha."
FWEL also did the study and engineering design for a Sasol/QP ORYX GTL facility in Qatar and an Escravos GTL facility in Nigeria.
"Of course, we would like to establish ourselves as a key EPC player in GTL like we already are in LNG, but GTL is still very much a development issue for most clients with only a single operating plant in the world outside of South Africa," said Hemingway.
Of the emerging mid-stream business areas, FWEL sees CTL as offering one of the biggest new opportunities going forward. The company is involved in a number of studies in this area, though the managers declined to identify its customers involved.
However, FWEL has previously announced the award of a feasibility study from Sasol, which has been considering building two 80,000 b/d CTL plants in China, among other projects.
CTL comprises an integrated process for converting coal into fuel products including diesel, naphtha and liquefied petroleum gas, via three principal processes: gasification of coal to synthesis gas, conversion of gas to liquids and hydroprocessing into final products. A central technology for the CTL process is Sasol's Fischer-Tropsch process for converting synthesis gas to liquid fuels.
"CTL could be bigger than GTL in the long term," said Carolyn Greenhalgh, director, corporate communications & global marketing at FWEL. It is impossible, she said, to predict the speed at which CTL might develop, but the drivers are compelling: countries with massive indigenous reserves of coal, such as China, the US and India, that are currently heavily reliant on imports to meet their transportation fuel requirements.
FWEL is, likewise, confident about the future role for CCS technology in the process facilities of the future, according to Hemingway: "You will see a lot of new facilities being designed [carbon] capture-ready so they have half a mind on the future. It is inevitable that this will be a big market."
For instance, FWEL has been involved with BP and its partners in the DF1 project at Peterhead, Scotland, which was developing the world's first industrial-scale project to generate electricity using hydrogen manufactured from natural gas to create "decarbonised fuels."
The project planned to create 475 megawatts of carbon-free electricity and permanently store 1.8 million tonnes of CO2. BP and Rio Tinto announced on 17 May, the formation of a new jointly-owned company, Hydrogen Energy, which will develop decarbonised energy projects around the world.
According to a BP statement, the company's previously announced hydrogen-fuelled power projects will now become part of Hydrogen Energy (see news story p6).
FWEL remains very active in the emerging CCS market, Davies emphasising : "It's a business line that we see as important moving forward and we are involved in the front end of some of those projects.
"But the economics ultimately need to be supported by giving a value for the CO2 in some shape or form - for example, through credit or enhanced oil recovery."
Meanwhile, the more established areas of a global E&C market are currently benefiting from one of the most robust ever up-cycles — fuelled largely by burgeoning demand in China.
In the traditional chemicals investment cycle, for instance, the dynamic has typically been one of "boom and bust" with overbuilding leading to product oversupply and product price falls, followed by a sharp decline in investment until demand growth drove new investment. It has not been unknown for plants to be mothballed soon after being built.
But, said Davies: "We started to be involved in the FEEDs for the current wave of investment in major petrochemical projects in early 2004 and are still seeing FEEDs for further new facilities being awarded three years later, which is probably unheard of."
The initial wave was olefins complexes - ethane-based crackers and then mixed feedstock crackers, together with units producing the fundamental chemical building blocks," added Greenhalgh.
"But Middle East countries are now looking to diversify even further downstream into speciality chemicals, engineering polymers, etc. This is further sustaining and extending the investment wave," she said.
FWEL also sees a lot of activity in the refining industry; with expansions, upgrades and grassroots facilities emerging in the sector, which for years has failed to generate the margins needed for investment in new capacity.
According to Davies, Hurricane Katrina forced the issue by showing just how little spare capacity there was, both in the US and the global refining system. Owners, he said, are now moving to create more capacity, for example, to make up a shortfall in transportation fuels, to reduce fuel oil production, or enable the refinery to process cheaper, heavier crudes, which are trading at a discount to lighter, sweeter crudes. "So from almost nothing, we are seeing a cycle of investment in refinery projects."
In the upstream market, likewise, official figures from the US government's Energy Information Administration forecast sustained growth in oil demand; from 85 million barrels/day in 2006, to 98 million b/d in 2015 and 118 million b/d in 2030.
Major investment will be needed to meet this increasing demand and to replace supplies lost as production from existing mature fields declines.
"When you add the new crude supplies required to meet the projected demand growth to those required to replace declining production from mature fields, it's fair to say that the fundamentals are in place to support considerable and sustained investment in upstream oil and gas," Davies concluded.
The Global E&C Group comprises four operating units; UK-based Foster Wheeler Energy Ltd (FWEL) and three other units headquartered in Houston, Milan and Singapore.
FWEL is focused principally on projects in the upstream oil & gas, liquefied natural gas (LNG), petrochemicals, refining and pharmaceuticals sectors, as well as emerging markets such as gas-to-liquid (GTL), coal-to-liquid (CTL) and carbon capture and storage (CCS).
Under-pinning FWEL's capabilities is a huge process engineering resource that carries out the study and process design phase, or FEED (front-end engineering and design). The UK operation includes around 400 degree-qualified chartered chemical engineers. The acid test for the company, however, is during the engineering, procurement and construction (EPC) activities, which are often carried out in the more remote and challenging environments of the world.
"This is an exciting time for us," commented Steve Davies, chairman and chief executive of FWEL, in an interview at the company's Reading headquarters.
Reviewing the global process market, Davies said the company has a very strong focus on serving clients in its core markets. At the same time, he added, "it is important that we also have an eye on the future, positioning ourselves to compete strongly in emerging technologies."
Meanwhile, FWEL's major customers are currently being challenged to adapt their upstream, midstream, and downstream refining and chemicals portfolios in response to the commercial and environmental pressures that are reshaping the process market landscape.
Davies cites "one or two" international oil companies (IOCs) as "probably leading the pack" in this regard, for instance, through their development of a renewables focus:
"We're also seeing these companies adjusting their business stream - possibly divesting parts of their chemicals activities and even some of their refineries. They are moving in a different direction to most IOCs."
For its part, FWEL has responded to such trends by developing a Mid-Stream operating group, which unites its LNG, GTL, CTL, gasification, and CCS expertise. One of the main goals is to enhance FWEL's established capability in these key sectors through leveraging its experience in more traditional technologies.
"There are a lot of similarities in the project work that FWEL carries out across its mid-stream business," explains Andy Hemingway, who heads the group.
"These projects are all big, they are all complicated and they all need quite a degree of integration and optimisation to make them fly economically. The more you can get the Capex and Opex of these facilities down, the more chance you have of the projects going ahead. This also needs to be coupled with innovative execution strategies to reduce time to market," he said.
For example, GTL typically involves gas treatment, Fischer-Tropsch units to convert the gas to a liquid and a refinery section to produce finished products, said Hemingway. "That's a series of units with, for example, a lot of heat sources and sinks that you can integrate to reduce the overall size and cost of the facilities and also bring down the operating costs."
According to Davies, LNG and GTL projects are the "big elephants" in the market.
Very few E&C construction contractors are accepted by customers as having the capabilities to deliver these projects. On the other hand, he said, very few of these multi-billion dollar projects are sanctioned each year.
FWEL is established in the LNG liquefaction business having last year completed the EPC phase of Qalhat LNG in Oman — Foster Wheeler previously having completed the two trains for Oman LNG, and having recently completed the FEED for Nigeria LNG's SevenPlus project. Producing 8.5 million tonnes of LNG per annum from a single train, the two eventual, planned trains will be the largest in the world.
Davies went on to highlight how FWEL developed a pioneering approach to deliver the North West Shelf Train V project, which involved adding 4.2 million tonnes of extra capacity to the Woodside-operated LNG facility at Karratha, Western Australia.
Due to overheating in the construction market in Australia at the time, FWEL opted to build the facility in 75 huge modules at a yard in Batam, Indonesia and ship them to the Australian site.
This 'modularisation' approach had never been implemented on an LNG project anywhere in the world, said Davies, noting that the last module had just recently been shipped to Karratha. "It is an innovative strategy, and we wouldn't want to contemplate what the schedule or the cost would have been in today's market had we not adopted that approach at Karratha."
FWEL also did the study and engineering design for a Sasol/QP ORYX GTL facility in Qatar and an Escravos GTL facility in Nigeria.
"Of course, we would like to establish ourselves as a key EPC player in GTL like we already are in LNG, but GTL is still very much a development issue for most clients with only a single operating plant in the world outside of South Africa," said Hemingway.
Of the emerging mid-stream business areas, FWEL sees CTL as offering one of the biggest new opportunities going forward. The company is involved in a number of studies in this area, though the managers declined to identify its customers involved.
However, FWEL has previously announced the award of a feasibility study from Sasol, which has been considering building two 80,000 b/d CTL plants in China, among other projects.
CTL comprises an integrated process for converting coal into fuel products including diesel, naphtha and liquefied petroleum gas, via three principal processes: gasification of coal to synthesis gas, conversion of gas to liquids and hydroprocessing into final products. A central technology for the CTL process is Sasol's Fischer-Tropsch process for converting synthesis gas to liquid fuels.
"CTL could be bigger than GTL in the long term," said Carolyn Greenhalgh, director, corporate communications & global marketing at FWEL. It is impossible, she said, to predict the speed at which CTL might develop, but the drivers are compelling: countries with massive indigenous reserves of coal, such as China, the US and India, that are currently heavily reliant on imports to meet their transportation fuel requirements.
FWEL is, likewise, confident about the future role for CCS technology in the process facilities of the future, according to Hemingway: "You will see a lot of new facilities being designed [carbon] capture-ready so they have half a mind on the future. It is inevitable that this will be a big market."
For instance, FWEL has been involved with BP and its partners in the DF1 project at Peterhead, Scotland, which was developing the world's first industrial-scale project to generate electricity using hydrogen manufactured from natural gas to create "decarbonised fuels."
The project planned to create 475 megawatts of carbon-free electricity and permanently store 1.8 million tonnes of CO2. BP and Rio Tinto announced on 17 May, the formation of a new jointly-owned company, Hydrogen Energy, which will develop decarbonised energy projects around the world.
According to a BP statement, the company's previously announced hydrogen-fuelled power projects will now become part of Hydrogen Energy (see news story p6).
FWEL remains very active in the emerging CCS market, Davies emphasising : "It's a business line that we see as important moving forward and we are involved in the front end of some of those projects.
"But the economics ultimately need to be supported by giving a value for the CO2 in some shape or form - for example, through credit or enhanced oil recovery."
Meanwhile, the more established areas of a global E&C market are currently benefiting from one of the most robust ever up-cycles — fuelled largely by burgeoning demand in China.
In the traditional chemicals investment cycle, for instance, the dynamic has typically been one of "boom and bust" with overbuilding leading to product oversupply and product price falls, followed by a sharp decline in investment until demand growth drove new investment. It has not been unknown for plants to be mothballed soon after being built.
But, said Davies: "We started to be involved in the FEEDs for the current wave of investment in major petrochemical projects in early 2004 and are still seeing FEEDs for further new facilities being awarded three years later, which is probably unheard of."
The initial wave was olefins complexes - ethane-based crackers and then mixed feedstock crackers, together with units producing the fundamental chemical building blocks," added Greenhalgh.
"But Middle East countries are now looking to diversify even further downstream into speciality chemicals, engineering polymers, etc. This is further sustaining and extending the investment wave," she said.
FWEL also sees a lot of activity in the refining industry; with expansions, upgrades and grassroots facilities emerging in the sector, which for years has failed to generate the margins needed for investment in new capacity.
According to Davies, Hurricane Katrina forced the issue by showing just how little spare capacity there was, both in the US and the global refining system. Owners, he said, are now moving to create more capacity, for example, to make up a shortfall in transportation fuels, to reduce fuel oil production, or enable the refinery to process cheaper, heavier crudes, which are trading at a discount to lighter, sweeter crudes. "So from almost nothing, we are seeing a cycle of investment in refinery projects."
In the upstream market, likewise, official figures from the US government's Energy Information Administration forecast sustained growth in oil demand; from 85 million barrels/day in 2006, to 98 million b/d in 2015 and 118 million b/d in 2030.
Major investment will be needed to meet this increasing demand and to replace supplies lost as production from existing mature fields declines.
"When you add the new crude supplies required to meet the projected demand growth to those required to replace declining production from mature fields, it's fair to say that the fundamentals are in place to support considerable and sustained investment in upstream oil and gas," Davies concluded.
