ROD DEAN'S 2006 REVIEW

** THESE PAGES WILL BE UPDATED WITH ROD DEAN'S 2007 REVIEW SOON **

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E & C Hydrocarbon Review - The Global view from Europe. Looking back on 2006 & ahead to 2007.

OK I know it’s late! But with TIC‘s doubling and sometimes trebling and schedules extending by 30% these factors affect the schedules of E & C industry scribes as well.! As each week has passed by in 2007 something out of the ordinary has happened. Giants have been toppled; acquisitions have taken place that on a P / E basis make you think ‘What is going on here’? We still wait to see the effect of our more reckless peers risk taking in 2004 and 2005 coming home to roost - well I have yet to see a single chicken! But I have seen a host of margins lurking around the 2-3% mark - which given the risks some of these companies take with LSTK contracting seems pretty meagre. Some of these companies are assisted by healthy margins enjoyed by the more sexy ‘Surf’ business which can generate margins in the region of 10-15% so that can keep the wolf from the door a little longer.

Anyway I am delighted to be able to present my 15th annual review of the International E & C Hydrocarbon industry and hope that in these unusual times I can highlight some of the major events that may enable us to understand the trends that point to the shape and size of our industry in the future and for those of us who are still gainfully employed to make strategic decisions that can prepare the ground so that we are able face up to and meet the challenges ahead.- and frankly they remain challenges.

Apologies for the two month delay (partly explained above) but I guessed there would be some very important events in our industry that could change the way we look at the future and sure enough the passing of Lord Titan, although not a massive shock, the timing was perceived by many to be somewhat premature and the shockwaves have been reverberating around the industry since then. Although everyone appears to be putting on a brave face and the financial results have been done and dusted with little damage to the stock price.

The Russians have been involved in a little bit of old style brinkmanship which must have most of the IOC’s scratching their heads and a number of contractors who have been following in their wake also wondering what’s going on, It’s back to our old friend LT, who has put a lot of faith and money into the land of the bear, now he is going his so called ‘hot line’ to the Kremlin may be a thing of the past. I also the future of TNK BP may be in doubt - certainly as far as the shareholding is concerned.. Shell has certainly had a rough ride in the Far East but seem to be sticking with it - what is clear is that the upper hand will be held by Gazprom and Rosneft in the future.

A new member of the LNG Club has also arrived and from the somewhat unfashionable surroundings of London W2 - although Paddington itself has been changing (and is no longer unfashionable). As I walked up Eastbourne Terrace recently the vista of glittering new office and apartment blocks was a big change to when I first walked down the same street some 33 years ago to pledge allegiance to this wonderful industry. In those days you were more likely to bump into Yootha Joyce rather than Don Hill! How times change. Offshore was the game in town then and Brown & Root and McDermott’s were the big names - the rest of us played the UK card and with the volumes of work so great we picked it up as we went along. Exciting days though - a latter day Klondike with all sorts of ‘chancers’ playing their cards as ‘Planners’ ‘Cost Engineers’ and other more rarefied titles. So that era came and went - but now we are in a much larger global boom (much much larger that the North Sea that I was lucky enough to be part of in the 70’s and early 80’s). I remember the (then) head of the John Brown Company ( a chap with a double barrelled name) said to us ‘ You know that this offshore game is a mere bubble - it won’t last’ Well e said that in 1975 or 1976, none of us believed him , but he was right.

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