ROD DEAN'S 2006 REVIEW

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

They remain strong in the North Sea, with 20% of there business, but also have a strong presence in the Gulf and North America, and are extending operations in Columbia, Venezuela, the Middle East, Africa and Asia-Pacific. Business was up across the three main areas of engineering and production, well support and gas turbine services.

Its manufacturing operation in China will be augmented by new facilities in Mexico and Saudi Arabia, fabricating well head valves and submersible pumps.

As well as its corporate HQ in Aberdeen and a subsidiary head office in Houston, Texas, the group now operates in 44 different countries, and employs 19,000.

Quite a story and one that has seen the stock rising well with a number of rumours of bid approaches. Well as we know and I keep repeating - many people pile in at the top of the market and with Sir Ian standing down as CEO in the New Year you never know. The Mustang purchase, some years ago is now looking good business - its all about timing as usual.

In Germany the big three have had another funny year but it seems finally to be moving towards some sort of conclusion:-
The big news in the Industrial Gases sector this year has been the acquisition of BOC by Linde for $15 - rumours of a Linde / BOC merger had continued for most of 2005 and I suppose something would ultimately take place. The (now) three main players in the sector Linde, Air Products and Air Liquide have operated in various JV arrangements with the other companies and continue to enjoy major success in their markets. LNG and GTL markets have remained robust and the general level of activity is very high across all fronts. The GTL plants utilise large scale ASU’s and there have been a couple of major awards in 2006 in the region of $1bn per plant. The fallout from the Linde / BOC deal was relatively minor with both US Anti Trust and the EU requesting relatively small divestments.

Linde sold their fork lift truck division to financial investors Kohlberg Kravis Roberts and Gold revolve around a successful start up of the much delayed Snohvit LNG plant currently in the completion stage in Hammerfest in northern Norway. We shall know in the next 3 months or so whether their seven year odyssey has been a success.

They have continued to make strong progress in the Ethylene business and have secured several substantial orders in the year.

The long awaited consolidation of the German E & C industry may be finally taking place! Gea Group AG has whittled down interested parties in buying the company's Lurgi business to four bidders and hopes to announce the buyer by the end of February. Lurgi’s value has been estimated in financial circles to be worth around - 500m Eur.

'From almost 40 bidders, they have managed to get the bidders down to six, and now have reached a final four. The bidders are made up of financial investors and companies in the same field, they are all financially strong businesses that are interested in strengthening the company, and they are optimistic that they will get a good offer.' Contrary to media reports, Russian gas giant Gazprom had not submitted a bid. Lurgi had hoped to close the deal by the end of 2006, but 'high interest' and 'complex due diligence' tests led to delays in the process. They have said that Lurgi workers should not fear job cuts following the sale of the company.

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