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.

Gea merged Lurgi with its Zimmer division at the beginning of 2007, after original plans to keep the two businesses separate. This was a strategic decision partly because Lurgi did not have enough engineers. Qualified engineers are very difficult to come by in Germany. Joining the two companies has strengthened the workforce by 110 people and given the company a competitive advantage.

We know that Linde are in the final four and wouldn’t this deal be a perfect solution for the German E & C industry. Linde will receive a mention in the LNG section via their involvement in Snohvit (as Main contractor, Woodside, Sakhalin and Brunei.

Lurgi has quite a lot of things going for it and with its position in GTL with Petro and Statoil plus a legacy capability in all things coal. We are still not sure how well its mega Methanol plants are operating - but the combination would form a powerful unit.

This leaves Uhde out in the cold, or does it? There maybe difficulties with some of their Middle Eastern Ammonia plants but these are only rumours. They do have some good technology and have had a good run in Egypt, China and one or two other places. I guess we will have to see the result of the Lurgi situation before any other local moves take place.

There has been little news from Tecnimont this year suffice to say they seem to be doing what they do well and are picking up additional work to supplement an already healthy workload.

Spain is seemingly unchanged with the same old traditional faces but that ‘Paragon of the Spanish establishment’ TR has launched an IPO and since then the stock has done extremely well. A healthy workload has been supplemented by a number of additional awards in the Middle East. The high workload has continued to be supplemented by their itinerant army of Venezuelans. I did say given the aggressive sales strategy the final results remain to be seen - so far so good.

Dragados - always big in civil engineering, infrastructure and offshore fabrication have a continued appetite for the Hydrocarbon end of the E & C industry - taking risk and working with those less willing to take risk. - we are still waiting to see where this leads - I thought it might be 2005 and then 2006 but even last year there were a few awards in the Middle east but nothing to say that they were going to join the higher echelons of our industry.

Thanks to a higher profit margin stemming from a strategy of focusing on a select group of fields in which it has strength, Chiyoda was able to outperform industry leader JGC in the fiscal first half ended September 2006. Chiyoda booked a 16.6 bn yen pretax profit for the half term, compared with the 14.5 bn yen posted by JGC.

JGC recorded sales of 275.2 bn yen for the fiscal first half, about 64 bn yen more than Chiyoda. But Chiyoda's operating profit margin was 6.4%, significantly higher than JGC's 4.4%. "We focused on a few key businesses in trying to rebuild our operations," said Chiyoda Executive Vice President Hiroshi Shibata. "We sought to boost our profit margin rather than expand sales." The company is concentrating on operations where it is competitive technologically, generating roughly 70% of its total revenue from handling LNG plants and related equipment. About 60% of its total sales came from Qatar, where it could more easily boost the profit margin due to its extensive experience of doing regular business there.

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