Bechtel's William Dudley is the president of two Bechtel Global Business Units: Petroleum and Chemicals (P&C) and Pipelines. Together these two GBUs are slated to earn the company $2.5 billion in revenues in 2003.
Essentially, it is Dudley who is in charge of providing engineering and construction services for the development of hydrocarbon resources around the world (Bechtel also serves the electric power generation, telecommunications, mining and civil infrastructure sectors).
Bechtel's hydrocarbon development work covers the spectrum from wellhead (drilling excepted) through end-use applications in chemical and petrochemical plants. Major offices are in Houston (headquarters), London, Calgary and New Delhi. About 80 percent of the revenue derives from overseas projects.
"Most of the work outside the United States involves development of new oil and gas fields, and in delivery systems," says Dudley from his Houston headquarters. "The hottest commodity is natural gas.
Over the past few years, major energy companies have been focusing a large portion of their technical and financial resources on bringing new natural gas supplies to market. As a result, we've become heavily involved in natural gas projects such as liquefied natural gas (LNG) plants, gas processing plants and pipelines. For example, Bechtel is involved in major LNG projects in Trinidad, Egypt, northern Australia and western Africa."
At such sites, Bechtel is usually working with a consortium specially incorporated to handle the large development project. In most cases the consortium will include one or more international petroleum companies and the petroleum company of the host country. In Egypt, for example, Bechtel is building a grassroots LNG plant for a consortium that includes British Gas, Edison Gas, the Egyptian Gas Authority and Gaz de France.
"We are not doing as much work in the U. S. as we've done in the past," Dudley admits. "There haven't been many grassroots projects to pursue. Most of our recent U. S. work has involved refinery modifications designed to help our customers comply with environmental requirements. Examples are the series of low sulfur gasoline and low sulfur diesel fuel projects we're currently doing for Shell at five refineries.
"Political instability, market uncertainties and growing environmental concerns have also combined to reduce the level of opportunity available to Bechtel in the pipeline business over the past few years," Dudley says. "Nevertheless, we're watching the market closely and we're ready to pursue attractive pipeline projects anywhere in the world."
Presently Bechtel's biggest pipeline project is in Algeria where it is building a 470-mile natural gas pipeline from the In Salah gas field to Hassi R'Mel, a major gas gathering and distribution center. The pipeline runs through an astonishing array of challenges, including hard rock, sand dunes 120 feet high, and summer temperatures reaching 120 degrees. The developer is British Petroleum and Sonatrach, Algeria's national oil and gas company. Bechtel expects to contract for other work in Algeria as the country continues to exploit gas resources located further out in its vast southern desert.
LNG is the fastest
growing segment of the energy industry. Bechtel has been involved with
LNG since its early days and has built roughly 40 percent of the world's
current LNG capacity. In 1969, Bechtel built the Kenai, Alaska, LNG plant
for Phillips Petroleum using their Cascade process for liquefying natural
Bechtel has been working with ConocoPhillips to further develop the process ever since.
"LNG is more competitive than it used to be," Dudley points out. "We believe we had something to do with that. Before Bechtel and ConocoPhillips entered the market with the Optimized Cascade Process, LNG was perceived to be very expensive. In the early 1990s, the market was dominated by one technology, and liquefaction plant costs ranged from $300 to $500 per ton of installed capacity. When we came in, we brought the price of liquefaction plants down to under $200 per ton, making LNG more competitive as an energy source. The Atlantic LNG plant in Trinidad was a major factor in the revitalization of the previously dormant LNG market in the Atlantic basin. This is a major reason why you see a lot more LNG activity today. LNG plant sizes are increasing also. Not long ago plant capacity was in the range of two million tons per year but are now in the three- and four-million-ton range. Our latest LNG train, which is in the early stages of construction, has a capacity of about five million tons a year and we are now designing plants with capacities of three and eight million tons a year.
"We have a good deal to offer with the Optimized Cascade process," Dudley continues "We believe we can build the plants more quickly and come in at a lower price. We also believe a plant with this process offers greater reliability than the competition. For all these reasons we are very competitive in the marketplace. Our project in Egypt we believe is going to be the fastest project every built - from initial planning to completion. Partly this owes to the fact that British Gas knew our capabilities and was willing to sole-source us for the project. This saved a good deal of time."
For more than a century Bechtel has prided itself in completing outstanding work in difficult terrain and under harsh conditions. Nevertheless it is always looking to build faster, and make plants that are less expensive than projects done before them by competitors. Bechtel tends to stress what it calls front-end optimization, that is, putting lots of emphasis on planning and design early on. As Dudley quickly points out, "Activities undertaken in the early stages of a project have the greatest impact on cost and schedule."
The Atlantic LNG project in Trinidad certainly showed how good planning, cost cutting and front-end optimization could help a business break away from the norm. When the project began in the early 1990s, the hope was that Trinidad's natural gas could be developed for shipment to the United States and Europe. At the time, few people in the LNG world believed that such a project could be economical Ñ it would require a major shift from the paradigm of high-cost LNG. When Bechtel won the engineering, procurement and construction (EPC) work and began construction in 1996, the project represented the largest single investment ever made in the Caribbean.
"We really had to show that we could keep costs down," says Dudley. "For the Trinidad project, we built a three-million-ton-per-year plant for about $600 million (EPC cost). The total cost to the owners including financing was about $1 billion. A major factor in our success was the "two-in-one" reliability feature built into the ConocoPhillips Optimized Cascade Process. The plant was designed with two 50-percent gas turbine compressor trains for each refrigerant unit. In the event that one gas turbine goes down, the plant could be re-balanced to operate at about 70-percent capacity until the turbine is brought back on stream. This feature, which was pioneered in the Kenai, Alaska, plant, enabled the owners to become comfortable with a single-train plant, thus achieving significant cost reductions. It also has allows plants of this design to operate at availabilities of over 95 percent, the highest in the world. The Kenai plant has not missed a single LNG shipment to Japan in 34 years."
Bechtel also builds LNG receiving terminals. It was responsible for the design and construction of the first terminals to be built on the East Coast of the U.S., at Elba Island, S.C. As Dudley points out, "Since LNG ships cannot pass through the Panama Canal, there are two distinct markets for LNG - the Atlantic and the Pacific. The Atlantic market has been more developed than the Pacific market. We would like to see permits obtained for projects on the Pacific Coast, where there are now no receiving terminals.