The document summarizes the state of the engineering, procurement, and construction (EPC) industry as presented by Ed Cloutier. Global demand for EPC projects has tripled in the past two years, with growth in upstream oil and gas and downstream refining and petrochemicals. However, there is a worldwide shortage of engineering and management talent that could limit projects and force companies to increase wages and retain older employees. While EPC projects are becoming larger and more selective, operating companies are taking on more proposal costs due to limited qualified bidders. Overall the EPC industry is in a turnaround position and markets should remain strong for the next ten years, but human resources availability remains a major restraint.
The document summarizes the state of the engineering, procurement, and construction (EPC) industry as presented by Ed Cloutier. Global demand for EPC projects has tripled in the past two years, with growth in upstream oil and gas and downstream refining and petrochemicals. However, there is a worldwide shortage of engineering and management talent that could limit projects and force companies to increase wages and retain older employees. While EPC projects are becoming larger and more selective, operating companies are taking on more proposal costs due to limited qualified bidders. Overall the EPC industry is in a turnaround position and markets should remain strong for the next ten years, but human resources availability remains a major restraint.
The document summarizes the state of the engineering, procurement, and construction (EPC) industry as presented by Ed Cloutier. Global demand for EPC projects has tripled in the past two years, with growth in upstream oil and gas and downstream refining and petrochemicals. However, there is a worldwide shortage of engineering and management talent that could limit projects and force companies to increase wages and retain older employees. While EPC projects are becoming larger and more selective, operating companies are taking on more proposal costs due to limited qualified bidders. Overall the EPC industry is in a turnaround position and markets should remain strong for the next ten years, but human resources availability remains a major restraint.
The document summarizes the state of the engineering, procurement, and construction (EPC) industry as presented by Ed Cloutier. Global demand for EPC projects has tripled in the past two years, with growth in upstream oil and gas and downstream refining and petrochemicals. However, there is a worldwide shortage of engineering and management talent that could limit projects and force companies to increase wages and retain older employees. While EPC projects are becoming larger and more selective, operating companies are taking on more proposal costs due to limited qualified bidders. Overall the EPC industry is in a turnaround position and markets should remain strong for the next ten years, but human resources availability remains a major restraint.
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STATE OF THE EPC
INDUSTRY Presented by
Ed Cloutier President American Executive Management
Rice Global E&C Forum 2005
October 11, 2005 STATE of EPC MARKETS
z GLOBAL EPC PROJECTS DEMAND HAS
TRIPLED OVER THE PAST TWO YEARS. z HOT MAJOR MARKETS; z INTERNATIONAL - UPSTREAM OIL & GAS z DOMESTIC – DOWNSTREAM REFINING PETROCHEMICALS z UPSTREAM & DOWNSTREAM WILL CONTINUE TO GROW OVER NEXT 10 YEARS PROVIDED MANPOWER EXISTS TO EXECUTE PROJECTS HUMAN RESOURCES IN CRISIS
z WORLDWIDE SHORTAGES OF ENGINEERING
AND TECHNICAL MANAGEMENT TALENT CURRENTLY AFFECTING EPC , OWNERS AND VENDORS -- WILL CONTINUE z PROJECTS WILL NOT START-- SOME WILL BE ABANDONED DUE TO UNAVAILABLE TALENT z THE INDUSTRY WILL BID UP WAGES / SALARIES RAID COMPETITORS, OUTSOURCE PROJECTS AND RETAIN OLDER EMPLOYEES. STATE OF EPC PROJECTS
z 90 % OF EPC PROJECTS ARE OUTSIDE THE USA
NEW PROJECT OPPORTUNITIES OUTSTRIPPING EPC CAPABILITIES WORLDWIDE z PROJECTS GETTING VERY LARGE AND HAVE HIGH PROPOSAL COSTS z EPC FIRMS NOW ARE MORE SELECTIVE OF WHICH PROJECTS TO GO AFTER z OPERATING COMPANIES PICKING UP MORE PROPOSAL COSTS DUE TO LIMITED NUMBER OF QUALIFIED EPC FIRMS WHO CAN BID z EPC FIRMS GETTING COST REIMBURSABLE AND MEANINGFUL RISK SHARING PROJECTS STATE OF COMPETITION
z EPC IS A SELLERS MARKET WORLDWIDE
z HALF OF THE EPC FIRMS WORLDWIDE WERE STRUGGLING TO STAY ALIVE UNTIL 2005 z INTERNATIONALLY WELL MANAGED FIRMS SUCH AS BECHTEL,MUSTANG,TECHNIP ,KBR AND JGC CONTINUE TO DO WELL z DOMESTICALLY JACOBS , CDI , PARAGON AND COMMONWEALTH ARE IMPROVING THEIR POSITION z NEW COMPETITION – KIEWIT AND WGI z ACQUISITIONS WILL CONTINUE z WESTERN EPC FIRMS DOMINATE LARGE PROJECT MANAGEMENT PROGRAMS STATE OF COMPETITION -- 2
z GLOBAIZATION OF THE INTERNATIONAL EPC INDUSTRY
NEEDS TO IMPROVE z LUMP SUM WORK DOMINATES IN THE MID EAST z CHINA IN COUNTRY IS DOING WELL– NOT SO IN THE INTERNATIONAL EPC MARKETS z GOOD CONSTRUCTION COMING FROM PHILIPPINES, KOREA, PAKISTAN,TURKEY AND THAILAND z SEVERAL EPC FIRMS PULLING OUT OF SOUTH AMERICA z HOUSTON IS NOW THE LOW COST ENGINEERING CENTER IN THE USA z EPC ADVANTAGE WILL COME FROM TECHNICAL INNOVATION OVER COST CUTTING z MOST US EPC FIRMS WILL BE MORE PROFITABLE PERFORMING COST PLUS CONTRACTING STRATEGIC ISSUES
z EPC AND OPERATING COMPANY MANAGEMENT IS NOT AS
EXPERIANCED OR AUTONOMUS AS IN THE 80’S z OPERATING COMPANIES NEED COMPETENT EPC FIRMS MORE THAN EVER z OWNER OPERATORS NEED TO ENGAGE EPC MANAGEMENT IN MEANINGFUL BUSINESS DIALOGUE z EPC FIRMS WILL EXCELL WITH “BEST”TECH / ALLIANCES z SALESMEN NEED TO BE CAPABLE BUSINESSMEN z “OPENBOOK” RELATIONSHIPS WILL DOMINATE z I T AND MANAGEMENT SYSTEMS WILL BE KEY OFFERINGS z COMPETENT HR MANAGEMENT IS NOW MANDITORY z MARKET OPPORTUNITIES ABOUND RECAP
z THE EPC INDUSTRY IS IN A TURNAROUND POSITION AND
WILL DO MUCH BETTER IN THE FUTURE z THE EPC INDUSTRY HAS LESS COMPETITION AND IS BECOMING MORE CLIENT SELECTIVE z OVERALL MARKETS SHOULD BE EXCELLENT OVER THE NEXT TEN YEARS z OWNER/OPERATORS WILL NEED TO PAY FOR MAJOR INTERNATIONAL PROJECT PROPOSALS AND IMPROVE BUSINESS RELATIONSHIPS WITH EPC FIRMS z HUMAN RESOURCES WILL BE THE MAJOR FACTOR RESTRAINING EPC/OPERATING COS. IN THE FUTURE z EPC TOP MANAGEMENT MUST DEVELOP STRATEGIC PLANS FOR SUCCESS AND BEST PROFITABILITY THE STATE OF THE EPC INDUSTRY IS GOOD AND GETTING BETTER
