Every now and again we traffic in rumors here on MDN, but we do so rarely and only when we trust the source of the rumor. In mid-March we brought you juicy tidbits from a highly trusted source about the PTT Global Chemical ethane cracker project in Belmont County, OH, a rumor about why a final investment decision (FID) to proceed has been delayed (see Rumor: Holdup in PTT OH Cracker Final Decision Due to Labor Rate). Our source is back, with more juicy updates, including a bombshell…
In our March post, we told you the following:
Our impeccable source tells us that multiple reliable sources told him/her that while the engineering contract was awarded to Bechtel last year, and while Bechtel was also tapped to actually perform construction of the plant (along with Bechtel’s joint venture partner, Great Arrow Builders), Bectel’s involvement with the project is now “up in the air.” Our source says depending on who you talk to, the Bechtel contract is not just “up in the air,” but that Bechtel is out, plain and simple. Several of our source’s sources said the same thing: Bechtel is history and will not be used on the project. Why?
The reason for the rift is (we are told) because of labor rates. Bechtel allegedly is committed to using the same labor rates they are using in Beaver County, PA for the Shell cracker project. Depending on which route you take, the Shell project is about 80 miles (a 1.5 hour drive) away from the proposed PTT project. Both PTT and Daelim, according to sources, want the lower Belmont County, OH labor rates for their project.
However, Bechtel being tossed from the project is hard to believe. Daelim subleases a floor from Bechtel in Houston and reportedly has a “strong relationship” with the company. Bechtel was previously awarded the contract, Daelim likes Bechtel and Daelim is a jv partner in the project…it doesn’t quite add up that Bechtel would be cast aside.
The disagreement over which labor rate to use has supposedly pushed the contract back to Fluor Corporation, which has no labor rate obligation. However, Fluor has a “recent poor track record in mega projects” according to our source’s sources, confirmed by other outside sources. Questions about Fluor kind of tips the scale back in Bechtel’s favor–maybe Bechtel isn’t out after all?!
Our source recently sent along this update:
Bechtel is back in as the EPC [Engineering, Procurement and Construction] company for the PTT Global project. All labor issues have been solved, so Fluor is now out again. This is a good thing, as Bechtel obviously knows how to do it in this region.
Then our source added this, about the timing of an FID announcement:
PTT is saying that it likely will be September when an FID is announced.
Finally, our source dropped a bombshell–that PTT may end up having to sell the project:
Multiple players are saying that PTT and Daelim are having enough trouble with the financing (causing the September timing) that they will be forced to sell the project to a bigger player. Two super majors are sniffing around, and there is some indication that a couple other major US and European players are sniffing too.
Wow! You read it here first folks. We now have a much better understanding of why an FID has been delayed time and again.
Committing something like $6 billion (or more) is the kind of decision that, if wrong, can kill a company. We understand, it’s an approach/avoidance thing.
Apparently the holdup on the FID is the inability to put enough money together to get it done.
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