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. We such a rumor to share, from a source we trust implicitly. We’ve been carping for over a year that PTT Global Chemical has repeatedly violated our deep well of patience by hinting that a “final investment decision” (FID) is “coming soon” for their $7-$10 billion ethane cracker complex in Belmont County, OH (see Still No Ohio Cracker Announcement, Preparations Continue). We now know why the FID is tardy.
In September 2015, PTT announced it was spending $100 million with two companies on potential designs for their multi-billion dollar project (see PTT Announces 2 Contractors Working on Belmont Cracker Plant). The two engineering companies selected to provide “front-end engineering design work and cost estimates” were Bechtel and Fluor Corporation. Essentially it was a “bake off” contest to see which set of plans would win. Somewhat related and also of interest is that Bechtel is the company contracted to build the Shell ethane cracker in Monaca, PA.
One year ago PTT took on a joint venture partner, South Korea’s Daelim Chemical, a subsidiary of Daelim Industrial (see PTT Global Ohio Cracker Grows to $10B Project w/New Partner). This has a bearing on our rumor.
Last June, PTT awarded the engineering contract to Bechtel (see PTT Awards Belmont Cracker Engineering Contract to Bechtel), which also has a bearing on our rumor.
Fast Forward to Today:
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?!
With all that said, the labor rate dispute is certainly a reason, perhaps the reason why an FID is delayed. One source noted that PTT/Daelim financing for the project is so complex and has so many contingencies, that any material change, like labor rates, puts the financing deal in jeopardy.
We’ll keep an ear to the ground for more developments.
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