SNC-Lavalin sees LNG plant opportunities amid low global oil prices
Friday, May 19, 2017
Canada’s SNC-Lavalin aims to take advantage of the weak oil price and growing investment in LNG and other gas projects to win new engineering and construction contracts.

Global oil prices are still in the throes of a two-and-a-half year plunge. After reaching monthly peaks of US$112 per barrel and US$105 per barrel in June 2014, crude oil benchmarks Brent and West Texas Intermediate (WTI) fell to US$62 per barrel and US$59 per barrel that December respectively.

Prices are still low, with Brent currently trading around US$52 per barrel, and WTI just under US$50 per barrel, as OPEC production cuts have not been enough to offset gains from US shale producers.

“I kind of hope that oil will not get back to US$100 because it will increase opportunities in other areas,” SNC-Lavalin oil and gas head Mark Adler told Reuters.

“We are quite big on gas, so if there is a move to gas then I think we are in the sweet spot there,” he added.

SNC-Lavalin’s oil and gas division – whose clients include Royal Dutch Shell, Saudi Aramco and ExxonMobil – reported losses from 2012 to 2014, but posted a profit in 2015 after acquiring UK-based engineering firm Kentz for US$1.5 billion.

The acquisition transformed SNC-Lavalin’s energy business because of Kentz’s track record in LNG projects, including Chevron’s Gorgon LNG export facility in Australia and the expansion of Gazprom’s Sakhalin LNG terminal in Russia’s Siberia.

Adler’s comments come as many LNG project proposals have been postponed or cancelled in the last few years owing to low global oil prices and also the marked drop in LNG prices over the past three years.

However, many analysts and producers see a need for more LNG project investment, since the current supply overhang is projected to subside around 2021 or 2022.

Some are even forecasting an LNG shortage in the next decade if more investment is not made in additional LNG projects and infrastructure.

SNC-Lavalin has offered capital to invest as equity to attract new business, Reuters added. Last December, the firm was awarded a US$100 million build-own-operate (BOO) contract for multiple gas facilities in the US Permian shale heartland from Crestwood Equity Partners.

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