How to Manage the Trend to Mega–Sized Engineering Projects

Related Vendors

EDL Anlagenbau Gesellschaft mbH

Italvacuum, Srl

TRM Filter d.o.o.

DECHEMA e.V.

A study carried out by VDMA and management consultants Maexpartners indicates that the effective use of modularization in systems engineering could reduce cost by an average 15%. This approach could even cut non-performance and warranty costs by 23%. The German-Korean energy products and services supplier Doosan-Lentjes has had good experience so far with this game plan. Using the Reference Product Model, the company has succeeded in reducing its internal execution costs by as much as 30%.

America is now the Industrial Plant Manufacturing Eldorado

One of the reasons why business has been good for the European and German industrial plant manufacturing industry in recent years is the shale gas bonanza in the US. There are ample supplies of oil and gas in the market, and chemical companies are now paying far less for their raw materials. The industry is investing huge sums to expand its production facilities.

Shale Gas/Plant projects

Shale Gas is Still Number 1 For Megaplant–Projects

The market research firm HIS estimates that the exploitation of unconventional energy sources such as shale gas and shale oil will stimulate investments amounting to 79 billion euros in the US alone by 2025. The actual figure could even be higher than that. 126 chemical projects with a total investment volume of $66 billion were announced during 2013 in the US alone. By 2018, ACC predicts that 10% of global investment in the chemical industry will take place in the US.

The core strength of industrial plant manufacturing service providers based in Europe is the ability to deliver high-tech solutions. A division of labor between process designers and planning teams on the one hand and engineering firms which actually build the plants is a model which is commonly used in America.

How the Shale Gas Boom Results in Higher Engineering Costs

However, industrial plant manufacturing projects are subject to the rules of supply and demand. Customers and EPC contractors can expect to be confronted with massive costs increases. Plant construction companies are already reporting an increase in project installation costs, particularly in the Gulf region states of Texas and Louisiana.

Due to an expected cost increase from 10 billion euros to nearly 16 billion euros, the energy company Shell decided in December 2013 to cancel plans for construction of a gas-to-liquids plant in Louisiana. Sasol of South Africa still plans to invest in a GTL plant in Louisiana, which could cost as much as 11 billion euros. However, a final decision on the project is not expected to be made until the front-end engineering design (FEED) is completed in 2016.

(ID:43247920)