Mechanical contractors — turnkey construction’s super achievers

BY MORRIS R. BESCHLOSS
PVF & economic analyst emeritus

With commercial/industrial construction having come to a grinding halt during the last two years, the PHCP industry’s super achievers — mechanical contractors— have been hard-put to keep their organizations intact, with the overwhelming work opportunities within their traditional sphere severely limited to maintenance and repair. But instead of retrenching and waiting for the long term turnaround, these titans of the mechanical trades have found new opportunities in the industrial sector of power generation, oil refining, transmission and production and even in the renewable energy projects that are popping up all over the country, supported by federal subsidies and income tax offsets.

The sophisticated expertise that the mechanical contractors offer has been enthusiastically received by such multi-national turnkey constructors as Fluor, Bechtel, Haliburton, etc. This is especially true since mechanical contractors’ problem-solving skills are filling a void that has long existed in the upper strata of the construction arena. Such intrepid expansion of mechanical contractor activities has allowed these critically important mechanical contractors’ organizations to keep their staffs intact while anticipating the comeback of the breadth of commercial activities that show early signs of reactivating by mid-year.
The PHCP industry’s mechanical contractors’ contribution to such technological problems as upgrading, mechanization and automation of piping and flow control systems has been received by turnkey constructors with open arms. It’s a fitting tribute to the mechanical contractor fraternity as a whole that it has extended its reach of incomparable skills to previously unexplored opportunities, which they can satisfy more efficiently than any other multiplicity of organizations.

Such initiative by the nation’s mechanical contractors will see this relatively small number of substantial businesses emerge from the worst economic downturn since the Great Depression with a broader base of future expansion than ever.

Global oil industry plans record 2011 spending

Despite all the hype about “renewable energy” generating from Washington, D.C. and the “green advocates,” the world’s major oil producers are preparing to spend a record $500 billion for new projects in 2011. This is practically double the amount expended early in the last decade.

Although the catastrophic Gulf of Mexico oil spill may have given deepwater drilling a bad name, much of this phenomenal expenditure will be dedicated to deepwater drilling in such disparate locations as Brazil and the African West Coast, as well as the South China Sea and Western Australia.

With existing oil production flat and post-recession demand rebounding at an unexpected pace, the major global oil companies, the nationally-run consortiums, and even wildcatters, are jumping into the fray created by an anticipated oil usage growth.

The current $90 a barrel price and forecasts for over $100 a barrel by the end of the first quarter have made previously untouched deepwater potentials especially profitable. Although new discoveries have been lagging behind demand for the last several years, the pessimistic energy outlook for a world in recession discouraged major international producers and equipment makers of drilling rigs and related appurtenances.

Since deepwater drilling will constitute an ever-larger component of new oil excavation, costs will become appreciably higher, with the resultant price increases all along the transmission, refining, distribution and retailing channels. These higher costs will also affect the multiplicity of end-use products that are derived from oil, such as a variety of chemicals, plastics and sundry consumer products.

Although such renewables as solar, wind and geothermal will play an increasingly significant role in power generation, expect oil, and possibly natural gas, to provide the lion’s share in transportation and power well past mid-century.

The previously discussed Williston Basin, located in the Dakotas, Montana and Canada’s Alberta and Manitoba, together with Canada’s continued oil sands expansion, will benefit the industry by its increasing expansion as the price of oil heads higher.

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