Q&A: Pierre Bechelany Guides Fluor’s Pipeline, LNG Growth

Pierre Bechelany left Louisiana Tech University with two degrees in mechanical engineering and a job with GE working on a contract for NASA. It turned out that space would be his first but not final frontier. Six weeks into his career, Bechelany received a call from Bechtel with an offer for a job in oil and gas. As a native of the Middle East, the industry was in his DNA and he jumped at the chance. He started in refining but soon moved into the company’s pipeline and LNG businesses.

Bechelany joined engineering and construction giant Fluor Corp. (NYSE: FLR) in 2010 as vice president of upstream operations. He moved into the pipeline and LNG business in 2013 and was named president of the division in August 2017, responsible for the company’s global marketing in pipeline, LNG and LNG regasification. A diverse company with a global workforce of more than 56,000 and 2017 revenue of about $19.5 billion, Fluor’s projects on five continents provide capacity of 60 million tonnes per year. Bechelany spoke with Hart Energy at the recent World Gas Conference in Washington, D.C. The edited conversation follows:

Hart Energy: When you sit down to plan an LNG facility and you’re talking to the client, what is the first thing you ask?

Bechelany: For us, especially if we are in a competitive bidding situation, we want to know how much front-end engineering was done. My first question: Have you done a full FEED (front-end engineering design) on it. When you enter into an EPC (engineering procurement construction) contract, there is time pressure, scheduling is an issue, price, lump sum etc. You want to make sure all the design options are thought out and people have thought about the process and technology, and make sure you have a very defined scope. For me, it’s key before we can commit to the EPC phase, especially if it’s lump sum.

Hart Energy: So you want to know how much they know about where they’re at?

Bechelany: Yes, because that depends on the amount of effort we need to spend. We do a lot of verification. We make sure they have done what they have supposed to have done and give us the documents before we can give them a price.

Hart Energy: What are clients asking for when they talk to you about their projects?

Bechelany: Every client will tell you: costs and schedules. That’s what they want. At the end of the day, the client wants to know what it’s going to cost, because at the end of the day, they’re going to go and sell the gas or sell the products to their customers. They want to know when we’re going to finish it so they can have a contract with their customers. They need to deliver the gas. Otherwise they’re going to go and buy on the spot market to make their commitments.

Fluor provided project management and advisory services for the Klaipedos Nafta LNG import terminal located in Klaipeda, Lithuania. (Source: Fluor, Klaipedos Nafta AB)

Hart Energy: How do you keep your project budgets under control?

Bechelany: First, in my opinion, it takes a strong team. To deliver, you need to select your team. We came a long way at Fluor. From 2011, we’ve been very selective in hiring the right people with energy and pipeline experience in my group so we can put them on their own projects. And that’s what we’re doing with LNG Canada where we handpicked the project management team so we make sure we can deliver certainty at the end of the day. That’s key for us, having the right people.

Of course, we look at the market conditions and do some hedging in terms of material. Selecting vendors early to make the material—especially if it’s a lump-sum project—is another key for us to control cost. We do a lot of fabrication work and we acquired the (Zhuhai Fabrication) yard in China (a joint venture between Fluor and China’s COOEC), for example, and that brings a lot of certainty to us. We can use this yard to fabricate, control productivity, control production and book capacity in this space.

Hart Energy: Are your projects typically lump sum or are there other arrangements?

Bechelany: We have both. LNG is a market that’s made up largely of lump sum. In pipelines we have both. We have a big pipeline job for NEXUS (250-mile natural gas pipeline from Ohio to Michigan) that’s EPC and reimbursement contract. It depends on the client’s requirements but LNG is normally lump sum.

Hart Energy: What is your outlook for the sector?

Bechelany: The sentiment for LNG is very upbeat now. If you look at two years back, people were not sure what was going to happen. The big surprise was last year—the import growth in China was 48% year over year. China is going to be the number one importer of LNG next year, so that’s very positive for us. It looks like there is a need for additional capacity. The question is how much? People are saying, from 50 million tonnes to 100 million tonnes by 2025. I’ll say maybe 50 million, 60 million. I’ll say three or four jobs should do 50 million; 100 million will be the upside.

There are a lot of pipeline needs in the U.S., in North America. Exxon just announced their new pipeline (in the Permian Basin), Kinder Morgan just announced their new gas pipeline. There’s a need for additional infrastructure. Tellurian is going after a few pipelines. The U.S. pipeline (sector) is robust for the next few years. There is a need to bring pipelines into the British Columbia region [in Canada]. We see some opportunities there. We’ve had projects there in the past but they were put on hold. Now clients are talking about reviving those jobs.

Hart Energy: What do you think about this trend toward smaller plants? Is it economically viable?

Bechelany: That’s a big question mark. A lot of projects have been put in front of the contractors but not a single project has been bid yet.

The biggest concern for me: how can they compete with expansion projects like adding a train on the Gulf Coast or in Papua New Guinea or other places vs. building those small- or medium-scale facilities and adding the infrastructure? How are they going to be able to compete? The good news is that they can bring it in phases. You don’t have to take a $10 billion job. Maybe you can start adding trains—2, 3, 4 million pounds at a time—but still, it’s not proven.

Hart Energy: So, even with a smaller project, a company would need to buy land around it first to be able to expand later.

Bechelany: You have to buy the land, you have to put the infrastructure around it, the jetty, the marine facilities, the tanks. All this has to happen in Phase 1. You need to have the commitment and that’s why you see some of the projects—even when they have commitments for 2 million or 4 million tonnes—they are waiting for commitments to 10 million tonnes of capacity, the max capacity, so they can justify the investment. They need the banks to finance the job and they cannot (get the financing) until they have off-takers and have sold the capacity. In terms of timing, I don’t think it’s helping the FID (final investment decision) process much. In terms of cost, everybody is saying $400, $600 per tonne. That’s what we hear right now. It’s a very competitive price. Achievable? Maybe. That’s a big question.

Fluor recently provided procurement, construction and construction management services for Energy Transfer Partners’ Mariner East 2 project in Pennsylvania. Fluor was responsible for new terminal facilities. (Source: Fluor)

Hart Energy: How does building a plant in Alaska differ from building one in Thailand?

Bechelany: In terms of design, it is different. The design in Canada, for example, a very cold climate, vs. Thailand, the design basis would be different.

Hart Energy: What about regulations?

Bechelany: Absolutely different. It’s a different ballgame. Even the U.S. and Canada are different. You look at FERC (Federal Energy Regulatory Commission) in the U.S. vs. the B.C. government in Canada, for example. There are totally different requirements, so we make sure we account for it. Even when you go to Mozambique right now, the requirements are totally different. That’s the beauty of Fluor, we have engineering capabilities across the globe so we can, depending on the region, depending on the location, put the right teams around it to make sure that we can account for all these regulatory issues.

We look at the local content plan. We have to have a local content plan for every project. It depends on the requirements. You go to a place like Mozambique, say, and you have to have 40% local labor force. We have to make sure we have the right training, skill sets around those people to get them ready. You go to North America, for example, and you have enough experience in the labor force that you can hire and meet the requirements. It depends on the location. We tailor operations.

Hart Energy: Are you able to hire engineers in locations like Mozambique?

Bechelany: If they are available, definitely for field engineering we will be using them. It depends on availability.

As you do your first project you build resources and then you start increasing your local content and local resources. We would love it do (hire local engineers). First, it would be more cost-effective. We would like to do it as long as we could find qualified people. But we are willing to train and we are willing to bring our know-how. It’s a good thing, it’s a good legacy to leave behind trained, skilled people who can operate the plants and manage on their own and maybe build the next project. There is nothing wrong with that. That’s what we do and that’s what companies like ours should do—improve the lives of others in countries around the world.

Hart Energy: What is Fluor’s outlook?

Bechelany: Our focus is still on pipeline energy. We are growing. I think we are growing very well and we see opportunities coming up right now and in the next few years in North America and eastern Africa—that’s where our focus is. Gas demand is going to continue to grow.

Joseph Markman can be reached at jmarkman@hartenergy.com and @JHMarkman.