EPC Outlook

Report
............The
Path of
Forward
............ Climate
Concern
John F Mika
Senior Vice President of Procurement
CH2M HILL
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Discussion Topics
• Procurement Executives Group (PEG)
• Global Economic Environment
• Supply Market Landscape
• EPC Industry Landscape
• Concerns and Threats
• Questions and answers
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Procurement Executives Group
AMEC, Peter Jessup
Bechtel, David Hammerle
Black & Veatch, Mike Gammill
Burns & McDonnell, Matt
Nordhus
Burns & Roe, Michael Clark
CB&I, Dan Kinsey
CH2MHill, John Mika
Fluor, Jim Scotti, Ed Ruane
Foster Wheeler USA, John
Crockett
McDermott, Ryan Siebenkittel
Jacobs, Harry Breijaert
KBR, John Townsend
Kiewitt, Christopher Gonzalez
Kvaerner Americas Inc., Jeanean
Slamen
Mustang, Ted Kelly
S & B, Kent Malone
Shaw, Gary Dellesky, Jim Malone
Technip USA, Art Wardlaw
The Industrial Co., Michael
Chambers
URS, Joe Christopher, Larry
Dinger
Worley Parsons, Tom Brock
Zachry, Glenn Kloos
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2011 Membership Profile
ENR Rankings
•Top Contractors
 6 of top 10 are PEG
 10 of top 25 are PEG
 12 of top 50 are PEG
•Top Design Firms
 7 of top 10 are PEG
 13 of top 25 are PEG
 15 of top 50 are PEG
•Top International Contractors
15 of top 225 are PEG
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Charter
The Procurement Executives Group
(PEG) serves as a forum for the
executive leadership of procurement
and supply management in the
engineering and construction
industry. We seek to represent,
promote, and improve the
contributions of our profession to the
industry we serve. In fulfilling this
mission, PEG and our member
company representatives are
committed to a set of Core Values….
Core Values
• Ethics and Integrity
• Safety
• Quality
• Diversity
• Sustainability
• Collaboration
• Leadership in
Procurement
Excellence
For more information, visit http://peg-eci.org/
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Headlines
• Concern around a double dip recession
• US and European expansion anemic
–
–
–
–
Consumer and business confidence
Sovereign worries
Fiscal tightening
Gridlocked US government
• Emerging markets fairing better
– Best growth
– Best pricing potential, selling or buying
• Projects
– “Giga Projects” is the new landscape
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Global Recovery: Diminished Expectations
Real GDP Growth
2009
2010
2011
2012
2013
United States
-2.6
2.9
1.5
1.8
2.3
Eurozone
-4.1
1.7
1.8
1.2
1.6
United
Kingdom
-4.9
1.4
1.1
1.9
2.3
Japan
-6.3
4.0
-0.2
3.9
1.8
China
9.2
10.3
9.2
8.3
8.9
India
9.1
8.8
7.5
8.1
8.6
Brazil
-0.6
7.5
4.2
4.6
5.2
World
-1.9
4.1
3.0
3.6
4.0
Source: IHS Global Insight
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U.S. Economic Growth by Sector
(Percent change unless otherwise noted)
2010
2011
2012
2013
Real GDP
3.0
1.5
1.8
2.3
Unemployment Rate
9.6
9.1
9.2
8.9
Consumption
2.0
2.1
1.9
1.8
11.6
12.5
13.5
15.0
5.3
3.7
2.0
2.9
0.58
0.60
0.67
0.94
Business Fixed Investment
4.4
7.8
4.3
5.7
Fed Government
4.5
-2.3
-2.9
-3.6
CPI
1.6
3.2
1.6
1.8
10 yr Treasury Yield
3.2
2.8
2.7
2.9
Oil Prices (WTI, $/bbl)
79
94
98
106
Light Vehicle Sales (Millions)
Industrial Production (growth)
Housing Starts (Millions)
Source: Global Insight
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Purchasing Managers’ Indexes: Manufacturing Slowing Down
PMI Manufacturing Indexes
values over 50 indicate expansion
65
60
55
50
45
40
35
30
2006
2007
United States
2008
2009
Eurozone
2010
2011
China
Source: Global Insight
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Pressures in Supply Chains are Beginning to Abate
United States
China
70
15
65
10
60
5
55
0
50
-5
45
-10
40
-15
2005
2006
2007
2008
2009
2010
2011
40
20
15
45
10
5
50
0
-5
55
2012
-10
2005
2006
6 Month Lag, PMI Component Index - Supplier Deliveries (Left Scale)
8
35
6
40
4
45
2
50
0
55
-2
60
-4
65
-6
2006
2007
2008
2009
2009
2010
2011
2012
Brazil
Eurozone
2005
2008
6 Month Lag, PMI Component Index - Delivery Times (Left Scale)
Year over year change, PPI, Total Industrial Products (Right Scale)
Year over year change, PPI, Core Intermediate Materials (Right Scale)
30
2007
2010
2011
2012
40
20
15
45
10
5
50
0
-5
55
-10
2005
2006
2007
2008
2009
2010
2011
2012
6 Month Lag, PMI Component Index - Delivery Times (Left Scale)
6 Month Lag, PMI Component Index - Supplier Deliveries (Left Scale)
Year over year change, PPI, Intermediate and Capital Goods (Right Scale)
Year over year change, PPI, Industrial Products (Right Scale)
Source: Global Insight
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Supply Base Risks and Influences
• Supplier performance
• Shop capacity restraints
• Global dispersion of supply chain,
continues
• Regulation changes and compliance
• Financial condition and access
• Commodity volatility
• Energy cost and availability
• Counterfeit, fraud, and suspect items
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Market Capital Expenditures (Capex)
•
•
•
•
Power
Oil, Gas, and Chemical (OG&C)
Civil
Mining
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Global Energy Demand
400
Forecast
50% Growth
350
MMBOED
300
250
200
Coal
150
Natural Gas
100
50
Liquids
0
1965
1975
1985
1995
2005
2015
2025
2035
Fossil fuels projected to meet 80% of energy demand in 2035
Source: U.S. Department of Energy, International Energy Outlook & BP Statistical
Review.
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Oil, Gas & Chemicals Global Capex
Power Global Capex
1200
1600
1400
1200
1000
800
600
400
200
0
1000
800
2010
2011
2012
2010
2013
2014
2015
2016
Nominal $US Bn
Nominal $US Bn
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600
400
200
0
2010
2011
2011
2012
2010
2013
2014
2015
2016
2011
Mining Global Capex
Civil Global Capex
900
500
700
400
600
500
Nominal $US Bn
Nominal $US Bn
800
400
300
200
100
300
200
100
0
2010
2011
2012
2010
2013
2014
2015
2016
0
2010
2011
Source: IHS Global Insight
2011
2012
2013
2014
2010 2011
2015
2016
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Total Global Capex
(Power, Oil, Gas & Chemical, Civil, Mining
4000
3500
Nominal $US Bn
3000
2500
September 2010 Forecast
2000
October 2011 Forecast
1500
1000
500
0
2010
2011
2012
2013
Source: IHS Global Insight
2014
2015
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Nominal $US Bn
Regional Global Capex
3,000
2,000
1,000
0
06
07
Africa
Asia-Pacific
Eastern Europe
08
09
10
11
North America
Middle East
12
13
14
15
Western Europe
Latin America
Source: Global Insight
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EPC Industry Landscape
• Strong capital expenditures 2012 – 2015
• Significant growth in EPC Spend ahead,
some bow wave happening
• Global project challenges
– Attracting and retaining staff
– Local labor shortages
– Lack of infrastructure
– Remote and challenging locations
– Complex scope and size
• Global sourcing
– Opportunities and challenges
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EPCSpend
‘Crystal
Ball’ - Spend
Forecast
Forecast
- Revisited
Nominal $US Bn
1600
1200
Civil
OG&C
Mining
Power
11
12
800
400
0
13
14
15
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‘Crystal Ball’ – Part II - Revisited
160
2
Total Freight Spend
1.8
Total Freight Tons
1.6
140
Freight Tons in Billions
Freight Spend in $US Billions
180
1.4
120
1.2
100
1
80
0.8
60
0.6
40
0.4
20
0.2
0
0
2011
2012
2013
2014
2015
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…….Climate of Concern
• 40% chance for double dip
• Can Washington work again in
collaboration
• Can the European debt crisis stabilize
• From Arab Spring to Arab Fall
• Can we continue to be ready for
impending expansion
Logistics is even more critical to
EPC success!
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Questions & Answers
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