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Technip Sees Worsening Oil, Gas Environment, Lays Off 6,000

Technip, which employs 36,000 worldwide, including 4,200 across North America, is laying off 6,000 people and sharply restructuring to prepare for "an even more challenging environment" in the oil and natural gas industry.

The Paris-based operator, whose turnkey skills are employed in offshore and onshore engineering and construction development, began to streamline the global business last year as prices declined. But it's only getting worse, not better, CEO Thierry Pilenko said Monday.

"The slowdown in the oil and gas industry is prolonged and harsh," he said Monday. "Therefore, we have decided to accelerate our cost reduction and efficiency measures, which I know will have tough consequences for employees across the group. Technip has built its leadership on sustained investment in key technologies and assets, to create a business with a breadth of skills and know-how.

"The launch of the plan...together with our recent initiatives, such as our Forsys Subsea joint venture, shows our determination to maintain this strategy, which is based on a long-term vision of how Technip can be best positioned to deliver our industry's needs, to reduce project costs and continue to create value."

Forsys, a 50/50 partnership launched in early June with FMC Technologies Inc., would provide subsea field architecture from concept to delivery.

Houston is regional headquarters. Other operating/manufacturing centers are in Channelview southeast of Houston, as well as in Boston; Mobile, AL; Claremont, CA; Carlyss, LA; Mexico City and Ciudad del Carmen in Mexico, and Port-of-Spain in Trinidad.

Technip provides conceptual design and detailed engineering for new units and retrofits of existing facilities, with projects that range from single process units to industrial complexes with multiple, integrated units.

BP plc hired Technip a lump sum project to design, engineer, fabricate, install and pre-commission new production systems at the Thunder Horse production unit in the deepwater Gulf of Mexico. Shell Offshore Inc. awarded Technip the contract to install a subsea gas pipeline structure in the GOM for its Stones field (see Daily GPIAug. 26, 2013).

Chevron Phillips Chemical Co. LP hired Technip for its Gulf Coast ethane cracker (see Daily GPIOct. 4, 2013). As well, Technip is part of the team building Sasol Ltd.'s ethane cracker and derivatives complex in Lake Charles, LA (see Daily GPIOct. 27, 2014). It also is working on global liquefied natural gas (LNG) projects, including Freeport LNG in Texas, and gas processors that include the Neptune facility in Louisiana.

The sharp decline in oil prices "has had a substantial impact on clients' behavior, national and international oil companies alike," said management. Among other things:

  • New projects continue to be deferred  "as clients assess their investment priorities in a durably changed" price environment;
  • On occasion there has been "irrational behavior" in bidding on some of the projects that were being sanctioned; and
  • Negotiations "have been protracted on contract changes and variations," in particular onshore/offshore projects, where some discussions "are now even stopped and will find their resolution through a legal process."

Technip management concluded "that these trends have not improved and, in some cases, have actually worsened over the last two months."

The restructuring plan, begun last year, now targets savings of around $917 million (Euro 830 million), of which $774 million (Euro 700 million) would be delivered in 2016 and the balance in 2017. There are one-off charges of $718 million (Euro 650 million) also anticipated.

A big part of the restructuring plan covers the onshore/offshore segment "and addresses its recent unsatisfactory performance" where profitable business "is unlikely even in the medium-term" including overseas and Latin America.

In the subsea business, Technip plans to reduce its fleet. The originally planned reductions in the fleet would have reduced it by two vessels this year but the company now intends to take out a further two vessels, one owned and one leased, taking the fleet down to 23 vessels from 36 at the end of 2013.

At the same time, Technip plans to "reinforce its investment" in key geographic and technology areas where it has first mover advantage, including floating liquefied natural gas projects.

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