Kuwait tells Fluor to stop refinery work
Friday March 20, 11:46 am ET
Kuwait advises Fluor to halt work on what would have been the nation's fourth refinery
IRVING, Texas (AP) -- Kuwait National Petroleum Co. told Fluor Corp. to stop working on a huge refinery project, the U.S. engineering and construction company said Friday.
Kuwait National Petroleum, a unit of state-owned Kuwait Petroleum Corp., told Fluor to stop work on the utilities and offsites for the now-canceled al-Zour refinery.
KNP's termination of the project is the second cancellation of a major oil project since December amid government corruption allegations. In December, Kuwait backed out of a $17.4 billion joint venture petrochemical project with Midland, Mich.-based Dow Chemical Co.
Originally, KNP had planned to spend about $14 billion on the 615,000 barrel-per-day al-Zour refinery. It would have been the nation's fourth refinery, with startup planned for 2012.
Fluor, which has about 300 employees performing engineering work on the project, said the remaining contract value of about $2.1 billion will be removed from its backlog in the first quarter.
Fluor, based in Irving, Texas, did not disclose whether it will receive a cancellation fee from the Kuwait project, but it's possible it will receive a payment, said analyst Heiko Ihle of Gabelli & Co. in Rye, N.Y.
The backlog loss is "not really a big deal," he said.
The $2.1 billion to be removed from Fluor's backlog represents about 6 percent of its $33.2 billion backlog at the end of 2008, a company spokesman said.
Ihle said the greater risk is that more energy-related projects could be canceled because oil and natural gas prices have fallen below where they were when the projects were initiated.
"The assumption is that more cancelations are coming. These projects are not feasible anymore," he said.
With rising natural gas prices, some liquefied natural gas terminals also may be canceled, Ihle said.
"One doesn't make a trend. But if things get worse, people will step back," he said.
Fluor shares fell $1.47, or 3.8 percent, to $37.35 in morning trading.
Source: Associated Press
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