Honeywell International Inc. (HON:US) has a solution for oil producers that need a refinery in a region where bombs and bullets fly. It will ship one ready-made.
The first of these small, portable units will be built in a factory, sent by sea to Iraq, trucked inland and “plunked down” on a prepared foundation, said Rajeev Gautam, president of Honeywell’s oil and gas service unit. The daily production capacity will be about 10 percent of a big refinery that would have to be built on location.
Assembling the equipment off-site may help energy companies solve the critical challenge of keeping large construction crews out of harm’s way while erecting infrastructure to tap oil fields in dangerous locales. Nigeria, the OPEC member that’s fighting the Boko Haram militant Islamist group, is among the markets where Honeywell sees sales potential, Gautam said.
“There are certain geographies where this is going to make sense,” Gautam said in an interview at UOP, Honeywell’s oil and gas service unit, in Des Plaines, Illinois.
The modular building of oil and gas equipment helps reduce cost overruns and construction time and is also a way for Honeywell to boost sales of its energy technology. UOP already has experience building modular equipment for natural gas processing and is expanding that technology to crude oil refineries.
The company bought a 70 percent stake in Thomas Russell Co., a builder of modular natural gas processing plants, for $525 million in 2012.
Plans to take Thomas Russell global are under way with the sale of a modular gas processing facility that will be delivered to Iraq, the first outside of North America for the business, said Rebecca Liebert, chief of UOP’s gas processing and hydrogen business.
As it expands the modular concept to refineries, UOP this week signed a contract to deliver a prefab unit for crude oil to Iraq.
UOP, whose sales rose 31 percent to $2.96 billion in 2013, is also seeking opportunities to build modular pieces for large refineries, Gautam said. Sections of a refinery, such as a Merox unit to remove sulfur, are small enough to assemble in a factory and plug into the work site, he said.
“When you look at mini-refineries and modular units of various kinds, this is a pretty good growth factor for us,” he said.
The portable refinery, which takes about two years to build, will help restart stalled projects in Iraq, Gautam said. Although front-end engineering work has been done for large refineries, funding hasn’t been available because partners are unwilling to risk operating in a country racked by violence, he said.
In regions, including Southeast Asia, where it’s challenging to build large projects and stay within budget, the small modular refineries also make sense, Gautam said.
With the modules, the foundation work is completed at the site and Honeywell ships the equipment encased in a steel frame that’s ready to be installed.
The modular processors for natural gas, which separate the different gases contained in the fuel, reduce fabrication and rework costs by about 30 percent compared with building them from scratch in the field, Liebert said. In U.S. gas fields, rain delays or harsh winter weather can slow construction and it’s getting harder to find qualified workers in places like North Dakota, she said. UOP builds its modular processors in Tulsa, Oklahoma.
“In these really rough environments, modularization to the fullest extent that you can is the way to go,” Liebert said.
UOP in September formed a joint venture with Black & Veatch to offer modular liquefied natural gas plants, which could help ease some flaring of natural gas while Bakken drillers wait for more pipelines to be built. The factory-built processing and liquified natural gas plants can be delivered in 12 months, Gautam said.
“We can really promise the customer fast gas,” he said. “That is worth real money to them.”
It’s worth real money to UOP too. Modular construction of equipment helps the company sell its refining and gas processing technology, which is where the profits are, Gautam said.
“You can license and have it stick built or I can deliver it as a modular unit,” he said. “It’s still the technology that we’re known for, otherwise I’m just a metal bending shop.”
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