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Fluor Daniel Is Awarded Huge Saudi Oil Pact

Energy: The deal is said to be part of a drive by the country to boost its production as worldwide output slows.

June 28, 1990|JOHN O'DELL, TIMES STAFF WRITER

Fluor Daniel Inc., the construction and engineering division of Irvine-based Fluor Corp., said Wednesday that it has landed a Saudi Arabian oil facilities contract that some industry analysts say could be worth as much as $6 billion over the next decade.

Fluor Chief Executive Les McCraw said the pact, which he called "prospectively the most significant project we've had in over a decade," is part of a multibillion-dollar drive by Saudi Arabia to boost its oil production to replace slackening worldwide output.


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McCraw would not comment on the value of the program management contract, saying the total is not known because the work will be released in several phases over the next seven to nine years by Saudi Aramco, the Saudi Arabian government-owned oil company.

The contract is not expected to create any significant new employment at Fluor, he said.

Fluor, a major international construction and engineering firm for the past three decades, was hit hard in the oil crash of 1981 and has been rebuilding and refocusing since. As part of the restructuring, Fluor reduced its dependence on oil-related projects--which accounted for as much as 85% of its business in the late 1970s--and began aggressively seeking industrial and government work as well.

Currently, McCraw said, Fluor Daniel's hydrocarbon unit accounts for only about 30% of the company's total revenue. That will increase with the new Saudi Aramco contract, he said, "but it will have a lesser effect in the current fiscal year and become a more significant part of our backlog in subsequent years."

Fluor's backlog of work--a major measurement of an engineering and construction firm's business--currently is about $9 billion, down from an all-time high of $16.3 billion in 1981.

McCraw said that while the percentage of oil-related business will grow, Fluor won't repeat its earlier errors. The company's dependence on the oil industry led to a $633.3-million loss in fiscal 1985.

Employment plunged to 14,000 in 1987 from a high of 44,000 in 1981. It has rebounded to a current level of 20,000 in the wake of a 1986 restructuring that led to creation of Fluor Daniel.

Fluor, which maintained a major business relationship with Saudi Arabia in the 1970s and at one time was involved in more than $10 billion in contracts there, was one of several U.S. companies asked to bid on the contract, said Herbert E. Hart, an analyst with the San Francisco investment banking firm of S. G. Warburg.

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