Ed Lewis, president and CEO of Industrial Information Resources Inc., Houston, said his company’s research into the petroleum refining, chemical processing and biotech and pharmaceutical construction markets showed a less-than-robust market. "IIR has identified a growing trend in the number of capital projects being canceled, delayed or put on hold because of economic conditions," he said. The decreases are most severe in the petroleum and chemical markets, while the biotech and pharmaceutical industries have been less affected.

"The ’90s are over," declared David A. Wyss, chief economist of Standard & Poor’s, New York City, a unit of the McGraw-Hill Cos., which also publishes ENR. Although he maintains the recession is largely over, "we’ve got to see business investment" to keep the recovery going because "the consumer is largely spent out," he said. Federal deficit spending also is providing a near-term boost to the economy, he added.

In 2002, construction kickoffs for petroleum refining projects fell 43.5%, or $3.6 billion, leaving $4.7 billion of projects still active, said Lewis. In 2003, he expects a 59% decrease, leaving $3.9 billion of active projects. This slowdown will continue until oil prices stabilize. But refineries will continue heavy investment on unit additions for fuel-sulfur reduction to comply with federal regulatory deadlines, said Lewis. The same driver will make air-emissions retrofits for nitrogen and sulfur oxides a priority. Capital spending will continue for fluid catalytic-cracking unit modernization to increase light-end products, but capital spending in general will be reduced because of rising costs for sweet crude oil.

"Chemical processing looks like it’s turning around," said Lewis. But "the sluggish economy will keep chemical producers in a cautious mode through 2003."

The "bright side" of the picture is the pharmaceutical and biotechnology market. Lewis said announced capital expenditures for that segment decreased only 7.7% in 2002, leaving active projects worth $10.8 billion. He expects projects totaling $9.1 billion to kick off in 2003. Biopharmaceutical manufacturing facilities are in short supply. Owners will centralize scattered manufacturing and research and development facilities, consolidating 23 separate sites into five campuses, said Lewis. Research and development facilities for both industry and universities are in the pipeline, and Lewis foresees continued investment by pharmaceutical manufacturers in Puerto Rico, a "prime location."

Daniel Valot, chairman of French engineer-constructor Technip-Coflexip, set the stage for owner-contractor dialog. The differences in size, financial depth and planning horizons between oil companies and their engineers and contractors have grown with recent consolidations among the oil majors, he noted. The imbalance in bargaining power has left engineers and contractors at the mercy of client demands for contractors to provide top-quality service for rock-bottom pay while shouldering more project risk and liability. Valot summarized his case with the question, "Masters, why do you go on killing your slaves?" An owner responded with the question, "Slaves, why do you keep committing suicide?"

Project size also has grown at a rate faster than contractor growth, Valot said. The situation has resulted in bidding costs that can run as high as $10 million on very large jobs, with "ferocious" competition among contractors jostling for position around a steadily shrinking dinner table, he said.

With 311 attendees from 11 countries, the 34th annual conference held Oct. 3-4 in San Francisco was smaller than last year’s, but its program was expanded, with nine workshops compared to last year’s five.