Fluor Inks Joint-Venture Pact in China : Firm Finalizes Deal to Manage Construction of Petrochemical Projects
Fluor Corp., the Irvine-based engineering and construction firm, Wednesday signed a final contract to enter into its first joint venture in China and help manage the construction of petrochemical facilities here.
In formal signing ceremonies Wednesday, Fluor officials agreed to work with the government-owned China Petrochemical International Co., commonly called SINOPEC, in a venture that will be called Sino Fluor Engineers. SINOPEC, with annual sales of $10 billion and 500,000 employees, is China’s largest company.
Each of the partners will own half of the new company, which will start with capital of $1 million. At the outset, the joint venture is expected to help manage the engineering and construction of three large petrochemical projects in the Shanghai area.
Last fall, when the agreement with SINOPEC was first announced, Fluor’s chairman and chief executive David S. Tappan Jr., said Fluor has the opportunity to become the dominant entity in the modernization of China. Tappan, who was born in China to missionary parents, has had a long-standing commitment to China. Fluor has had an office in Peking since 1978 and had earlier worked on several other engineering projects here. But the new deal marks the first time that the company has set up a joint venture here.
Faith in China Market
“In the long run, if you’re going to participate in this market, you’re going to have to be here,” Tappan said Wednesday. “The optimum way to penetrate the market is to form a joint venture.”
Tappan said he believes that, 25 years from now, “you’re going to look back and say the China market was the most important new market of the past half century.”
He added: “There are just not that many new markets, and China is one of the great ones.”
According to Thomas A. Howell, senior vice president for project management at Fluor Engineers Inc., the American company will bring 35 or 40 of its employees here to work on the China venture. At the outset, the China venture will have 250 to 300 Chinese employees working on the Shanghai projects.
Fluor entered into a preliminary agreement to set up the new joint venture last November. Since then, a feasibility study has been completed and the two partners have put the contract in final form. On a visit to Fluor’s headquarters in November, SINOPEC president Chen Jinhua, said he and other Chinese officials considered dealing with other U.S. engineering firms, but chose Fluor because of its technical background, success with other Chinese projects and because he and Tappan had similar visions for China’s petrochemical future.
Fluor officials say the company also is working on plans for a second joint venture, with China’s Nonferrous Metals Industry Corp., to work on mining projects.
For the first quarter of fiscal 1985 ended Jan. 31, Fluor posted a $32.6 million loss on revenues of $951 million. The latest results contrasted with net income of $16.5 million on revenues of $1.1 billion in the first quarter of fiscal 1984.
