MC Exclusive: L&T in talks with global EPC majors to form JVs for mega projects in the Middle East

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Larsen & Toubro (L&T) is in talks with global engineering, procurement, and construction (EPC) giants to form joint ventures (JVs) to bid for mega projects that are likely to come up in the oil-to-chemicals (O2C) space in the Middle East, Subramanian Sarma, the company's President, Energy, and Wholetime Director, told Moneycontrol in an exclusive interview.

Sarma said that the Middle East, L&T’s second biggest market after India, is expected to make significant investment in converting oil to chemicals and petrochemicals, and $50-$60 billion worth of projects is expected. Execution may begin as early as FY25.  as countries in the region aim to pivot from conventional energy resources.

"We will have to do some kind of partnership because these are large projects, and you will need multiple players to join hands to handle those $5 -$6 billion contracts, maybe even larger,” Sarma said.

“We are talking. These are not subcontractors,  but more like joint ventures. These will be project specific,” he said.

Sarma did not disclose the names of potential partners, saying they could be from ``the east or west.” Industry sources indicate that L&T may be exploring tie-ups with JGC Corporation (formerly Japan Gasoline Co), Toyo Engineering Corporation, Samsung Engineering, and Hyundai Engineering and Construction. These engineering majors already have a strong presence in the Middle East and have often competed with L&T for projects. Moneycontrol could not check with these companies if they are in talks with L&T.

Sarma said that L&T can handle projects worth up to $4 billion on its own, and typically ties up with a partner only if there is a capability gap.

“Purely based on the financial size of the contract, $4 billion could be the threshold. It could be lower or higher depending on the circumstances and other factors. The partnerships will be with tier one EPC companies,” he said.

Sarma, who heads the energy business of L&T, highlighted the increasing scope for O2C and petrochemicals projects, especially in the Middle East, as oil producers look to diversify the use of their crude oil reserves, converting them into high-value petrochemical products that will continue to be in demand even as traditional fuel markets shrink​.

“I don't know the reason why they're accelerating some of the projects. Maybe they want to monetise quickly,” he said, talking about the push for O2C projects.

Many O2C projects are currently in the planning stages and Sarma said that about six such mega projects, each valued between $10 to $15 billion, have already been launched.

"I expect these projects to come up for execution maybe in FY25 or sometime next year," he said.

These projects come as  the global petrochemical industry — essential to the production of clothing, tyres, detergents, fertilisers, and countless other everyday products — is currently going through a transformative period.

On a global basis, the most important driver of oil demand growth over the medium term is expected to be petrochemicals, accounting for about 2.7 million barrels per day of additional oil products demand between 2023-2030, the International Energy Agency said earlier this year.

"Between now and March, you will see conventional projects, but beyond the next financial year we will see a lot of new development in O2C and petrochemicals," Sarma added.

Among the major petrochemical projects executed by L&T are the dual field cracker unit for HRRL in Barmer, India, the ethylene glycol project for IOCL in Paradip, and the normal paraffin and derivatives complex for Farabi Petrochemical Company in Saudi Arabia​.