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Energy and Resources SNC says commodity slump delaying infrastructure projects

Robert G. Card, president and chief executive officer of SNC-Lavalin, gestures during a news conference following their annual general meeting in Montreal, May 8, 2014. Mr Card says the only silver lining in the current slump in commodities is that acquisitions in the oil and gas business can now be made at reasonable prices for companies that have the resources.

CHRISTINNE MUSCHI/REUTERS

The global commodity slump and slowing growth in China will delay any significant uptick in oil and gas infrastructure projects until at least 2016, the head of Canada's largest engineering firm says.

Robert Card, chief executive officer of SNC-Lavalin Group Inc., said there are a handful of bright spots for new oil and gas development in parts of the United States and Canada, where unconventional drilling is under way, but aside from that "there isn't anything happening anywhere."

Even China, which has been the healthiest of the BRIC countries (Brazil, Russia, India and China), is now dialling down its growth targets, he noted. While that may be a good thing for the world's economy over the longer term, "it is certainly putting a damper on things now," Mr. Card said. Chinese demand for commodities is diminished, which in turn is driving down prices and restricting capital flows, he said.

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And there is no sign of a turnaround in the short term, Mr. Card told The Globe and Mail's editorial board on Tuesday. "We are going to have to face this for some time. If you had asked me a year ago, I would have said that by the end of 2015 we would have hoped for an uptick. Now I am pushing that off to 2016 or 2017 at the very earliest."

The only silver lining in this situation, he said, is that acquisitions in the oil and gas business can now be made at reasonable prices for companies that have the resources.

Indeed, that is what SNC-Lavalin has done. In August, it finalized its $2.1-billion takeover of Kentz Corp. Ltd., a British-based company that sells engineering, construction and support services to the global oil and gas sector.

The Kentz acquisition gives SNC-Lavalin a strong position in building liquefied natural gas (LNG) infrastructure, Mr. Card said. The company has two large LNG contracts in Australia, he said, and could get subcontracting work on British Columbia projects if they come to fruition.

But there is a window of opportunity for Canada's LNG development that may not stay open indefinitely, Mr. Card said. While there should be two decades of solid demand for LNG, there are new supplies of natural gas coming on stream – from shale-gas projects in China and through pipelines from Russia, for example – and Canada needs to take action while it has a chance. "Clearly it is a hot window [for LNG development] right now," he said. "I think the window gets less hot, not more hot, each year."

He said his company would also benefit if controversial pipelines such as Keystone XL and Northern Gateway come to fruition. There would be engineering spinoffs in power projects, mining and infrastructure if the pipelines get built, he said.

Mr. Card – an American who came to Canada in 2012 to help SNC-Lavalin clean up its scandal-plagued business – said he thinks pipeline delays are a problem for all Canadians because they send a negative message about the country's ability to get things done. "It sends a sign of weakness to the rest of the world," he said. "If [Canada] can't do something so obviously in our self-interest, then what does it take to act on other issues?"

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