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CBI to Acquire Phillips' E-Gas Biz

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Chicago Bridge & Iron (CBI) recently announced that it has entered into an agreement with Phillips 66 (PSX) to acquire its E-Gas Technology business. The financial terms of the deal were not disclosed.

The decision to acquire E-Gas Technology is a strategic move by Chicago Bridge, a leader in the LNG storage niche market, as it will help the company to cater to the rising demand for energy infrastructure, especially in the LNG, gas processing and oil sands markets. Projects from round the world drove the upside during the year.

Therefore, the company is very positive about the increase in order activity in the LNG division. Recently, in Mar 2013, the company received a project from Asia for the engineering, procurement, construction and commissioning work for LNG storage tanks. The contract is expected to be completed by 2015 and is valued at more than $180 million.

The E-Gas solids gasification technology is a verified and established procedure to convert coal or petroleum coke into syngas. Syngas or synthesis gas is a fuel gas mixture comprising primarily of hydrogen, carbon monoxide and carbon dioxide. Syngas is basically used for power generation or can be further converted to substitute natural gas, hydrogen and downstream methanol-related chemicals production.

Further, E-Gas Technology converts coal in an eco-friendly manner. The process is also cost effective and removes approximately 95% of the mercury in coal.  In addition, the technology recovers almost about 99% of the sulfur, which is further marketed for use in the fertilizer industry. Furthermore, the gasification process produces no ash, but recycles byproducts into useful products including road construction materials.

Phillips 66 is a holding company created after the spin off of the downstream assets of ConocoPhillips (COP). Based in Houston, Texas, Phillips 66 is primarily engaged in producing natural gas liquids and petrochemicals.

Through the acquisition of the E-Gas Technology, Chicago Bridge & Iron expands its scope into the syngas value chain. Syngas derived from gasification technologies has received significant attention and investment in the current years. The growing market for syngas is a consequence of the rising energy demand and climate change problems.

Chicago Bridge & Iron currently has a Zacks Rank #2 (Buy), similar to another industry player Orion Marine Group Inc. (ORN).

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