Larsen & Toubro (L&T), India’s largest construction and engineering company, is poised to make significant investments in the Middle East, targeting a $50-60 billion opportunity in projects converting oil to chemicals (O2C) and petrochemicals. According to a report by Moneycontrol, Subramanian Sarma, whole-time director and president (energy) of L&T, disclosed these plans, indicating a strategic focus on this lucrative sector from the financial year 2025.
Sarma highlighted the potential of these O2C projects, stating, “There’s a $50 to $60 billion opportunity in O2C projects. I expect these to come up for execution maybe in FY25, or sometime next year.” He further elaborated that while conventional projects will continue to be executed until March, a wave of new developments in oil-to-chemicals, petrochemicals, and new crackers is expected beyond the next financial year.
L&T aims to capitalize on this opportunity independently but is also exploring potential joint ventures with other major engineering, procurement, and construction (EPC) companies for larger projects. This strategic approach will enable L&T to optimize its capabilities and resources in the burgeoning O2C sector.
The company’s current project pipeline remains robust, particularly in conventional projects, while green energy initiatives are gaining momentum. L&T sees substantial opportunities in blue ammonia and carbon capture projects in the Middle East, with green hydrogen development being notable in Europe. The company plans to integrate green hydrogen projects into its existing engineering business, focusing on electrolyser manufacturing, EPC projects, and manufacturing for exports.
L&T’s market cap stands at $60.11 billion, with a consolidated total order book of ₹4.75 trillion as per the financial year 2024’s fourth quarter data. The company’s international order book exposure in the Middle East has significantly increased, rising from 20 percent in the first quarter of 2022 to nearly 40 percent by the end of the fourth quarter of 2024.
However, analysts have raised concerns about L&T’s heavy reliance on the Middle East due to the region’s geopolitical instability and the impact of fluctuating commodity prices on the company’s earnings. Fixed rates for Middle Eastern projects mean that any changes in commodity prices can affect L&T’s financial performance.
L&T’s shares showed a slight increase, closing 0.07 percent higher at ₹3,650.45 on Monday, July 15, compared to ₹3,648 the previous week. The company has scheduled a board meeting on July 24 to consider its April-June quarter results, as per its Bombay Stock Exchange filing.
As L&T looks to the future, its strategic focus on O2C and green energy projects, coupled with its robust market presence, positions it well to navigate the challenges and capitalize on the opportunities in the Middle East and beyond.
