ECF ’15: Downstream operators mull strategies to cope with US Gulf labor crunch

By Ben DuBose
Online Editor

GALVESTON, Texas -- Project delays in both the upstream and downstream are helping to mitigate a potential craft labor shortage for planned US Gulf gas-based projects, two leading project operators said on Tuesday.

Robert Clark, project director for US mega projects at Sasol, said his company’s plans to delay a final decision on its planned $14-billion gas-to-liquids (GTL) plant in Lake Charles, Louisiana, has relieved some of the pressure on its near-$9-billion ethane cracker project, which remains on course to produce 1.5 million tpy of ethylene when complete.

“From a corporate standpoint, it’s been very difficult,” said Clark, who spoke at the inaugural Energy Construction Forum. “But from a project standpoint, I see it as potentially a good thing for the availability of craft labor.

“It’s taken a little bit of stress off the company and the engineering houses in terms of getting the planning and engineering done,” Clark added.

In the US, the new project market share has nearly tripled since 2012, with up to 100,000 craft workers potentially needed for planned downstream projects in Texas and Louisiana alone. Those workforce requirements roughly double what the industry has said it sees as its top sustainable number.

For example, just for Sasol’s ethane cracker project in Southwest Louisiana, Sasol could use about 7,000 craft laborers in the peak construction period.

But Clark noted also cautioned that Sasol is a gas-to-liquids (GTL) based company, giving it some sensitivity to the price of oil. As a result, the company cited the decline in oil markets as a reason behind its recent decision to delay the GTL project.

Sasol also does not believe it will be alone in that assessment, potentially giving it more options for the projects it does move forward on.

“We believe we’ll see a few more craft personnel available for construction due to projects that may be put on hold, primarily from some of the bigger expansions in the Lake Charles area,” said Clark.

In the meantime, Clark said his company has put in some risk mitigation techniques to help offset the labor crunch. Those techniques including putting some modular work offsite to reduce the peak craft load.

“We have a combination of modular construction and pre-assembly going on,” said Clark. “We’ve been able to distribute some of the engineering workload by low-cost facilities like in India and the Philippines. “We’re just trying to mitigate the labor crunch as best we can.”

Taylor Auburg, project director at Freeport LNG, cited location as a huge positive for his company’s development.

“It’s fortunate for us to be in the Houston market,” said Auburg. “If you take all the construction workers between Harlingen, Texas and Mobile, Alabama, half of them live in the Houston market, where we will be the major employer of construction personnel.

“So to be in that market is very fortuitous for us,” he said. 

Freeport LNG expects a construction peak of 4,000 workers and to hold that peak for roughly a year. The company’s contractor partners include Zachry Industrial and CB&I, with significant participation by Chiyoda.

Auburg also said timing is critical to the success of the $14-billion Freeport LNG project. The company's first train should be operational by the third quarter of 2018, with the second train coming online five months later. Each train will have a capacity to produce roughly 4.64 million tpy of LNG, with first commercial exports planned for 2018.

“We really haven’t seen a shortage of labor on the engineering side,” said Auburg. “We expect to be on the back end of the wave.”

In fact, Auburg said he typically finds himself with roughly eight qualified candidates for each home office position that opens up. A bigger challenge is actually retaining strong employees, he said.

“They want to know that you’re committed to your project and know that it’s going to go forward,’ Auburg said. “You have to give them a definitive plan or they’ll look for the next spot to jump to.”

If there is a potential worker shortage, however, Auburg believes the pain upstream producers are feeling from the collapse in oil markets could potentially work to the benefit of the downstream.

“I know there’s a study saying only 5% of workers can go from upstream to downstream, but as someone that’s been in this industry, I disagree 100% with that study,” said Auburg. “There will be opportunities.”

The inaugural Energy Construction Forum continues through Wednesday at Moody Gardens in Galveston.

BONUS VIDEO FOOTAGE: Check out the ECF's Exhibit Hall, which included this outside crane demonstration with the latest downstream plant construction technologies.

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