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Buildings
Business power and industrial
& Labor
PETROLEUM
Construction
Economics Global Drive for Petroleum Pushes
Technology
Tight Labor Force to the Limit
Education Demand for refineries, pipelines and LNG continues unabated
Environment 09/19/2007
By Tom Nicholson
International
Power
& Industrial
Transportation For contractors that build the
facilities and infrastructure that feed
Multimedia the world’s voracious appetite for oil
and gas, markets never have been so
good, yet also so bad. It’s a market of
extremes with a severe backlog of
-advertisement-
demand, yet an equally severe dearth
of people to meet it. The monstrous
demand for refineries, liquified- Subscribe
-advertisement- natural-gas (LNG) plants, pipelines
and underwater facilities is prompting to ENR and
dozens of multibillion-dollar projects get
to proliferate around the world, but unlimited
also causing many contractors to feel CB&I
the monster’s bite as shrinking pools Liquefied-natural-gas terminals are gaining ground as access to
of labor and materials present project the demand for the fuel increases in many parts of the ENR.com
world.
pitfalls.
Globally, demand for oil has continued to ratchet up steadily around the world as India
and many Asian nations continue to develop western-style thirsts for energy. In North
America, contractors that rely on upstream Gulf of Mexico-based work have seen that
market remain flat in the past year as investments are being steered downstream, while
oil producers increasingly look to heavy crude from Canada’s oil sands to meet
“In the past you could say, ‘However goes the Gulf of Mexico, so goes the whole
market,’ but not anymore,” says Bruce Wilkinson, CEO at Houston-based McDermott
International Inc. “The last couple of years have been a dry period in the Gulf.”
Refinery Expansions
Related Links: CLICK
Demand for petroleum in the U.S. shows HERE!
no signs of drying out, nudging oil Most Sectors are Going
producers to move investments into heavy- Gangbusters, But Credit
crude refining as growing global demand Crunch Is Potential Threat
and ongoing war in the Middle East
squeezes supply. The influx of investment
Transportation Market Is
into heavy-crude refining has ignited a
spate of growth and expansion across the Strong, But Funding
domestic refinery construction market. Shortfalls Remain
The investments that oil producers are putting into exploring the Gulf of Mexico now
will yield a new round of upstream construction projects down the road, some
contractors say. It takes several years “from the point of discovery, to drilling a well, to
engineering and construction,” says Wilkinson. “That work will start to come by 2010 or
so.”
Perhaps most indicative of the level of demand coming from the U.S. market is a
greenfield oil refinery being planned for construction in Yuma, Ariz., the first new U.S.
refinery in 30 years. Owner Arizona Clean Fuels Yuma LLC waded through four years
of regulatory procedure to get state and federal ap-proval of a plan to start the first U.S.
refinery since 1976. Sited on 1,400 acres in a remote area about 100 miles southwest
of Phoenix in Yuma County, the plant will produce cleaner-burning fuels when
completed in 2011. The plant will be able to supply approximately one-half of the
gasoline, diesel and jet fuel demand for the state of Arizona, according to the owner.
Refinery upgrades and expansions have spurred a flurry of work for Foster Wheeler
Corp. over the past year as the Clinton, N.J.-based contractor designed and
constructed 35 delayed cokers for refineries in the U.S. and abroad, says Troy Roder,
CEO of Foster Wheeler LTD. A means to upgrade refinery processes, “coking is widely
accepted and has really caught on in the last two years,” Roder says.
LNG terminals make up a big portion of many firms’ portfolios this year as worldwide
consumption gains momentum. However, regulatory issues are tossing up hurdles in
some states. “LNG is becoming more of a world-wide commodity like oil,” says
Wilkinson. “There is a global demand now growing in India and Asia with new players
and new consumers.”
But for contractors across the industry, whether a large upstream construction-
management firm or a smaller downstream contractor or subcontractor, the lack of
available project managers, engineers and skilled trades workers is perhaps the single
biggest challenge faced in getting jobs completed on time and under budget.
“We see the demand for labor,” says Bob Salazar, vice president of business
development at Norway-based Aker Kvaerner’s Houston office. The firm has about
15,000 employees in 30 different countries, 4,500 working in the petroleum market
around the Gulf of Mexico. “From the management side, there is an incredible demand
in the U.S. market.” The firm’s international reach allows recruiting and training of
people around the world, says Salazar.
For smaller firms such as ARB Inc., which performs about 20 projects per year in the $2-
million range, the labor factor is a wild card on many projects. In order to chase work in
the high-octane market, “We have doubled our staff in the last 18 months,” says
Kessler. “We are having trouble finding everyone from designers to engineers.” Kessler
says he has seen projects delayed across the industry due to unavailability of
managers or trades workers.
“There are two major issues: the availability of people, and the costs of materials,” says
Redmon. Jobs are being delayed “while they wait for materials prices to come down
and because they can’t find the people they need. I’ve never seen the people shortage
this bad before.”
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