Facing worker shortage, maritime industry reaches out to youth, retirees

Local maritime industry leaders and educators are working to encourage more young people to take jobs — requiring everything from long stints at sea to repairing ships — to ease a shortage of workers qualified for those jobs.

The industry has been facing a shortfall and an aging workforce, but filling those jobs and encouraging young people to enter the industry is crucial to the nation’s operations and security, local leaders and educators said.

A big part of the problem is that many young people just don’t know about the opportunities in the maritime industry, said Col. Michael Fossum, chief operating officer and vice president at Texas A&M University at Galveston.

And once students know about the industry, they have to be willing to rise to the demands of professionalism and, for some positions, many weeks at sea, Fossum said.

“It’s not an 8-to-5 job,” Fossum said. “That kind of job’s not for everybody.”

Jobs in the maritime industry can include anything from working as an engineer on a ship to transportation.

In an address at a maritime education summit this spring, national Maritime Administrator Adm. Mark Buzby estimated a shortage of about 1,800 mariners required for the nation’s needs.

The maritime industry is a competitive field in which to recruit new employees, said Niels Aalund, senior vice president of maritime affairs for West Gulf Maritime Association.

Workers are definitely getting older with fewer younger people replacing them, but there’s also generally low unemployment in Texas, which makes recruiting challenging, Aalund said.

“A common concern throughout the industry is a trained and educated workforce,” Aalund said.

That’s the main concern of Larry Terrell, branch manager at Danner’s Inc.

The transportation company shuttles maritime workers from the ships to the airport, stores or other places they need to go while in port and transports parts and equipment to ships, Terrell said.

It’s a demanding job that’s sometimes hard to recruit for, Terrell said.

“Some days are just crazy,” Terrell said. “It’s around the clock. It just never stops.”

Terrell’s trying to recruit more workers by reaching out to retirees about working part-time, he said.

But there is an encouraging number of young people interested in maritime jobs once they’re introduced to the options, said Richard Chapa, director of career and technology education at the Texas City Independent School District Industrial Trades Center.

Opened in 2017, the center provides high school students classes in trades skills, such as construction and welding.

This year, the center is graduating 10 students involved in the maritime program, and the freshman class has 22 students taking maritime classes, Chapa said.

The industry has a lot of opportunities for young people and students are starting to recognize that, said Nate Swerdlin, maritime instructor at the center.

“Of my seniors, pretty much all of them are going to take a pathway in maritime,” Swerdlin said. “That wasn’t the case two years ago.”

But maritime jobs could pay someone out of high school about $43,000 annually, with opportunities to advance to jobs paying $65,000 to $75,000 in a few years, Swerdlin said.

The shortage in young people isn’t unique to the maritime industry, Chapa said. Years of pushing four-year college means many students don’t realize the opportunities in skilled labor, Chapa said.

But staffing the maritime industry is crucial, Fossum said.

“We depend on maritime for our global reach to the markets around the planet and without that access we are severely cut off, we’re crippled,” Fossum said.

Staffing the industry also is crucial to the nation’s security, he said.

Fossum hopes advances in technology will attract more young people to the field, he said.

But there’s still a lot of progress to make, Fossum said.

“Right now, there is absolutely a shortage of ship engineers in the field and we see that even on our campus,” Fossum said. “We can’t attract enough students into that program to meet the demand that’s out there.”

Courtesy of The Daily News – Galveston County

https://www.galvnews.com/news/article_5357737c-4c33-5ae8-9431-aace0258a1c8.html

Kinder Morgan plans billions in 2020 project, JV spending

Houston-based Kinder Morgan Inc. (NYSE: KMI) plans to spend about $2.4 billion on expansion projects and joint ventures in 2020, according to a press release.

That’s in line with recent ranges the midstream company has been eyeing.

As of the end of the third quarter, Kinder Morgan had $4.1 billion in capital projects on its backlog, and it plans to spend between $2 billion and $3 billion each year on organic investment opportunities, according to a November presentation to its shareholders. In-service dates for projects on the backlog range from the fourth quarter of 2019 to 2023, the company said in the presentation.

“Capital projects are a high priority of ours. We spend $2 billion to $3 billion a year on capital projects, and we think that’s going to continue, certainly for the foreseeable future,” said Dax Sanders, the company’s executive vice president and chief strategy officer.

Sanders was speaking at the November investor presentation.

Pembina deal

The company also expects to sell its Canadian subsidiary and an associated pipeline to Calgary-based Pembina Pipeline Corp. (NYSE: PBA) for $2.5 billion by the first half of 2020. The company’s budget expectations right now anticipate using the proceeds from that deal to pay down debt, which would create about $1.2 billion of flexibility in the balance sheet that Kinder Morgan could use to repurchase shares or for other growth projects, the company said.

Kinder Morgan concluded a strategic review of the Canadian subsidiary in May and at the time had decided to continue to operate the company and hold on to its 70 percent share. KML was initially offered on public markets as a way of funding an expansion to the Trans Mountain pipeline, but the company completed the $3.46 billion sale of the Trans Mountain assets and expansion project to the Canadian government in the third quarter of 2018.

During the strategic review, Kinder Morgan considered selling its 70 percent interest in the Canadian subsidiary or buying back the 30 percent it doesn’t already own. The review included two bidding rounds and discussions with potential buyers, but Kinder Morgan ultimately decided the deals offered at the time weren’t satisfying.

 

By Joshua Mann  – Senior reporter, Houston Business Journal

Courtesy of Houston Business Journal

https://www.bizjournals.com/houston/news/2019/12/05/kinder-morgan-plans-billions-in-2020-project-jv.html

Houston Food Bank Suffers $3 Million Loss n Fresh Food

Houston Food Bank is seeking volunteers to help with donations after it was forced to throw away nearly 2 million pounds of fresh food worth almost $3 million.

 

An ammonia leak Tuesday night happened after one of the fans used to cool a refrigerated area “caved into the actual unit,” Brian Greene, president of Houston Food Bank, told ABC Houston station KTRK.

 

The food that was tossed was worth an estimated $2.7 million, Greene said. Fresh produce that was en route to the warehouse is being stored in refrigerated trucks as repairs continue inside the facility.

 

Video taken inside part of the facility’s 28,000 square feet of refrigerated space shows aisles and aisles ceiling-high shelves completely bare.

 

Greene said volunteers are needed urgently so the organization can continue to accept donations from “all over the country.”

 

The food bank operates 24 hours a day and serves about 1.1 million people who are struggling with food insecurity, he said.

 

 

By: Julia Jacobo

Courtesy of ABC 13 News KTRK

https://abcnews.go.com/US/houston-food-bank-tosses-million-fresh-food-ammonia/story?id=67164797

 

ExxonMobil plans a $2B Baytown chemical expansion project

Irving, Texas-based Exxon Mobil Corp. (NYSE: XOM), which has a major presence in Houston, has decided to move forward with a $2 billion project in Baytown.

Exxon will expand its Baytown chemical plant, creating about 2,000 jobs during construction, according to a May 2 press release. The expansion is expected to start up in 2022.

Once online, the expansion is expected to create at least 25 permanent positions paying at least $62,970 per year, according to documents filed last summer with the Texas comptroller.

The expansion will add a new Vistamaxx performance polymer unit, which will produce “products that offer higher levels of elasticity, softness and flexibility,” per the May 2 release. It will have a capacity of 400,000 tons of Vistamaxx polymers per year, which will “contribute to a reduction in materials used and increased performance in everyday products,” per the release.

Exxon also will be able to enter the linear alpha olefins market, producing about 350,000 tons per year. “Linear alpha olefins are used in numerous applications, including high-performing engine and industrial oils, waxes and building blocks for surfactants, polyethylene plastic for packaging, and other specialty chemicals,” per the release.

According to Exxon’s release, the 100-year-old Baytown complex is the largest integrated petrochemical complex in the U.S. It spans about 3,400 acres along the Houston Ship Channel and includes a refinery, chemical plant, olefins plant, plastics plant and global technology center. Last year, Exxon completed a new 1.5 million-ton-per-year ethane cracker at its Baytown complex after four years of construction.

“Our Baytown chemical expansion will put us in a solid position to maximize the value of increased Permian Basin production and will deliver higher-demand, higher-value products produced at our Gulf Coast refining and chemical facilities,” Exxon Chairman and CEO Darren Woods said in the release. “Global demand for chemicals is expected to be greater than energy demand growth and GDP growth over the next 20 years.”

The newly announced expansion project is in addition to Exxon’s Growing the Gulf initiative, which the company announced in 2017. The $20 billion, 10-year initiative will build and expand 11 manufacturing facilities, according to previous press releases. Investments began in 2013 and are expected to continue at least through 2022.

The recently completed ethane cracker plus other projects in Mont Belvieu, Beaumont and other areas along the coast are all part of the Growing the Gulf initiative. In Beaumont, Exxon recently made a final investment decision to move forward with a major expansion of its refinery.

Another project associated with the initiative is Exxon’s joint venture with Saudi Basic Industries Corp., known as SABIC, for a proposed $10 billion, 1,400-acre petrochemical complex in San Patricio County, Texas. The plans include an ethane steam cracker that could produce 1.8 million tons of ethylene each year.

By Olivia Pulsinelli 

Courtesy of Houston Business Journal

https://www.bizjournals.com/houston/news/2019/05/02/exxon-oks-2b-baytown-chemical-expansion-project.html

Anadarko cancels Chevron deal, enters into Oxy deal for $57B

The Woodlands-based Anadako Petroleum Corp.  (NYSE: APC) officially terminated its previously announced acquisition deal with Chevron (NYSE: CVX) on May 9, the same day that the California-based energy giant bowed out of a bidding war over the company.

Houston-based Occidental Petroleum Corp.  (NYSE: OXY) came out on top in that fight. The companies also announced May 9 that they have entered into a definitive merger agreement for Occidental to acquire Anadarok.

Anadarko paid a $1 billion breakup fee to cancel the Chevron deal, as expected. Glenn Vangolen, Occidental’s senior vice president of business support, will lead the integration of the two companies with a team including representatives from both, according to a May 9 press release from Occidental.

As previously announced, Anadarko shareholders will receive $59 in cash and 0.2934 of a share of OXY per share of APC. When Occidental sent that offer to Anadarko on May 5, it was valued at $76 per share. The equity purchase price of the offer was valued at $38 billion, and the deal’s total transaction value is $57 billion, including the assumption of Anadarko’s debt.

Occidental’s prior offer on April 24 also was valued at $76 per share. However, the finalized deal is for 78 percent cash and 22 percent stock, whereas the proposal announced on April 24 was a 50-50 split. When the deal for Chevron to acquire Anadarko was first announced on April 12, it was valued at $65 per share, consisting of 25 percent cash and 75 percent stock. That deal had an enterprise value of $50 billion. Based on Chevron’s stock price, the deal’s value was down to $61.62 per share as of May 3.

Additionally, Occidental’s finalized offer does not require approval by the company’s shareholders, but it does require Anadarko shareholders to approve it. Occidental has obtained committed financing for the entire cash portion of the aggregate transaction. The deal is supported by a $10 billion commitment from billionaire Warren Buffet’s Berkshire Hathaway Inc. (NYSE: BRK.A, BRK.B) and an agreement from Paris-based Total SA (NYSE: TOT) to buy $8.8 billion in assets. The Total deal represents a major portion of the $10 billion to $15 billion in divestitures that Occidental plans to make over the next 12 to 24 months. Occidental expects it could close the Anadarko deal in the second half of 2019 and that the acquisition would create $2 billion of annual cost synergies and $1.5 billion of annual capital reductions.

“We are pleased to have reached an agreement with Occidental that delivers significant, near-term value to our shareholders,” Al Walker, chairman and CEO of Anadarko, said in the company’s May 9 press release. “Anadarko’s employees have strategically assembled a premier portfolio of world-class assets, and this transaction would not have been possible without our board’s leadership over the past several months. We are proud of the substantial premium we have delivered to our shareholders and look forward to working with Occidental to ensure a smooth transition.”

Goldman Sachs & Co. LLC, Evercore, and Jefferies LLC are acting as financial advisers to Anadarko. Wachtell, Lipton, Rosen & Katz is acting as legal adviser to Anadarko. Bank of America Merrill Lynch and Citi are acting as Occidental’s financial advisers. Cravath, Swaine & Moore LLP is serving as legal counsel.

By Olivia Pulsinelli

Courtesy of Houston Business Journal

https://www.bizjournals.com/houston/news/2019/05/09/it-s-official-anadarko-cancels-chevron-deal-enters.html



Canada to buy Kinder Morgan’s Trans Mountain Expansion Project

Kinder Morgan Canada Ltd. has reached an agreement with the Canadian government to sell the Trans Mountain Expansion Project (TMEP). Canada will purchase the crude transportation project and the pipeline and terminal assets constituting the existing Trans Mountain pipeline for $4.5 billion in a transaction expected to close in August and intended to ensure TMEP’s timely completion.

The agreement will guarantee resumption of work for the summer construction season. Federal loan guarantees will ensure that construction continues through the 2018 season.

TMEP involves building 1,150 km of 36-in. OD pipeline, generally paralleling the route of the existing system. The expansion will carry 590,000 b/d of crude from Alberta to coastal British Columbia for export, bringing total capacity to 890,000 b/d. Beginning construction this year should allow the expanded system to enter service in 2020.

The Canadian government noted that the core assets required to build TMEP “have significant commercial value, and this transaction represents a sound investment opportunity.” The government does not, however, intend to own TMEP long term. “At the appropriate time, Canada will work with investors to transfer the project and related assets to a new owner or owners, in a way that ensures the project’s construction and operation will proceed in a manner that protects the public interest,” the government said in a press release.

Kinder Morgan will work with the government to find a third-party buyer for both the existing Trans Mountain pipeline and TMEP.

The government will extend federal indemnity to protect any prospective new owner from costs associated with “politically motivated delays.” The province of Alberta will also contribute to get the project built. Alberta’s contribution would act as an emergency fund and would only come into play if required due to unforeseen circumstances. In return, Alberta will receive value commensurate to their contribution, through equity or profit-sharing.

Canada’s Minister of Finance Bill Morneau noted the deepening conflict between Alberta and British Columbia regarding TMEP in announcing the acquisition: “Division among provinces—such as the dispute that has arisen between Alberta and BC—cannot be allowed to fester. Especially not when the resulting impasse threatens both the livelihood of thousands of workers and Canada’s solid reputation as a good place to invest. And so, for the last few weeks I have been in intense negotiations with Kinder Morgan, Trans Mountain’s owner. Discussions became necessary when the political uncertainty in British Columbia made it difficult for the company to proceed with construction.”

BC Premier John Horgan, governing in coalition with the Green Party, had pledged to block the pipeline despite federal approval granted in December 2016. Alberta subsequently moved to limit energy shipments to British Columbia (OGJ Online, Apr. 23, 2018).

Ratings agencies also cited the interprovincial dispute in their initial statements. “The announced sale by Kinder Morgan Canada of its Trans Mountain Pipeline system and TMEP is credit positive for Kinder Morgan Inc.,” said Terry Marshall, a Moody’s senior vice-president. “The sale removes the significant risk attached to the TMEP expansion, eliminating at least $6.4 billion (Can.)—before potential cost overruns—of additional capital to complete the project and the uncertainty of construction scheduling and completion, given the opposition to the project from various stakeholders.”

Contact Christopher E. Smith at chriss@ogjonline.com.

U.S. Gulf Coast Port Limitations Impose Additional Costs on Rising U.S. Crude Oil Exports

U.S. crude oil exports averaged 1.1 million barrels per day (b/d) in 2017 and 1.6 million b/d so far in 2018, up from less than 0.5 million b/d in 2016. This growth in U.S. crude oil exports happened despite the fact that U.S. Gulf Coast onshore ports cannot fully load Very Large Crude Carriers (VLCC), […]

Boom in West Texas oil patch lifts wages, prices

In West Texas, rising oil prices are fueling a sharp economic upswing, lifting employment and pay to records, driving up spending at hotels, restaurants, and car dealerships, and raising the cost of housing and other essentials.

This parched patch of land, under which lies the largest oil-producing rock formations in the United States, is the epicenter of a growth binge that shows just how tight the link remains between low unemployment, rising wages, and upward pricing pressure.

After a two-year crash, the price of crude CLc1 began to recover in 2016 and pierced $60 a barrel early this year. But oil is still far cheaper than at the peak of the previous eight-year boom that began in 2006 North Dakota’s Bakken oil patch and supercharged the city of Williston.

In the Permian basin, which stretches across West Texas and eastern New Mexico, the latest boom is being helped by advances in technology that allow drillers to extract much more from each acre.

“$60 is like the new $100,” said Dallas Fed economist Michael Plante in a mid-April interview.

Breakeven costs are now as little as $25 per barrel, according to the Dallas Fed’s most recent survey, so energy companies here no longer need $100 oil to make lots of money.

And Midland and its neighbor Odessa, the biggest towns for miles and the regional base for major oil producers in the Permian Basin, including Occidental Petroleum Corp (OXY.N), Chevron Corp (CVX.N), Apache Corp (APA.N) and Pioneer Natural Resources Co (PXD.N), are feeling the surge.

“It is a full-fledged boom,” says Dale Redman, chief executive of Propetro, a Midland, Texas, firm that supplies heavy-duty horsepower to drill sites, where energy companies coax crude from the ground with sand and water.

He has tripled his workforce since early 2016, drawing workers from towns and cities hundreds of miles away. Over half of his 1,200 employees make more than $100,000. “What it has done is raised wages for all these folks. But housing and the cost of living has gone up as well.”

To Midland Mayor Jerry Morales, “It’s a good story right now.” He says the city is trying to keep up with the drop in housing inventory and rise in rents by approving new apartment complexes and working with developers to put in water and sewer pipes.

But as owner of two restaurants in town, including Gerardo’s Casita, he sees the other side too.

“The biggest problem I face is low unemployment – finding workers,” he said in a phone interview, adding that he is increasing pay every six months to keep staff from leaving for other jobs, and he is hiking his menu prices as well.

MACROECONOMIC IMPLICATIONS

Investment by the energy sector, for years a drag on growth, has in recent quarters begun to add to it, U.S. government figures show. But oil is only about 2 percent of U.S. GDP, says Lutz Kilian, an economics professor at the University of Michigan. That limits the effect of swings in the industry on the overall economy.

And though exports of oil have increased, helping to shrink the U.S. trade deficit in energy by half from fourth quarter 2016 to fourth quarter 2017, the improvement has had negligible impact on the much larger overall U.S. trade deficit, which grew during that period.

But as an object lesson in the connection between low unemployment and rising prices, Midland and Odessa does have macroeconomic implications.

On a national level, wage growth and inflation have remained surprisingly subdued even after 90 consecutive months of jobs gains, and an unemployment rate of 4.1 percent and expected to head still lower.

“If the rest of the country starts to look more like West Texas … then we will certainly see stronger wage gains” nationally, said David Berson, chief economist for Nationwide Mutual.

Berson predicts that when wage gains start to accelerate nationally, probably by early next year, they will boost inflation more than expected.

JOBS JUMP, TRUCK SALES SURGE, RENTS RISE

Oil companies are drilling wells faster, and putting more wells on a single site, using technology to find the best angles and depths to get the most out of each layer of shale.

That has helped boost per-employee output by Texas oil and gas companies to an estimated $820,000, according to Waco, Texas-based economist Ray Perryman.

“Companies are making enough money to be able to afford to pay higher wages,” he said.

Unemployment was 3.2 percent in Odessa and 2.5 percent in Midland in February. Average weekly earnings in March hit records in both towns, which have a combined population of about 250,000. Sales tax receipts have soared.

“You have people that move in, you train them and then someone else offers them a job: there is constant raiding going on,” says Jeff Sparks, chief operating officer of family-owned Discovery Oil in Midland, who has only recently shifted to the more efficient and capital-intensive drilling techniques that have pushed per-barrel extraction costs down so steeply.

EXPANSION PLANS

At the Odessa car dealership the Sewell family has run since 1935, Colin Sewell sold 1,073 trucks in the first three months of this year, up from 670 last year. He is building a brand new service center on the outskirts of town.

Jason Tarulli, senior project manager at general contractor UEB, is using an out-of-town crew to build a downtown Odessa construction project he is overseeing, because local hiring would have been impossible.

His costs are rising; rent for a one bedroom in his building rose by more than $1,000 in less than a year, to $3,630.

Everyone who has lived here a while knows that the boom is not going to last, including Sondra Eoff, who is footing about half the $80 million bill for the downtown project, meant to help keep the town vibrant for the long run and not just during boomtimes.

“When there’s an up, there’s a down,” she says.

 

The Oil And Gas Situation: Four Big Factors Influence U.S. Oil Markets

Here are four big factors influencing the domestic oil and gas industry as the week begins:

The rig count continues to escalate steadily.  The DrillingInfo daily rig count sits at 1105 as of May 13, up 25 from two weeks before.  This is not surprising at all – crude oil prices remain strong, making an increasing population of potential drilling projects economic to drill.  More than 80% of those rigs are drilling oil wells, and over half of them are doing it within the state of Texas.   Again, no surprise, given that the preponderance of the vast Permian Basin lies within the state.

We should expect the rig count to continue to rise at least through the end of June , at which point company drilling budgets for the second half of the year will kick in.  We’ll have to wait to see what happens after that, although if the strong price environment prevails it is reasonable to expect continued steady increases through the end of 2018.

The oil price didn’t rocket up after President Trump’s Iran announcement.  In fact, the opening WTI price on Monday morning was about a dollar below its level when the announcement was made.  Obviously, the market had already priced the President’s decision into its collective hive mind.  No surprise there.

That having been said, the major factors that influence crude prices do appear to agitate in favor of further increases in the coming months.  Demand growth remains strong, declining inventories globally indicate that the 4-year global surplus has pretty much gone away.  A new OPEC reports indicates that “oil inventories in developed nations in March fell to 9 million barrels above the five-year average. That’s down from 340 million barrels above the average in January 2017.”

The same OPEC report also notes that the cartel possesses plenty of spare capacity to step in and stabilize the market should a dramatic drop in Iran’s oil supply ultimately come about:  “OPEC, as always, stands ready to support oil market stability, together with non-OPEC oil producing nations participating in the Declaration of Cooperation.”

OPEC’s export limitation agreement with Russia is set to continue through at least the end of 2018, and that, along with these other factors, agitates in favor of crude prices ending the year slightly higher than their present levels.

A widening Permian price differential could send capital to other U.S. basins during the second half of the year.  Deepening pipeline constraints are making it harder and harder for Permian producers to get their product out of the Basin to market, especially those who do not own reserved capacity on the increasingly strained pipeline system.  The Wall Street Journal reported on May 10 that some companies are experiencing as much as a $10/bbl differential as a result.

While drilling budgets for most producers are set through the end of June, this increasingly constrained situation could result in companies that produce in multiple basins shifting some of their drilling capital to non-Permian regions during the second half of the year and into 2019.  The Eagle Ford Shale, DJ Basin and Bakken Shale would be the most likely beneficiaries of such a re-directing of capital.  The per-well economics in these other basins may not measure up to those in the Permian, all other factors being equal, but the differential blowout for some Permian producers means all other factors aren’t equal at this point.  This situation is likely to persist into 2019, when a raft of new pipeline buildouts are scheduled to come online.

The growing U.S. refinery/production mis-match means America’s crude exports will keep rising.  The U.S. Energy Information Administration reports that exports of domestic crude topped 2 million barrels of oil per day (bopd) in April, a whopping rise of 489,000 bopd from March, and 210,00 bopd higher than the previous record set in October 2017.

U.S. refiners set up mainly to process mid-gravity or heavy crudes coming in from other countries simply lack the capacity to refine all of the light, sweet crude flooding out of the nation’s shale basins.  The fact that the oil has to be refined somewhere and that producers are often able to commander higher prices by exporting their product, along with ongoing expansion of export capacity at the Port of Corpus Christi and other Gulf Coast ports mean that we can expect to see the U.S. become an even bigger player in the crude export market in coming years.

All in all, 2018 is a very healthy and expansive time to be engaged in the oil and gas business in the United States.

 

David Blackmon  Forbes