To Modularize Or Not To Modularize? That Is The Question

Covestro, Tesoro and BP weigh in

As if prompted by the arrival of winter, the Gulf Coast labor market has cooled and may continue to cool for a while. The market may heat up again next year, but how does a cooling labor market impact owners’ decisions whether to modularize or not?

Rick Rashall, group head of construction for Covestro, advises never to let cost and schedule determine whether to modularize or not.

“It’s more difficult all the time to get good, skilled labor, so more consideration has to go into modularization,” Rashall said, speaking on a panel at the recent Refining Engineering & Construction event in Houston. “But you have to choose what’s right for your site when you’re looking at that labor market and what that availability is.”

Rashall believes the labor market is an issue whether a project is stick-built or modularized.

“But at least when you’re pushing it into the shop,” he reasoned, “you’ve got a more controlled environment with a more continuous labor market than you have in the field with a stick build.”

Justin Shapiro, senior project engineer for Tesoro, offered the cooling of the labor market affords the construction industry the opportunity to bring what he calls “The A Team” versus “The C Team” into plants.

“The thought process is that in the fabrication shops and modularization shops, they have that continuity of crafts that they always have: ‘The A Team’ is available,” he said. “So with the cooling labor market, I can see that we’d be inclined to more stickbuilt construction.”

Shapiro noted there’s “a very strong labor union representation” in most of Tesoro’s plants on the West Coast.

“The labor rates are negotiated on a biannual basis where we are locked in, whether the market is hot or not,” he said. “So ideally, in a lighter market, we can get cheaper labor rates, so we don’t usually put that into our considerations when we’re looking at modularization options. There are no bargains, whether you’re buying food or milk or anything else out there.”

Considering the pros and cons of offshore modularization, Utpala Dubey, project services and global project solutions manager at BP, observed one of the major factors that drives the modularization decision is the size of the module.

“Size is restricted by the barge sizes and the lifting capacity of the cranes,” she said. “However, having said that, offshore requires that there be a lot more skilled labor than onshore. All things being equal, if you are looking for value preservation, narrowing the uncertainty around the module gives you much better options. It gives you a lot of leeway, and it is the biggest growth that we have.”

Regarding whether the outcome of the recent U.S. presidential election will change owners’ appetites for overseas modules due to the proposed raising of import taxes, Shapiro said the current expectation is “steady as she goes.”

“Working with downstream modularization, we’re looking at smaller modules, so we’ve been targeting more local fabrication shops,” he said. “We haven’t really been looking at the international module shops, at least not from the downstream side. We left those to the big boys, like the upstream groups in the heavy industries and larger shops.

“We have a plant in South Dakota, and we looked exclusively at four or five shops that were within about 200 miles of that plant. That’s kind of a change in focus in how we do modularization, trying to build up these local shops to support us. I think that’s probably the opportunity we’re going to have to explore the most in order to really make modularization a standard in downstream.”

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