The development of shale resources in the U.S. has sparked a tsunami-like wave of investments, especially in the Texas Gulf Coast. As many as 225 chemical projects valued at over $140 billion have been announced, expected to result in a $226 billion addition to the nation’s economic output by 2023.
These new projects, projected to add 700,000 permanent new jobs by 2023, are creating a surge in demand for skilled craft and technical workers — a challenge that is crucial to the success and sustainability of the petrochemical industry.
“These types of jobs have typically been called blue-collar jobs, but I’d like to give them a different title,” said Chevron Phillips Chemicals Cedar Bayou Plant Manager Mitch Krutilek, addressing the 2015 Petrochemical & Maritime Outlook Conference held recently in Pasadena, Texas.
“I think about these jobs as gold-collar careers,” Krutilek said. “These are strong, long-term demand jobs.”
Craftspeople, including welders, pipefitters, riggers, electricians and technical workers (process operators and electrical technicians) are among the gold-collar careers in high demand and typically require a technical degree or other certifications.
“The kicker behind that,” he added, “is these credentials are among the lowest cost options young adults have today.”
“And these positions pay very well,” Krutilek, a member of the conference’s “Petrochemical and Refining” panel, said. “At CP Chem, a fully qualified process operator can make over $100,000 a year with salary and overtime. In addition to the salary, these jobs provide good health care and typically provide excellent 401k retirement benefits.”
CP Chem’s Gulf Coast Petrochemical Project, a $6 billion expansion project, broke ground in 2011 in two locations.
“In Baytown, we are building a methane cracker that will produce over 3 billion pounds a year,” Krutilek said. “In Brazoria County, we are building two large polyethylene units that will each produce over a billion pounds of polyethylene per year.”
The expansion will create approximately 400 long-term jobs by 2017.
“In addition, during the engineering and construction phase, we will have over 10,000 jobs for engineering and construction,” Krutilek said.
Krutilek added CP Chem currently employs approximately 5,000 people, 40 percent of whom are eligible for retirement and will leave their positions within the next few years.
Chris Witte, senior vice president of BASF Freeport, echoed Krutilek’s insistence workforce development is a major challenge within the petrochemical industry.
“We have a baby-boomer generation,” he said. “We had a workforce issue before all this development was going on, and the additional growth has made it that much worse — or better. We need to spread the word these are great jobs, secure jobs, they are well-paying jobs, and they are jobs they can be proud of.”
“We are faced with a shortage of skilled labor to keep pace with the investment growth in the region,” said Dow Houston Operations Site Director Monty Heins. “This is an issue for our plant operations, and a significant issue for Dow Chemical’s partners who play an integral role in sourcing our maintenance, turnaround, engineering and construction work.”
Growth in the Gulf
A number of petrochemical and refining companies are currently expanding in the Gulf Coast region. Construction of an ammonia production plant is underway at BASF’s Freeport location, with targeted completion in 2017.
“The Freeport site was BASF’s first foray into North America. Now, almost 60 years later, Freeport is our largest site in the U.S. and it continues to grow,” Witte said. “During the recession, we were very diligent from a fixed-cost containment standpoint, but over the past four years we have seen growth opportunities.”
“Our region is a hotbed of growth,” Heins said. “The shale gas production has heralded in a new era of chemical manufacturing, and we’re all benefiting from that.”
The largest chemical manufacturing company in both Texas and Louisiana, Dow also has new projects underway at several of its Gulf Coast locations. Dow’s new world-scale propane dehydrogenation plant in Freeport remains on track for start-up in late 2015.
“Also in Freeport, we have a world-scale ethylene cracker that’s currently under construction, with estimated start-up in 2017. That cracker will also take advantage of shale gas,” Heins said.
Heins added new performance plastics plants are being built in both Texas and Louisiana to transform advantaged ethylene into products that enhance food and consumer packaging, as well as hygiene and industrial and medical applications.
“These comprehensive investments in both Texas and Louisiana will employ 7,000 contract workers at each construction,” he said. “In Texas, these projects will bring close to 500 permanent jobs.”
As the incoming board chair for the East Harris County Manufacturers Association (EHCMA), Heins said EHCMA is actively collaborating with high schools, local technical colleges, veterans’ organizations and other sources to recruit new workers to step into these soon-to-be-available “blue-collar careers.”
“Visible, active education, outreach and recruiting for our critical job needs is paramount,” he said. “That is going to continue to be a significant part of what we do at our Dow facilities and at EHCMA.”
Anticipating TSCA
Witte noted the EPA’s proposed Toxic Substances Control Act (TSCA) will challenge future growth, increasing manufacturing costs by developing new ozone regulations that will put growth at risk.
“The first standard was set at 120 parts per billion back in 1979,” Witte explained. “It was then lowered in the mid-1990s to 85 parts per billion, and then again in 2005 to 75 parts per billion. It is currently under discussion to be lowered again.
“We’ve been running this marathon for quite a while, and every time we get close to the finish line, the line gets moved back, and then moved back again,” Witte continued. “How far back it will be moved we don’t know. All we ask is that we have balance in certain regulations.”
“I guess we’ll know soon enough,” Heins said.
Both Witte and Heins warned the likely substantial increase in manufacturing costs will create “significant operational uncertainty,” which will impact the industry and its position in the global economy.
The EPA estimates the national cost impact will range from $4 billion up to $15 billion if emission standards are lowered to 65 parts per billion, Heins said, making TSCA one of the most expensive regulations in U.S. history. Its passage would cause a negative economic ripple effect throughout all industry, he said.
“It will impact everything we do,” Witte agreed. “We need a balanced number that recognizes the costs associated with that number — a number that’s achievable and allows us to compete.”
“We have seen an average in the industry of a 30-percent decrease in ozone levels in the U.S. from 1980 to 2013,” Heins said, touting industry’s already-achieved advances toward cleaner air. “Let us continue to operate at a standard that’s beneficial to our communities as well as to the industry.”
Witte stressed the industry’s demonstrated dedication to safety and environment responsibility.
“We have a very safe industry. We’re not perfect, but we strive for continuous improvement,” he said. “We openly share our successes, and we openly share when we have issues so we can learn from one another. I think that’s the mark of a great industry.”
Shell Deer Park General Manager Barry Klein affirmed the industry’s attention to the safety and wellness of its employees, contractors and community.
“Safety and reliability are at the core of our business,” he said. “We recognize any incident in our industry has a huge impact. We can talk about running our businesses all we want, but if we don’t run it safely and we don’t run it reliably, it doesn’t matter. That is truly one of our key priorities.”
Facing the future
“There has been a different shift in the growth and the nature of production in the U.S.,” Klein added. “Going back to the early 1980s, there were about 300 refineries in the U.S. As of last year, there were about 140. Large changes are taking place in the supply of oil and refining capacity on the back of fiscal and economic uncertainty.”
Heins noted advantaged trade is also critically important to the financial strength of the industry.
“Congress allowed the Export-Import Bank reauthorization to expire for the first time in over 80 years,” he said. “This bank plays a key role in enabling growth for our U.S. manufacturing-based economy.”
There are 84 base-port credit agencies around the world, Heins said, adding the U.S. would be significantly disadvantaged if this official export credit agency is discontinued.
“In Texas, we need advocacy and approval of progressive trade regulations to enable the new business exports that investment startups will bring in the next two to three years,” he said. “It is an economic advantage for the Houston Port Region to secure this business locally.”
Despite these various regulatory, economic and workforce challenges that hinder growth, Heins believes “our future is ever so bright for the U.S. petrochemical industry.”
“These are exciting times,” he concluded. “We look forward to continued partnerships as we grow and prosper together.”
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