If Only We Had Your Problems! Labour Shortage Threatens To Bust The Shale Boom
How high is demand for welders to work in the shale boom on the U.S. Gulf Coast? So high that “you can take every citizen in the region of Lake Charles between the ages of 5 and 85 and teach them all how to weld and you’re not going to have enough welders,” said Peter Huntsman, chief executive officer of chemical maker Huntsman Corp.
So high that San Jacinto College in Pasadena, Texas, offers a four-hour welding class in the middle of the night.
So high that local employers say they’re worried there won’t be adequate supply of workers of all kinds. Just for construction, Gulf Coast oil, gas and chemical companies will have to find 36,000 new qualified workers by 2016, according to Industrial Info Resources Inc. in Sugar Land, Texas. Regional estimates call for even more new hires once those projects are built.
The processing and refining industries need so many workers to build new facilities in Texas and Louisiana because of the unprecedented rise over the last three years in U.S. oil and gas production, much of it due to shale. Labor shortages, causing delays in construction, threaten to slow the boom and push back the date when the country can meet its own energy needs, estimated by BP Plc to be in 2035.
Worker scarcities are already evident in the unemployment rates of Texas (5.7 percent) and Louisiana (4.5 percent), both below the national average of 6.7 percent, according to the Bureau of Labor Statistics. The lowest jobless rate of any area in the U.S. in February was 2.8 percent in Houma-Bayou Cane-Thibodaux, Louisiana, because of offshore-oil exploration in the Gulf of Mexico.
Companies will spend $35 billion, more than ever, on expansion projects along the Houston Ship Channel by next year, creating a total of 265,800 jobs, a 2012 Greater Houston Port Bureau survey shows. Louisiana, where $60 billion in building projects are planned through 2016, will need 86,300 workers over that time, according to the state’s Workforce Commission.
“This is an exponentially larger investment period than Louisiana has ever seen,” said Tom Guarisco, a spokesman for the Workforce Commission in Baton Rouge.
The biggest shortages will be for welders, electricians, instrumentation technicians, fabricators and pipe fitters, according to Roger Blackburn, executive account manager at Infinity Construction Services LP, which employs about 2,500 workers on the Gulf Coast. The scale of the projects means costs and delays will probably escalate, he said.
Labor scarcity can erode profit. Cost run-ups and labor shortages have hindered recent energy-boom projects in Canada and Australia. Wages for oil and gas workers in Canada rose to as much as 60 percent higher than U.S. counterparts, labor data show. In Australia, cooks at offshore projects are earning more than A$350,000 ($328,000) a year while laundry hands get more than A$325,000 and barge welders almost A$400,000, imperiling investments in liquefied natural gas, according to the Australian Petroleum Production & Exploration Association.
Enterprise Products Partners LP said March 18 that permitting for a facility east of Houston, in Mont Belvieu, Texas, that turns propane into propylene is running three months behind. In December, Royal Dutch Shell Plc canceled a $20 billion gas-to-liquids plant slated for Louisiana, citing potential cost overruns. Construction for three new U.S. natural-gas-processing plants could go as much as 40 percent over budget and finish nine months late, Sergey Vasnetsov, senior vice president of strategic planning at LyondellBasell Industries NV in Houston, said at a March 12 conference in New York.