Hurricane Harvey to Delay Gulf Coast Capital Project Completions
The impact of Hurricane Harvey on the timing of active capital projects along the Gulf Coast will be felt for months and perhaps even years to come, according to Tony Salemme, vice president of Industrial Info's Craft Labor Group. In just Harris County, Texas, Industrial Info is tracking more than $30 billion in project activity, ranging from those that are still in the planning stages to those that are nearing completion.
Like other parts of the Texas Gulf Coast, Harris County was hammered with torrential rainfall and has suffered massive flooding.
"Almost all of the construction sites are as flooded and muddy as everywhere else" that was hit by Harvey, Salemme said. "You can't go in until all that dries out. So with flooding, poor site conditions and the inability to move equipment, I don't anticipate anybody's projects NOT being delayed. There are going to be delays of a week, days or even a month just on that issue alone."
As refineries, chemical plants and other facilities strive to restart, they will need additional labor and other resources, putting more pressure on grassroot and expansion capital projects.
In Harris County, Industrial Info is tracking 42 capital projects worth $7.4 billion that are now in the construction phase. For December this year, Oxiteno USA (Houston, Texas) is currently expected to complete its Ethoxylated Surfactants Unit expansion project in Pasadena. The project includes installation of new and equipment and modification of existing equipment to increase production capacity at the plant site. For more information, see Industrial Info's project report.
Further out, Targa Resources Corporation (NYSE:TRGP) (Houston, Texas) is expected to complete a $115 million grassroot condensate splitter this February in Channelview, Texas. Construction of the 35,000-barrel-per-day splitter kicked off in June 2016. For more information, see Industrial Info's project report.
There are 19 capital projects worth nearly $2.6 billion in Harris County that are currently expected to kick off construction in the fourth quarter this year. Expected project completions number 39 for the same period, with a combined value of nearly $3.7 billion.
Labor supply shortages pose a long-term issue, Salemme continued. "There are already shortages in mechanical and trade crafts, so now there are also shortages in the soft crafts, like painters, insulators and laborers," he said. "Laborers are the guys with shovels, and a lot of shoveling will be going on."
Since 2013, the total man hours required to meet demand in the 11 metropolitan areas of the Gulf Coast has grown by some 40%, Salemme said, adding: "We have repeatedly said that we are in historic Demand levels since the peak of 2015. The Gulf needed some 37,000 travelers to meet 'demand,' and now with Harvey the problem will be worst."
In the months ahead, there will be shortages of construction materials and items like valves, pumps and copper, he added. "Everybody is going to want it all at the same time."
"This is so much bigger than what people are thinking of right now," he said.
Hurricane Irma could greatly compound the situation, even if it doesn't hit Texas or Louisiana, Salemme continued. Hurricane damage in Florida would include housing units and power facilities. Repairs would "require the same laborers, insulators, copper wiring, etc.," he said.
"Industrial Info offers a labor analysis that 'forecasts' wages against a model that represented 'extreme' wage inflation on the same scale as [Hurricane] Katrina, and that is a part of our subscription," Salemme continued.
A live web demonstration of the Labor Analysis and Forecast tool is available by reaching out to Tony Salemme at firstname.lastname@example.org or 1-800-762-3361.
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