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Hurricane May Delay Some Petroleum Project Starts Until 2018
Volume of petroleum deliveries grows, capital markets strong
Low-pressure air from three industrial fans raised a 750-ton roof nine stories, capping a cryogenic tank at the Phillips 66 Terminal Expansion in Freeport, Texas.
PHOTO BY NICK GRANCHAROFF, ZACHRY GROUP
Contractors say they expect the demand for petroleum—liquefied natural gas (LNG) and petrochemicals production, in particular—will remain strong across the U.S. in the near future, with capital markets and construction projects following suit.
U.S. petroleum deliveries increased from the previous year 4.9% in July—the highest mark for July deliveries in a decade, the American Petroleum Institute reported this summer. While gasoline deliveries reached an all-time high of 9.7 million barrels a day in July, domestic crude-oil production is up 8.6% from last year, API notes.
That’s good news for firms working in the U.S. petroleum sector. Capital growth and construction starts should follow in kind, leaders say. “The Gulf as a whole should remain strong for the next 10 years,” says Kent Free, senior director at PCL Industrial Construction Co., Houston. PCL works mostly in the petrochemicals market, and Free says that niche “is strong and will continue to be strong. The expectations of growth are still there.” He adds, “But the peak of capital [spending] may shift into 2019, 2020 or 2021.”
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Free and others say that’s because uncertainties remain about the long-term impact of Hurricane Harvey, especially in the heavily flooded areas along the Gulf Coast, where the storm halted about half the region’s gas production, shut down pipelines and severely disrupted deliveries, temporarily driving up gas prices across the country. Eastern Texas was hardest-hit, with nearly 40% of its gas-processing capacity off line at some point as a result of the storm, according to Platts. As of Sept. 15, three refineries in the Gulf Coast region remained shut down, according to the Energy Dept.
Other than the short-term diversion of money for repairs to facilities, the biggest concern is the strain that storm reconstruction will place on an already thin construction workforce and high demand for materials in the Gulf, Free says.
“All indications so far are that owners still intend to go through with projects that are bidding, but they may be delayed a few months,” Free says. “Also, owners and contractors may have to work through the labor issues together, and we may see some risk-shifting on that front—back to the owners. There’s going to be a lot people wanting to get a lot of work done pretty quickly.”
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“Based on our experience with Katrina and Sandy, we know that rebuilding requires several years to gear up. So, we expect Harvey to influence construction starts in the region during 2018-19 …after the immediate damage is dealt with,” Robert Murray, chief economist for Dodge Data & Analytics, told ENR.
The Gulf region has had a healthy year for construction starts, including the July launch of the $1.5-billion Brownsville-to-Nueces natural-gas pipeline in Texas; the $690-million Gulf South Coastal Bend Header Pipeline, also in Texas; the $300-million Cameron Access natural-gas pipeline expansion in Louisiana and an $869-million, natural-gas-fired power plant in Louisiana, among others, according to Dodge.
“Oil-and-gas customers are still there. They’re not going away,” Free says.
