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As we enter the second quarter of 2020, uncertainty prevails in our industry. Oil prices as of this writing declined precipitately to new lows with WTI Crude Oil at $30.98/bbl and Brent Crude Oil at $34.45/ bbl. Natural gas prices also fell to $1.799/BTU.
The fallout from the collapse of the negotiations between Russia and OPEC for reduced production to shore up prices, reduction in worldwide consumption (primarily China) due to the COVID-19 coronavirus, and a mild winter have exasperated the uncertainty in the energy markets.
A disruption in the supply chain caused by the COVID-19 virus may cause delays of offshore welding fittings and forged steel flanges. It is suggested that you keep in close contact with domestic manufacturers in the event severe disruptions are encountered.
Increased scrutiny of imported material is empathized due to the fraudulent practices of offshore manufacturers to seek competitive advantage over domestic manufacturers mentioned in previous articles in The Wholesaler.
With all this uncertainty in mind, energy project starts for the second quarter are moving forward.
In the U.S. Mid-Atlantic region — Maryland, North Carolina, South Carolina, Virginia and West Virginia — planned project starts for natural gas total $2.4 billion.
Plants in this region have ready access to gas generated from the Marcellus Shale, and natural gas-fired power plant build-outs remain relatively strong. Two combined-cycle power plant startup projects are planned for West Virginia and Virginia. NOVI Energy’s planned 1,060-megawatt plant in Charles City, Va., near Richmond, is the largest — with an estimated total investment value (TIV) of $1 billion.
Energy Solutions Consortium LLC intends to start construction on combined-cycle plants in the West Virginia cities of Follansbee and Clarksburg. The Brooke County Generating Station (Follansbee) will have a generating capacity of 750 MW. In Clarksburg, the Harrison County Generating Station will have a generating capacity of 630 MW. The total TIV of these projects is $1.48 billion.
The Federal Energy Regulatory Commission issued an order approving Chesapeake Utilities’ proposed Del-Mar Energy Pathway Project. The $37-million project will add 12 miles of natural gas infrastructure in the Kent and Sussex counties of Delaware and nearly seven miles in the Wicomico and Somerset counties in Maryland.
Construction is set to commence in the late first quarter of 2020 or the beginning of the second quarter, with completion estimated to be late fourth-quarter 2021.
The South Dakota Water Management Board approved five water permit applications for the 830,000 bpd Keystone XL pipeline venture. There are no other permits needed for construction to begin in the state. Pre-construction activities have started, with actual construction beginning in late second-quarter 2020.
On March 3, Sempra Energy’s Port Arthur LNG subsidiary and Bechtel Oil, Gas and Chemicals Inc. signed a fixed-price engineering, procurement and construction contract for a liquified natural gas project in Port Arthur, Texas. It has an estimated TIV of between $8 billion and $9 billion.
The project — located on nearly 3,000 acres of land along three miles of the Sabine-Neches waterway — may be one of the largest LNG projects in North America. It has expansion capabilities of up to eight liquefaction trains and 45 million tonnes per annum capacity.
Construction will begin after Sempra reaches a final investment decision, which is expected this year. The LNG production is scheduled to start by 2023. Sempra anticipates the project will generate approximately 5,000 construction jobs at peak.
Optimism for Construction Starts in Southeast
Last November, Dodge Data & Analytics predicted the volume of 2020 construction starts in the United States would decrease by 4 percent, or about a total of $776.4 billion.
Richard Branch, chief economist for Dodge Data & Analytics, states that construction will decline in 2020 but “nothing like what we saw in the last recession,” adding that there will “still be lots of opportunity for growth” in certain areas.
Optimism is still high in the Southeast. “We can’t help but think that the tables are going to turn, but it feels very similar to 2019,” notes Dan Kaufman, regional president with JE Dunn Construction in Atlanta.
Last year proved exceedingly strong, he says, with 2019 finishing out as “the best year ever in our company.” The year ended with the contractor’s backlog at a record high. JE Dunn’s backlog of work for 2020 should total “a little over a billion dollars,” and 2021’s backlog is already at approximately $700 million, Kaufman notes.
“All geographic markets in the Southeast continue to show signs of growth, and our design partners are busier than ever,” says Mark Whitson, Southeast region leader for DPR Construction in Raleigh, N.C.
The life sciences construction market in the Raleigh-Durham area “continues to show very strong growth,” he says, adding that the health-care sector throughout the Southeast also exhibits ongoing robust growth. The region continues to draw capital investments in manufacturing facilities, with that project sector appearing to remain “extremely strong.”
Major metropolitan areas across the Southeast have been delivering an abundance of construction activity, and there is little sign this activity will be slowing.
“Nashville has had tremendous growth, and there are typically 20-plus tower cranes visible from the skyline,” states James Ferris, chief operating officer with Orlando, Fla.-based TLC Engineering Solutions. I personally counted 28 tower cranes visible from the hotel room window during my recent visit.
“We believe 2020 will likely be another steady year for the Southeast construction market, even considering external unknowns and impacts,” states Robin Savage, president and COO of Robbins & Morton.
He cited Nashville, Tenn.’s recent recognition by the Wall Street Journal as one of the nation’s top U.S. job markets: “Southeast cities — including Atlanta, Orlando, Charlotte, [N.C.] and Nashville — continue to rise in popularity with young professionals as they attract new business and industry.”
The Mechanical Contractors Association of America’s 2020 convention, held March 15-19, is the platform for industry leaders to express their prognostications for the construction industry’s health in 2020 and 2021. I will address MCAA’s industry outlook in my May column.
PVF Roundtable News
The second meeting of the PVF Roundtable’s 2020 season will be a networking meeting scheduled for May 12 at Houston’s The Bell Tower on 34th. It will begin at 4:15 p.m. and end at 8 p.m.
This meeting will be preceded by the PVF Roundtable Golf Tournament in Memory of Don Caffee, May 11, to be held at the Clubs at Kingwood in Houston. To register, go to www.planmygolfevent.com/35278-2020PVFGOLF.
The PVF Roundtable board of directors urges you and your associates to attend the golf tournament and networking meetings. This is where the movers and decision-makers from all sectors of the PVF industry meet to network and exchange information and ideas.