By the time this report is published, it will be the middle of the third quarter of the year. The anticipated, and hoped for, increase in activity has begun, with several projects entering the construction stage during the quarter. Another positive sign is that the Energy Information Administration (EIA) raised its Brent and West Texas Intermediate (WTI) oil price forecasts in its July Short Term Energy Outlook (STEO).
According to the latest STEO, EIA expects the Brent spot price to average $40.50 per barrel in 2020 and $49.70 per barrel in 2021. The WTI spot price is expected to average $37.55 per barrel in 2020 and $43.31 per barrel in 2021.
As of this writing, Brent is at $43.12 per barrel and WTI is at $40.57 per barrel.
The EIA expects high inventory levels and surplus crude oil production capacity will limit upward price pressures in the remaining months of 2020; however, as inventories decline into 2021, those upward pressures will increase.
The construction markets most affected by COVID-19 are oil and gas production and processing, liquified natural gas, petroleum refining and power generation, excluding transmission and distribution. The markets that have reacted favorably are chemical processing, food and beverage, packaging, and pharmaceuticals.
The skilled labor shortage continues to be a significant constraint going forward. Many travelers will retire, file for disability, change to local jobs or remain out of the workforce.
The assumptions are that the lack of demand in the Permian Basin of West Texas and New Mexico will allow for an ample supply of skilled labor, but that simply is not the case. The labor supply of the Permian is minuscule compared to the needs of those in the Gulf Coast.
Chemical Plant Maintenance Projects
Chemical producers are planning the startup of delayed maintenance projects during the third quarter. The U.S. Gulf Coast region will see most of the third-quarter maintenance projects.
Formosa Plastics Corp. is starting a turnaround on ethylene oxide and ethylene glycol units at its plastics facility in Point Comfort, Texas, in September, delayed from a planned turnaround in May.
In Louisiana, CF Industries Holdings is preparing to begin a turnaround on a urea unit at its nitrogen complex in Donaldsonville. West Lake Chemical Corp. is also expecting to begin work on its turnaround on the Plant K line at its polyethylene resins facility in Sulphur in September of this year.
Mosaic Co. began its turnaround this month on its Phosphoric Acid East Unit at the New Wales Fertilizer facility in Mulberry, Fla.
Industrial Manufacturing in the Great Lakes
The Great Lakes Region — which consists of Illinois, Kentucky, Michigan, Ohio and Wisconsin — is expecting more than $5.2 billion in third-quarter project starts in the industrial manufacturing sector.
The U.S. automotive industry in the region dominated the number of projects starts slated for the third quarter. One of the largest automotive projects is Lordstown Motors Corp.’s renovation of a manufacturing plant in Warren, Ohio, to produce electric pickup trucks.
The former General Motors plant is the site of the project. It entails converting the existing 6.2-million-square-foot stamping and assembly plant with new production and auxiliary equipment to produce the electric pickup trucks.
Additional, smaller startup projects set for the third quarter include Flex-N-Gate Corp.’s expansion of its automotive parts manufacturing plant in Royal Oak, Mich. The project consists of the destruction of a 17,700-square-foot building and the construction of an approximately 66,000-square-foot facility, which includes a fabrication building, warehousing space and an employee support building.
Data centers have become necessitous in this time of online communication and e-commerce. One of the largest projects scheduled for startup in the region during the third quarter is Facebook Corp.’s grassroots data center in DeKalb, Ill. The project includes the construction of two data center buildings totaling more than 971,000 square feet with a total investment value (TIV) of approximately $800 million.Northeast Region Projects
The Northeast Region — Delaware, New Jersey, New York, and Pennsylvania — and the New England Region — Connecticut, Massachusetts, Maine, New Hampshire, Rhode Island and Vermont — combined have $2.5 billion planned project starts for the third quarter.
New York leads the region in startups with more than a billion dollars in project value starts — with the computer and semiconductors sectors taking the lead in TIV. Cree Inc. plans to begin construction in Marcy, N.Y., on a 200-millimeter silicon-carbide wafer fabrication facility. The facility will be constructed on a site of the State University of New York at Marcy Nanocenter.
It will include a 500,000-square-foot fabrication facility with 135,000 square feet of cleanroom space, a utility building, warehousing areas and administrative buildings.
Dominion Energy Inc. canceled the 1.5-bcfd Atlantic Coast Pipeline (ACP) project due to “too much legal uncertainty.” The U.S. Supreme Court ruled that the U.S. Forest Service properly exercised its authority under the Mineral Leasing Act of 1920 to grant a permit for ACP to pass through a natural forest beneath the Appalachian Trail. Cost estimates increased due to downstream litigation from $5.7 billion to more the $8 billion.
Dominion sold virtually all its gas transmission and storage segments to an affiliate of Berkshire Hathaway Inc., valued at $9.7 billion, including the assumption of $5.7 billion of debt.
In addition to the cancellation of the ACP, a federal court on July 6 ordered the Dakota Access crude oil pipeline to be shut down within 30 days, pending completion of a study of the line’s potential environmental impact. The pipeline, operated by Energy Transfer L.P., carries 570,000 b/d of crude oil more than 1,000 miles from North Dakota to Patoka, Ill.
Energy Transfer believes the ruling by Judge James Boasberg, an Obama appointee, is not supported by the law or the facts of the case and filed an immediate motion to stay the decision. If not granted, it will pursue an expedited appeal with the appellate court.
On a brighter note, Appalachia is on the cusp of an energy and petroleum renaissance, according to the U.S. Department of Energy.
As energy infrastructure expands in the region, manufacturers and consumers of the Midwest, New England and East Coast have an opportunity to benefit from low-cost energy and energy-related products, such as petrochemicals, produced in Appalachia.
Harnessing these opportunities will decrease our reliance on foreign-sourced supply chains and bring back U.S. jobs to this vital region. Great opportunities for domestic pipe, pipe valve, welding fitting and flange manufacturing.
Low-cost offshore materials, due to low-quality standards and fraudulent reporting practices, are reinforcing the need to re-shore your supply chain with high-quality, domestically manufactured materials, including welding fittings and forged-steel flange.
PVF Roundtable News
The August networking meeting of the PVF Roundtable scheduled for the 11th is canceled due to the flare-up of the COVID-19 virus and constraints on large events issued by Texas Gov. Greg Abbott.
The board of directors recommends referring to the PVF Roundtable website (www.pvf.org) for updates on networking meetings and events scheduled due to the uncertainties resulting from the COVID-19 pandemic.