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April marks the beginning of 2021’s second, following a first quarter that has seen the current administration’s negative impact on the energy sector of our economy. This posture, coupled with the pain inflicted by the COVID-19 pandemic, has delivered a severe and devastating blow to the energy sector not seen since the Arab oil embargo crisis in the 1970s.
Employment in the U.S oilfield services and equipment (OFS) sector declined by an estimated 10,000-plus jobs during the month of February, predicted on a Bureau of Labor Statistics (BLS) data analysis by the Energy Workforce and Technology Council (EWTC).
Winter Storm Uri may have had some effect; however, three straight months of OFS job losses suggest that other factors are in play. Researchers from the University of Houston’s Hobby Shell of Public Affairs estimated the number of OFS jobs in the United States dropped by 14.5 percent overall from February 2020 to February 2021.
Their data also showed Texas has lost more OFS jobs since February 2020 than any other state, estimated at 56,000. Louisiana (down more than 10,000 jobs) and Oklahoma (losses of 8,600 jobs) came in second and third.
OFS job losses in 2020 translate into annual wage losses of $15.5 billion, notes the EWTC, adding that the sector’s employment is at its lowest level since at least 2013.
The Midstream sector has been surprisingly resilient during the crisis as 2020 was disastrous for all oil producers and many related sectors such as OFS, contract drillers, etc. Many Midstream players have not focused on oil transportation but rather on the movement and storage of natural gas, or NGL.
Midstream companies are poised to see additional potential revenue growth with the advent of hydrogen being the fuel of the future. The most practical way of transporting hydrogen is via existing, and future, natural gas midstream pipeline infrastructure.
This works by blending up to 15 percent hydrogen with natural gas, resulting in lower CO2 emissions. Research indicates hydrogen can be incorporated into existing natural gas systems at concentrations up to 15 percent with only minor system modifications.
Eleven power plants around the country announced they plan to use hydrogen/natural gas blend, and we are likely to see more.
Midstream generally isn’t a high-growth industry. And due to the move to more regulatory difficulties, getting new major pipelines and other projects approved has become quite difficult.
Those who are worried about climate change should be embracing natural gas/hydrogen pipelines instead of opposing them.
Natural Gas Plant Maintenance Projects
Natural gas-fired power plants are looking to begin 200-plus maintenance projects during the second quarter, per Industrial Info Resources.
NRG Energy Inc. is preparing for outages in the Houston-Gulf Coast areas of Texas, including the natural gas combined cycle (NGCC) Unit 4 at its Cedar Bayou Power Station in Baytown. In addition, the company is preparing for a 56-day outage on Unit 34 at the T.H. Wharton Power Station in Houston.
Calpine Corp also is preparing for an outage, this one for 45 days at NGCC Block No. 2 at the Freestone Energy Center in Fairfield, Texas, and a 17-day outage on the NGCC Bosque Energy Center in Clifton, Texas.
In addition, Silicon Valley Power is preparing for a 45-day outage on its NGCC Unit 1 at the Donald Von Raesfeld Power Station in Santa Clara, Calif. And San Diego Gas & Electric is scheduling a 41-day outage at their NGCC Unit 1 at the Desert Star Energy Center in Boulder, Nev.
Exxon announced plans for capital expenditure (capex) projects to range between $16 billion to $19 billion in 2021 and between $20 billion to $25 billion annually through 2025. These would be high-return, cash-accretive projects that can be modified by market conditions. These investments are expected to generate returns of greater than 30 percent, noting that upstream investments generate a 10 percent return at $35/barrels of oil or less. As of this writing, WTI is at $64.22/bbl and Brent is at $67.74/bbl.
2Q Industrial Manufacturing Projects
The U.S. Southeast Market, which includes Alabama, Florida, Georgia, Mississippi, Tennessee and Puerto Rico, is expected to see more than $3 billion in second-quarter industrial manufacturing project starts.
Amazon will be building a 219,000-square-foot grassroots warehouse and distribution center in Forsyth, Ga. The online retailer will construct a 125,00-squarefoot last mile distribution center in Saint Augustine, Fla
UPS will begin construction on a last mile delivery point facility in Ridgeland, Miss., with a total investment value (TIV) of $29 million.
In Greenville, Ala., Hwashin America Corp. is expanding an automotive stamping plant for automobile chassis and body components by constructing an 80,000-square-foot facility with one or two new stamping presses to increase manufacturing space and capacity .
The U.S. Great Lakes market includes Illinois, Indiana, Kentucky, Michigan, Ohio and Wisconsin. It is scheduled to see approximately $3.3 billion in industrial manufacturing sector project startups in the second quarter.
One of the largest is Facebook’s Phase IV expansion of its data center campus in New Albany, Ohio. This project includes a 450,000-square-foot data hall.
In Cleveland, Amazon will begin the construction of a grassroots delivery center. The 112,000-square-foot facility will support operations for the South Cleveland region.
in Green Bay, Wis., Marinette Maritime Corp. will expand its shipyard by constructing an approximately 150,000-square-foot final hull erection and outfitting hall, and a 40,000-square-foot paint and blasting facility. These facilities, along with a state-of-the-art ship-lift system, has an estimated TIV of $100 million.
The above is just an overview of the PVF sector market influences and second-quarter construction activities.
Low-Cost Offshore Material
The PVF market for carbon-steel butt-welding fittings and forged-steel flanges continues to be inundated with low-cost offshore material. Keep in mind the old adage, “You get what you pay for.” Front-end savings from unregulated offshore sources are most often offset by increased cost of installation due to poor quality, alignment problems and increases in liability exposure.
Prices for carbon-forged steel flanges, along with seamless pipe, rose since the March column was written. Upward pressure on pricing due to the rising cost of scrap and steel is expected to be reflected in the market place as we move into the second quarter .
Close contact with your suppliers regarding both price and availability is strongly suggested in order not to be caught off guard regarding the status of the carbon-steel butt-welding fitting and forged-steel flange market.
PVF Roundtable News
As a member of the PVF Roundtable board of directors and the PVF Charitable Foundation, I encourage you, and your associates, to attend the first Networking Meeting of 2021 — which also is a membership drive — to be held April 13 at Houston’s The Bell Tower on 34th, 713-868-2355.
With the current administration’s decision to defund apprenticeship programs not sponsored by the unions, it emphasizes the importance of the PVF Charitable Foundation to fund the scholarship programs for the trades, along with academia, to insure the future of the PVF sector.
For those who have not attended, and those who have been unable to attend due to the restrictions imposed in response to the COVID-19 pandemic, I urge you to attend and connect, or reconnect, with your peers.
This is a unique PVF venue for you and your associates to network with those in the PVF industry to share information, meet new contacts and develop new and long-lasting friendships.
All members of the board look forward to seeing you at The Bell Tower.
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