SPRING 2020
PLUS: Pandemic impact Deepwater Horizon a decade later Focus on maintenance + turnarounds
SATURATION
POINT
What do low prices mean for ethylene and LNG projects planned for south Louisiana?
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10/12 INDUSTRY REPORT • SPRING 2020 3
CONTENTS
SATURATION
POINT
Publisher: Rolfe McCollister, Jr.
What do low prices mean for ethylene and LNG projects planned for south Louisiana?
PAGE 18
EDITORIAL Editorial Director: Penny Font Editor: Sam Barnes Contributing Photographers: Terri Fensel, Cheryl Gerber, Jordan Hefler, Don Kadair ADVERTISING Sales Director: Kerrie Richmond Senior Account Executives: Judith LaDousa, Marielle Land-Howard, Angie LaPorte, Kelly Lewis Account Executives: Mary Katherine Bernard, Mandi Bryant, Taylor Fountain Advertising Coordinator: Brittany Nieto CORPORATE MEDIA Editor: Lisa Tramontana Content Strategist: Allyson Guay CUSTOM PUBLISHING Sales Director: Erin Palmintier-Pou MARKETING Chief Marketing Officer: Elizabeth McCollister Hebert Marketing & Events Assistant: Taylor Floyd Events: Abby Hamilton Community Liaison: Jeanne McCollister McNeil PRODUCTION/DESIGN Production Manager: Melanie Samaha Art Director: Hoa Vu Graphic Designers: Gracie Fletcher Miller, Melinda Gonzalez, Emily Witt ADMINISTRATION Business Manager: Lauren Ritchey Digital Manager: James Hume Business Associate: Kirsten Milano Business Associate: Tiffany Durocher Office coordinator: Tara Lane Receptionist: Cathy Brown
6
35 Real and present danger
Editor’s Take
Industrial plants face a new level of threats from drones, cyberattacks and corporate espionage.
LAUNCH
8 ICYMI 12 The Big Picture
40 Pipeline economics
Entergy’s J. Wayne Leonard Power Station
The need to move more oil and gas will likely grow.
15 Executive Profile
Meet Farhad Ahrabi, CEO of Cameron LNG
17
FOCUS: MAINTENANCE & TURNAROUNDS
Intelligence Pandemic pandemonium
45 Industry 4.0 is here
Louisiana’s manufacturers are embracing smart facilities, digitization and the Internet of Things.
NEWS
26 Deepwater Horizon
50 Stumbling blocks
10 years later, the Gulf of Mexico is a safer place.
PLUS: A Q&A with Bureau of Safety and Environmental Enforcement Director Scott Angelle on how he’s working to correct the ‘over-regulation’ spawned by the disaster.
Many factors can send a turnaround into a tailspin, but most are avoidable.
INSIGHT
55 David Dismukes:
Irreparable changes are coming to the American oil and gas industry
57 Connie Fabre:
A PUBLICATION OF LOUISIANA BUSINESS INC. Chairman: Rolfe H. McCollister, Jr. President and CEO: Julio A. Melara Executive Assistant: Sandra Macdonald
CLOSING NOTES
SUBSCRIPTIONS/ CUSTOMER SERVICE 9029 Jefferson Highway, Suite 300 Baton Rouge, LA 70809 225-421-8157 • FAX 225-928-5019 1012industryreport.com email: circulation@businessreport.com
Industry’s portrayal as villains is a distortion of reality
58 The boom at a glance
Our maps of the projects driving the industrial boom
62 My Toughest Challenge
Bill Fenstermaker, chairman and CEO, C.H. Fenstermaker & Associates in Lafayette, looks back at the bottoming out of the oil market in the mid-1980s
Send your ideas and company news to editor@1012industryreport.com. 4 10/12 INDUSTRY REPORT • SPRING 2020
AUDIENCE DEVELOPMENT Audience Development Director: Katelyn Oglesby Audience Development Coordinator: Ivana Oubre
Volume 5 - Number 1 © Copyright 2020 by Louisiana Business Incorporated. All rights reserved by LBI. 10/12 Industry Report is published biannually by Louisiana Business Inc. Reproduction without permission is prohibited. Business address: 9029 Jefferson Hwy., Ste. 300, Baton Rouge, LA 70809. Telephone (225) 928-1700. POSTMASTER: Send address changes to 1012 Industry Report, 9029 Jefferson Hwy., Ste. 300, Baton Rouge, LA 70809. 10/12 Industry Report cannot be responsible for the return of unsolicited material—manuscripts or photographs, with or without the inclusion of a stamped, self-addressed return envelope. Information in this publication is gathered from sources considered to be reliable, but the accuracy and completeness of the information cannot be guaranteed. No information expressed here constitutes a solicitation for the purchase or sale of any securities.
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BEAUMONT BAYTOWN
SULPHUR
BATON ROUGE BROUSSARD ST. ROSE
CORPUS CHRISTI
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10/12 INDUSTRY REPORT • SPRING 2020 5
IN THIS ISSUE
Oversupply likely to continue as the world reels from a pandemic
SAM BARNES
T
he U.S. oversupply of fossil fuels and ethylene will undoubtedly continue in the near term, as production significantly outpaces demand. This fact was profoundly amplified by the Covid-19 pandemic, which has led to unprecedented price drops. Upstream producers in the Permian Basin are flaring the commodity in record amounts as they can’t justify the expense of pipelines to get it out. For now at least, it’s cheaper to burn the product, much to the dismay of environmentalists. Of course, demand will eventually catch up with supply—particularly as LNG plants come online, making the construction of pipelines more defensible. Meanwhile, the downstream petrochemical industry is tapping into incredibly low-cost natural gas as both a fuel source and raw material. As for ethylene, while current conditions could temporarily delay ethylene projects across the Gulf Coast and other regions, they’ll eventually come to fruition as the U.S. is very much a global player these days. Long-term worldwide demand is expected to continue in China and developing countries, and the U.S. will likely remain the cheapest source of the product. Check out our cover story on page 18. DEEPWATER HORIZON: 10 YEARS LATER A mix of good and bad sprang from Deepwater Horizon in 2010, but it’s undeniable that the Gulf of Mexico is a safer place to operate these days. An influx of BP and
6 10/12 INDUSTRY REPORT • SPRING 2020
government money has funded a variety of initiatives in the wake of the disaster, and institutions scattered across the Gulf Coast are researching everything from spill prevention to containment. Other programs, such as GOMOSES (Gulf of Mexico Oil Spill & Ecosystem Science Conference), convene annually to discuss aquatic research and other preventative measures. Read more about the transition beginning on page 26. On the regulatory side, significant changes now ease what some say placed a stranglehold on offshore investment with very little corresponding return on safety. The Bureau of Safety and Environmental Enforcement insists that its actions do not ignore or contradict any of the recommendations made following Deepwater Horizon. Most significantly, BESE unveiled a revised Blowout Preventer Systems and Well Control rule in 2019, rectifying what many in the offshore industry say was an ineffective, kneejerk reaction to the 2010 disaster. BESE Director Scott Angelle points to other money-saving initiatives that are innovative and collaborative, such as agency inspectors limiting offshore visits and the processing of regulatory paperwork on land. In the process, the bureau hopes to reduce offshore inspection costs while increasing inspection times. Check out our Q&A with the director on page 32. INDUSTRY 4.0 Tools are flooding the industrial market that enable owners to corral,
manipulate and extrapolate their data, ranging from innovative R&D to digital supply networks—all under the umbrella of “Industry 4.0.” Indeed, digitization is gaining a foothold in the industrial market, fueled largely by an increasingly competitive landscape. But with this excitement comes complexity, and for cash-strapped enterprises, the pressure to enter the digital world can feel risky and beyond their means. Others have taken sizeable leaps forward in this regard. Cornerstone Chemical in Waggaman appointed its first digitization leader last summer, enabling them to corral and motivate the plant’s various departments in order to take and sustain the necessary digital steps. They’re expecting noticeable efficiency improvements as a result. Others offer uniquely tailored services that assist industrial owners, particularly those that are small to mid-sized, with entering the complex realm of digitization. Elsewhere, LSU’s Industrial Assessment Center at LSU offers free assessments and recommendations in the realm of digitization. Read our take on the phenomenon beginning on page 45. This has had significant implications in the maintenance world. Put simply, by better managing data, companies are becoming more predictive about their work processes, exerting better control over schedules and minimizing those “emergencies” that threaten to derail both capital and maintenance investments. The story begins on page 50.
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LAUNCH ICYMI
COURTESY CNBC
Tellurian Chairman Charif Souki, speaking with Dan Murphy at the ADIPEC conference in Abu Dhabi
Tellurian tales Tellurian has had more than its share of headlines—and the drama that attracts them—this spring. From ending a lawsuit that accused the company’s founder of stealing plans for its $29 billion Driftwood LNG export project in Lake Charles from his previous employer, to laying off more than 40% of its workforce to battle tough market conditions, the Tellurian story continues to twist and turn. Here’s a look at some more recent developments. JANUARY 30 Ahead of a scheduled February Houston trial, Cheniere Energy permanently dismisses all claims against Tellurian, Chairman Charif Souki and Vice Chairman Martin Houston. The case pit billionaire corporate raider Carl Icahn against Souki. 8 10/12 INDUSTRY REPORT • SPRING 2020
Icahn alleged Souki—who was at the helm of Cheniere during the building of its first major LNG project in Louisiana, Sabine Pass— stole early plans for a second LNG plant in the state, and used them as the foundation of his new company, Tellurian Energy. In the lawsuit, Cheniere claimed Souki and Tellurian owe $47 million loaned to fund early development work by consultancy firm Parallax Energy. FEBRUARY 24 Tellurian deploys a team to India that coincides with President Donald Trump’s visit with Indian Prime Minister Narendra Modi, presumably to finalize the details of a $2.5 billion supply deal. The deal is largely touted for its expectation of strengthening trade ties between India and the United States.
FEBRUARY 27 A final agreement by India’s Petronet LNG to buy up to 5 million tons per year year of LNG from the proposed Driftwood production and export terminal on the west bank of the Calcasieu River is delayed. Tellurian extends its Memorandum of Understanding with Petronet to May 31 to allow additional time for Petronet’s consultative review process. The MOU was signed in September 2019 and originally anticipated that the agreement would be finalized by the end of March. MARCH 9 Tellurian Inc. cuts roughly 40% of its workforce—some 70 employees—and announces senior management changes in a restructuring effort designed to cut costs and focus on Driftwood.
The company is also contemplating putting off a final decision on whether to build the facility by 12 to 18 months. MARCH 23 Creditors provide the company an 18-month lifeline in the face of tough market conditions that include the ongoing oil war between Russia and Saudi Arabia and the coronavirus pandemic. In a filing with the U.S. Securities and Exchange Commission, Tellurian reports that Wilmington Trust and other creditors have given the company an extension on $75 million in loans that were due May 23. Under a new agreement, creditors give Tellurian until Nov. 23, 2021 to finish paying the loans. Tellurian must make a $3 million payment by April 22 and issue creditors more than 11 million shares of stock. 1012industryreport.com
COURTESY SHELL
The Blue Hammock Bayou project
PROACTIVE PIPELINES Shell Pipeline’s Donnie Garrison touts a proactive approach to protecting the Louisiana’s thousands of miles of offshore pipeline. Taking an early role in re-creating and sustaining the state’s coastal marshes, he says, could lead to big savings in the long run as it significantly reduces erosion and eliminates the costly exposure of pipelines. “A sustainable marsh provides the
protection and support for our oil and gas pipelines, in turn protecting the infrastructure that provides the revenue to support our community and economy,” says Garrison, Shell Pipeline’s offshore operations support supervisor. He spoke at the Bayou Industrial Group luncheon in Thibodaux in March. In his role, Garrison supports Shell’s 2,500 miles in pipeline assets
along the Gulf Coast by developing partnerships with landowners, conservation groups, contractors, and local and state agencies to facilitate infrastructure protection projects. Shell also develops new marsh through the cooperative engagement of the oil and gas industry in coastal sustainability planning. “This is important to oil and gas, as well as all of us who live along the Gulf Coast, because coastal erosion affects our pipeline systems,” he adds. In a pilot project, Shell Pipeline partnered with CH2M for the first natural infrastructure project at Ship Shoal Pipeline, a 31-mile pipeline that delivers 200,000 barrels of crude oil a day to Louisiana from deep-water assets in the Gulf of Mexico. A portion of the pipeline runs along the Blue Hammock Bayou on the Louisiana coast where, due to natural erosive forces, it faced many challenges. “The issues of a changing landscape facing Ship Shoal Pipeline range from integrity to maintenance costs, as well as increasing marine traffic raising the potential for
incidents along the pipeline right-ofway,” Garrison says. Shell initially collaborated with The Nature Conservancy to consider and design nontraditional approaches that would benefit the infrastructure as well as the coastal ecosystem. CH2M was brought on board, and what began as a notion to protect pipelines turned into a long-term, sustainable and visually appealing solution. During the project, the team designed and installed vegetation and sediment-filled erosion baskets, among other things. The natural infrastructure performed beyond expectations, with strong plant growth and accumulation—rather than erosion—of sediments. The sustainable solution is protective of the pipeline, has helped stabilize the marsh, and has enhanced the natural habitat. The site is now a resilient and thriving ecological asset. The Blue Hammock Bayou natural infrastructure project, Garrison says, has become a model for balancing coastal infrastructure integrity and an evolving natural environment.
NUMBERS
$93
MILLION AMOUNT BID BY 22 COMPANIES on 71 federal oil and gas tracts in the Gulf of Mexico in March— the lowest since the sales began in August 2017 and lower than any sale since 1993 for the productive central Gulf.
THEY SAID IT We are expecting to see an increase in energy-related loan defaults and bankruptcy filings in 2020 due to the recent price drops and high volatility. This will create good buying opportunities for those with access to capital, a strategic plan, and a longer-term view on assets in Texas, Louisiana, and the Gulf of Mexico in particular. —Attorneys J. Eric Lockridge and Katie Hollowell, via Louisiana Law Blog
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10/12 INDUSTRY REPORT • SPRING 2020 9
LAUNCH: ICYMI PROJECTS
Shore
NUMBERS
POWER MARINE VESSELS DOCKED at South Louisiana’s Port Fourchon can now play a role in helping protect Louisiana’s environment by replacing fossil fuel-generated ship power with Entergy’s new shore power product. Entergy Louisiana and Edison Chouest Offshore have partnered to build the first utility-scale shore power installation at Port Fourchon, the port that plays a role in providing nearly 20% of the nation’s oil supply. Shore power is a beneficial electrification product developed by Entergy’s innovation department, KeyString Labs, to enable customers to reach their own sustainability goals by leveraging Entergy’s cleaner generation
4.6
BILLION Port Fourchon
profile. Shore power in Entergy’s service areas is estimated to potentially achieve as much as a 42% net reduction in carbon emissions, a 48% net reduction in sulfur oxides emissions and a 98% net reduction in nitrogen oxides emissions, when comparing emissions rate of marine diesel oil versus Entergy’s at-the-plug emissions rate.
This initial installation extends Entergy Louisiana’s local distribution system to simultaneously accommodate 10 ECO marine vessels at port. ECO developed and deployed technology that allows marine vessels to seamlessly transition from fossil fuel-generated ship power to cleaner electric grid power.
AMOUNT OF DEBT McDermott International Inc. is trying to eliminate in an approved Chapter 11 plan of reorganization. The company is being investigated by the U.S. Securities and Exchange Commission over projected losses at the Cameron LNG project.
The Greater Issue Date: Lafourche 5-21-19Port AdCommission proof #4won a 2020 Transportation Excellence Award in March from the Staterespond of Louisiana its with Northern Expansion II, Slip C project. The initiative moved rich, dredged • Please by e-mailfor or fax your approval or minorPhase revisions. sediment open area ofrevisions water to help develop a future Coastal Wetlands Park for the community. • AD WILL RUNin ASaISnearby unless approval or final are received by the close of business today. • Additional revisions must be requested and may be subject to production fees. Carefully check this ad for: CORRECT ADDRESS • CORRECT PHONE NUMBER • ANY TYPOS This ad design © Louisiana Business, Inc. 2019. All rights reserved. Phone 225-928-1700 • Fax 225-926-1329
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QUICK FACTS:
Louisiana + energy LOUISIANA IS ONE of the top five states in both natural gas production and reserves. The state accounted for 9% of U.S. total gas production in 2019 and it has about 7% of the nation’s gas reserves.
THEY SAID IT
• Louisiana’s 17 oil refineries account for nearly one-fifth of the nation’s refining capacity and can process 3.3 million barrels of crude oil per day. • New Orleans is the nation’s third-largest coal exporting port, with about one-eighth of total U.S. coal exports shipped out of the port through the third quarter of 2019. • Louisiana’s total energy consumption and per capita energy consumption both rank among the top three states in the nation, largely because of its energy-intensive chemical, petroleum, and natural gas industries. • Louisiana has the second-highest per capita residential sector electricity consumption in the nation. More than 6 in 10 Louisiana households rely on electric heating and almost all households have air conditioning. SOURCE: U.S. Energy Information Administration, March 19, 2020
“We will start seeing a number of the companies that will have to be cutting back on expansion plans. This guarantees nothing new will come online here before 2024. Even if things were to turn around, it will take time before companies are willing to make and get commitments to spend.” —LSU CENTER FOR ENERGY STUDIES EXECUTIVE DIRECTOR DAVID DISMUKES, on the state of oil markets in late March
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10/12 INDUSTRY REPORT • SPRING 2020 11
THE BIG PICTURE
CLEAN & EFFICIENT
ECONOMIC DEVELOPMENT The J. Wayne Leonard Power Station, which began commercial operation in May of 2019, will supply reliable, clean energy to customers to help support the tremendous growth Louisiana is experiencing. Because of the plant’s high efficiency, it has been projected that customers will save more than $1.3 billion over the anticipated 30-year life of the unit. The approximately $870 million project employed nearly 1,700 people over the course of the three years it took to build the facility. During construction, more than $60 million in contracts were awarded to Louisiana businesses. ENVIRONMENTAL Entergy Louisiana says the 980-megawatt power station is among the cleanest natural gas-powered plants in its fleet. Combined-cycle gas turbine units like the J. Wayne Leonard facility emit on average about 40% less carbon dioxide than Entergy’s older natural gas-powered units. With the J. Wayne Leonard Power Station, and the Lake Charles Power Station coming
AP PHOTO/ARNULFO FRANCO
12 10/12 INDUSTRY REPORT • SPRING 2020
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online in March, Entergy Louisiana has replaced more than half of its generation fleet with modern, highly efficient gas-powered units. In addition to providing reliable, cost-effective power, Entergy’s investments in its generation portfolio transformation and nuclear improvements since 2000 have resulted in substantial reductions in the company’s NOx, SO2, mercury and CO2 emissions, highlighting Entergy’s commitment to environmental stewardship and helping Entergy’s multistate fleet to meet its goal of emitting only one half of the carbon per megawatt hour in 2030 that it emitted in 2000. CONSTRUCTION FACTS Parts used to build the J. Wayne Leonard plant came from worldwide vendors and from across the United States. The plant runs on Mitsubishi and Toshiba Generators, a Toshiba Steam Turbine and Mitsubishi Gas Turbines. The Mitsubishi turbines were manufactured
in South Carolina. The project recorded more than 4,100,000 man-hours of work. It took workers 1,023 days to construct the plant. BY THE NUMBERS Enough wire and cable were used to circle Louisiana State University’s Tiger Stadium approximately 592 times. If the 1,792,488 feet of wire and cable were rolled out, it would extend over 339 miles. The 2,101 tons of structural steel equals the weight of 104,650 40-pound sacks of crawfish or 126 Entergy 60-foot bucket trucks. The 26,859 cubic yards of concrete is enough to pour foundations for 100 single story, four-bedroom, two-bath houses. The 295,108 feet of conduit and cable trays laid end-to-end would run the length of the Lake Pontchartrain Causeway from Metairie to Mandeville and back again.
J. Wayne Leonard Power Station, Montz, Louisiana
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10/12 INDUSTRY REPORT • SPRING 2020 13
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LAUNCH: PEOPLE
Executive Profile: Farhad Ahrabi
What are some of the biggest challenges facing the LNG industry?
To get into the LNG business requires foresight, resilience, knowhow, staying power and perseverance. In our case, about $10 billion was needed to build and operate an LNG facility of this magnitude. The LNG business is not a shortterm game. You must have your eye on the long-term and really be able to ride out the peaks and troughs. It requires a lot of things coming together for a gas chain of this 1012industryreport.com
NAME
Farhad Ahrabi POSITION
CEO COMPANY
Cameron LNG HOMETOWN
Houston EDUCATION
Ph.D. in chemical engineering, University of Exeter, UK; bachelor’s degree in chemical engineering, University of South Wales, UK.
magnitude to be developed, executed and operated. If you’re only looking at the next six months or the next year, then perhaps this is not the business for you. You’ve really got to have a long-term view. What do you find most rewarding about being in this industry?
Without a doubt, it’s having the opportunity to work with thousands of dedicated men and women, putting their hearts and souls into building a facility as complex as what we have in Hackberry. I am humbled by how the local communities have embraced us with open arms and have accepted us as one of their own. I can honestly say that on behalf of everyone at Cameron LNG and our partners, we are grateful for the community’s hospitality. Are there some best practices in Hackberry that can be shared with owners of other large mega-projects?
I think the most important best practice deals with safety. Our employees, our EPC contractor and all our service providers can be very proud of their incredible focus on safety on this project. During the last five and a half years, some 85
DAVID TIDWELL
F
arhad Ahrabi’s initiation into the world of oil and gas, and eventually liquefied natural gas, began in 1986 when he joined British Gas—now Royal Dutch Shell—upon receiving a Ph.D. in chemical engineering. He spent nearly three decades with the company, gaining invaluable experience in various aspects of the business. While working in Trinidad and Tobago in 1998, Ahrabi found himself on the front lines of a veritable economic explosion in the LNG market. It ultimately became his life’s passion. In 2014, he left BG and joined Houston-based Cameron LNG as its chief executive officer. Today, Cameron LNG is close to reaching the final stages of constructing its three-train LNG facility in Hackberry, Louisiana. “It’s a proud moment for me, personally, and for all of our employees and partners,” Says Ahrabi: “It has been an exciting few years, on this roller coaster journey of ours.” Cameron LNG began commercial operations in August 2019 and has been shipping LNG worldwide ever since. Based in Houston, Ahrabi frequently travels to Hackberry, as he is responsible for the management of the Cameron LNG joint venture, which involves Sempra Energy, Total, Mitsui & Co. Ltd. and Japan LNG Investment LLC.
million hours have been worked without a single lost time incident and that is “best in class” in respect to any mega-project in any location and in any business. And there are many lessons to be learned in this particular accomplishment. I can say, without a doubt, that every employee who worked on the Cameron LNG site took his or her safety and that of their colleagues extremely seriously. At our peak we had about 11,000 workers at the site conducting high-risk activities over a long period. Achieving this level of safety is an incredible achievement, and everyone who worked on that site can be proud of what they’ve done. So what are you most excited about?
There’s something rewarding about using technology to extract and collect gas molecules from one part of the world to another across vast oceans to supply clean energy
for cooking stoves, heating homes and lighting streets. The worldwide demand for LNG rose by 12.5 percent in 2019. LNG demand is expected to double by 2040, with natural gas playing the key role in shaping a lower-carbon energy system. So it’s a good business to be in. We’re providing a clean energy source around the world where it can help people. So what can be wrong with that? On a personal note, what do you do away from LNG?
I’m a family man. My wife and my two children mean the world to me and I work hard to cherish that bond within our family. Though I work hard and take satisfaction in my work, I also value my personal and family time. So I spend a lot of time with the family. I exercise and read a lot. That keeps my mind in a good place. I encourage everyone to find that balance in their life. 10/12 INDUSTRY REPORT • SPRING 2020 15
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LAUNCH: INTELLIGENCE
PANDEMIC PANDEMONIUM How COVID-19 impacted industry As 10/12 Industry Report went to press, it had been 71 days since confirmation of the first Covid-19 case in the United States, and 21 days since the first in Louisiana. The state quickly moved to the forefront of the epidemic with the fastest per capita growth rate of coronavirus cases in the world, most of them in New Orleans. Gov. John Bel Edwards had closed schools and issued a stay-at-home order. Neither the petrochemical nor the oil and gas industries were immune from the effects of the virus. Here’s a look at major impacts at the time.
STRICKEN WORKERS ‘STICK A FORK IN IT’ Even before Covid-19 hit U.S. shores, petroleum was in trouble. Production rivals Saudi Arabia and Russia had engaged in a battle for oil market share by flooding the market at a time when the coronavirus was beginning to confine people globally to their homes. At press time, Brent crude futures had fallen by nearly 50% to about $26 a barrel, and gasoline was selling in some areas of Louisiana for $1.29 a gallon, with 99-cent gas looming as a prospect. Analysts weren’t exactly hopeful that there might be a rapid recovery for energy. “For 2020, it’s kind of done,” LSU Center for Energy Studies Executive Director David Dismukes told The Advocate in late March. “Stick a fork in it.” Read his analysis on page 55.
SHRINKING PRODUCTION In late March, ExxonMobil reduced the run rates at its Baton Rouge refinery and reduced its contract workforce by 1,800. The company also reduced its production processing rate to 440,000 barrels per day at what is its second-largest U.S. refinery. Final decisions on spending cuts were pending at press time. “Based on this unprecedented environment, we are evaluating all appropriate steps to significantly reduce capital and operating expenses in the near term,” said Chairman and CEO Darren Woods in a prepared statement. “We will outline plans when they are finalized.”
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By late March, seven workers at four industrial facilities between Baton Rouge and New Orleans had tested positive for Covid-19. Companies were pausing construction, sending employees home to work remotely and limiting those on site to essential personnel only. Four contract workers at Dow Chemical in Plaquemine were stricken with the virus; the BASF complex in Geismar and the Denka Performance Elastomer plant in LaPlace had reported one confirmed case each and a handful of other workers remained in precautionary self-quarantines. A contract worker at the Bayer Crop Science complex in Luling died in midMarch after testing positive for the virus.
HALTING CONSTRUCTION Multiple petrochemical construction projects were halted in late March over concern for worker health and safety. FG LA, a division of Taiwan’s Formosa Plastics, suspended major construction at its planned petrochemical complex in Louisiana amid the pandemic, although site design work on the project continues. Bayer, too, announced it was halting a nearly $1 billion expansion in Luling to limit the spread of the virus when one of its contract workers at the Bayer Crop Science complex died after testing positive for the virus.
10/12 INDUSTRY REPORT • SPRING 2020 17
COVER STORY
SATURATION
POINT What do low prices mean for ethylene and LNG projects planned for south Louisiana? BY SAM BARNES
18 10/12 INDUSTRY REPORT • SPRING 2020
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sidiary FG LA LLC—plans to move forward with its new $9.4 billion St. James Parish mega plant despite short-term demand problems. Janile Parks, director of community and government relations for FG LA LLC, says in a written statement that preliminary work has already begun, but admits there is a good deal of market uncertainty. “We will monitor the developments closely and adjust our planning accordingly,” Parks says in the statement. “While the price of ethylene has dropped,” she adds, “the cost of raw materials has also lowered due to development in the shale gas market; therefore, the project phases remain unchanged at this point.” Dubbed the Sunshine Project, the Formosa facility will produce polyethylene, polypropylene and ethylene glycol products to be sold to domestic and international markets. The owner currently plans to construct the plant in two phases from 2021-2029. There is reason for Formosa’s optimism. According to a study by Grand View Research, domestic demand for plastic products is expected to rise over the next decade, and global demand by about 3% to 4% per year. “These studies demonstrate current and increasing market demand that the project will help to meet,” Parks says. Trey Hamblet, vice president of chemicals research for Industrial Info Resources in Houston, says even though commodity ethylene prices are “at the floor,” he feels that most of the proposed ethylene proj-
“It’s politically indefensible. At the end of the day flaring is not a good idea.” ERIC SMITH, associate director, Tulane Energy Institute
ects will come to fruition. “Do they become a reality in the timeframe they’re currently proposed? Probably not,” Hamblet says. “We might be in an oversupply position at the moment, but if you look at consumption around the world, China is still growing, southeast Asia is still growing and the demand for polyethylene, polypropylene, ethylene, methanol, ammonia, etc. are still significant in
the long-term. “And we are the cheapest place on planet Earth to produce them.” He also expects the new Enterprise terminal to be joined by an additional three to four terminals in the next five years as the commercial export of large-scale quantities of ethylene expands. “I think that will help the long-term fundamentals
10/12 INDUSTRY REPORT • SPRING 2020 19
CHERYL GERBER
S
ometimes too much is just too much. While the supply glut in natural gas, ethylene and oil ultimately provides cheaper feedstocks for the petrochemical industry and positions the U.S. as the global supplier of choice, it also signals demand-side problems. Of course, this has been exacerbated exponentially by the Covid-19 pandemic, as worldwide demand for all fuels fell dramatically due to stay-at-home orders, lockdowns and temporarily shuttered plants. It’s a complex dynamic that plays out in rather visible and tragic ways in the Permian Basin. The associated natural gas coming out of oil wells there is being flared in unprecedented volumes, as it has nowhere to go. That’s because incomprehensively low gas prices make it difficult to justify the expense of getting the product out. This likely will continue through 2020 to an extent, despite furloughs and spending cuts caused by the pandemic and a Russian-Saudi price war. A similar price dynamic holds true for ethylene. U.S. spot ethylene prices continued their decline into 2020, due to a fundamental oversupply in the market and lagging demand. To find an outlet, U.S. ethylene producers have turned to export terminals, such as Enterprise and Navigator Holdings’ new 1 million-ton-per-year facility in Morgan’s Point, Texas. Short-term variables aside, many industrial owners are bullish about ethylene’s long-term prospects. Formosa Plastics—through its sub-
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“On the supply side, we’ve just got an ocean of natural gas.” because ethylene becomes an export commodity in a global market,” he adds. “We can compete around the world for those people that are producing ethylene from naphtha or methanol or other feedstocks. “I think all the big players are thinking we’ll be locked into this incredibly cheap access to feedstock for so long that it supports that long-term play, perhaps into the 2030s.” Roughly 60% of the ethylene produced in the U.S. goes into manufacturing polyethylene, “and I think that percentage of consumption is indicative of the rest of the world,” Hamblet says. TEXAS IS BURNING Meanwhile, there’s so much natural gas coming out of the Permian that gas processing facilities in the region can’t handle it all. Improved 1012industryreport.com
drilling efficiencies and cost reductions, higher associated gas production from oil rigs and production growth are to blame, as they’re outpacing a rise in domestic demand and exports. The natural gas spot price at Henry Hub was expected to average $2.33 per MMBtu in 2020 even before Covid-19’s impacts. That’s 24 cents lower than the 2019 average of $2.57 per MMBtu. That’s not likely to change anytime soon. In its 2020 Short Term Energy Outlook, the U.S. Energy Information Agency projects average U.S. natural gas prices will be 9 percent lower in 2020. Subsequently, flaring has become a source of negative attention for Permian oil producers, and Texas regulators have come under pressure from environmentalists and politicians to do something about it. Rystad, a provider of flaring and
LOREN SCOTT, economist, Loren C. Scott & Associates in Baton Rouge
venting data, estimates that Permian producers burned off or released about 190 million cubic feet per day of natural gas in 2019. The company gets its information from the U.S. Environmental Protection Agency and the Texas Railroad Commission, which regulate oil and gas in the state. Eric Smith, associate director of the Tulane Energy Institute, points to an unfortunate lack of foresight as the culprit. “It’s a sad scenario in West Texas,” Smith says. “This is perfectly good natural gas, but it’s being flared. The price is so low that there’s no incentive for them to do anything else.” The expense of processing the gas for transport, in accordance with federal regulations, sets the
bar too high. At the end of the day, transporting the oil—not gas—out of the Permian is significantly more profitable. “After the gas is separated from the oil, they’ve also got to take out the C3s and C4s and propane and butane and some of the ethane to comply with federal guidelines,” he adds. “That makes it too expensive to ship.” To change the current dynamic, Smith says the state regulatory bodies need to impose stricter guidelines for issuing flaring exemptions. “I think it’s politically indefensible,” he adds. “At the end of the day it (flaring) is not a good idea.” Loren Scott, an economist at Loren C. Scott & Associates in Baton Rouge, says the problem isn’t likely to end soon, as many of the 10/12 INDUSTRY REPORT • SPRING 2020 21
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COVER STORY
COVER STORY
JORDAN HEFLER
They’re not just out there drilling exploratory wells to see what the geology looks like.” There’s also increasing demand for the gas due to rising LNG demand in southwest Louisiana and the potential of long-term contracts. “If you’ve got a long-term contract to produce gas to export, through LNG or some other plant, then you could, in theory, continue to produce no matter how low the prices go,” Upton says. Scott agrees. “Haynesville’s salvation is that it’s geographically closer to the Lake Charles LNG facilities than the Permian Basin.”
FEWER RIGS, SAME PRODUCTION: Greg Upton, assistant professor of research at LSU’s Center for Energy Studies, says the Haynesville Shale play is surprisingly competitive right now, even with low gas prices. The advent of new fracking technologies is playing an undeniable role, as fewer rigs are needed to produce the same amount of gas.
Permian wells are in their fourth and fifth years of production and are therefore producing more natural gas than oil. Additionally, increased fracking in the Permian, Bakken and Marcellus shale plays will likely keep the prices depressed for the next four to five years. In addition to the Covid-19 pandemic, some other short-term reasons for the price problem exist. “We had an unusually warm winter,” Scott says. “The weather phenomena that we’re experiencing right now has decreased the amount of heating that is required and decreased the demand for natural gas by billions of cubic feet. That’s causing supplies to build up in storage and the price to go down. “On the supply side we’ve just got an ocean of natural gas.” One silver lining … there’ll be no flaring in the Haynesville Shale Play, 22 10/12 INDUSTRY REPORT • SPRING 2020
as it is strictly a dry gas play. There is also a very specific need for the natural gas being produced there, chiefly the burgeoning LNG market in southwest Louisiana. “We drill for that gas on purpose,” Tulane’s Smith says. “You’ve got to take the water out and do some treatments, but it’s basically pipeline quality gas.” Also, the EIA expects growth in consumption in the U.S. industrial sector in 2021, driven by new methanol plants using natural gas as feedstock. HAYNESVILLE RISING Greg Upton, assistant professor of research at LSU’s Center for Energy Studies, says the Haynesville Shale play is surprisingly competitive right now, even with low gas prices. The advent of new fracking technologies is playing an undeniable role, as fewer rigs are needed to
produce the same amount of gas. That explains why rig counts in the Haynesville Shale have dropped from 140 to about 30, while production increased by some 28% in 2017 and 2018. “If you look strictly at the rig counts, that’s not really indicative of what’s going on,” Upton says. “It’s because of improving technology; they’re able to do more with less. There are even some expired leases that they’re actually re-leasing now.” Tyler Gray, president and general counsel of Louisiana Mid-Continent Oil & Gas Association, says improved efficiencies at the wellhead are enabling Haynesville producers to do more from one location. “That’s due to a multitude of factors, such as the way that they drill it, the length of the laterals etc.,” Gray says. “It’s not like the old days when you’d just poke holes in the ground. They know exactly where the gas is.
DEMAND CHANGES EVERYTHING If anything is going to change the oversupply issue, it’s going to be on the demand side of the equation. Long-term, much of that will likely come from an explosion in LNG investment along the Gulf Coast, as well as billions of dollars in new industrial cat cracker investment. LNG capacity coming online virtually ensures an eventual drawdown of supply, Smith says. “These things (oversupply) tend to be self-correcting. The price will go up, and everybody’s a lot happier. They won’t be interested in flaring gas when they can buy it for $3 to $4.” Meanwhile, there are thousands of drilled but incomplete wells in the Permian simply waiting for a market upturn. “It costs almost as much to frack the well as it does to drill it,” he adds. “So what they’ve done is drill, but not complete, a lot of wells. When the price goes up a little bit they’ll make a decision whether or not to frack the well and put it online.” However, if global demand goes flat, the entire value chain will be disrupted. There are some very real concerns in that regard. When the trade war began, Louisiana’s exports to China dropped precipitously. “If you don’t have that demand source at the end of the value chain, that hurts everyone,” LSU’s Upton says. “You don’t have customers.” “So the question is not whether we have the product, the question is when we build the infrastructure to export the product, will the export demand be there?” Mark Finley, an energy and global oil expert at Rice University’s Baker 1012industryreport.com
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COVER STORY
FREQUENT FLARING: Rystad, a provider of flaring and venting data, estimates that Permian Basin producers burned off or released about 190 million cubic feet per day of natural gas in 2019.
Institute for Public Policy in Houston, says a drop in demand poses the biggest threat, as the supply side is firmly under domestic control. Taking a long-term view, Finley says electric cars and an increasing environmental awareness could also lead to a paradigm shift in global market demand. If that happens, all bets are off. “There are also some shortterm threats,” he adds, “such as a global economic slowdown, or more recently a virus, that could have dire consequences.” Through it all, the LNG market has not been immune. They’ve also experienced some recent “flies in the ointment,” namely Covid-19 and 24 10/12 INDUSTRY REPORT • SPRING 2020
delayed contracts. India’s Petronet LNG recently delayed a final agreement to buy up to 5 million tons per year of LNG from Tellurian’s proposed Driftwood LNG production and export terminal on the west bank of the Calcasieu River. In a recent announcement, Tellurian said it had extended its Memorandum of Understanding with Petronet to May 31 to allow additional time for Petronet’s consultative review process. Tellurian originally expected to finalize the agreement by the end of March. The negotiations involve not just the purchase of LNG but also an equity investment in Driftwood
Holdings. India’s demand for LNG has risen 27 percent year over year, and Modi plans $60 billion of investments in natural gas infrastructure for the company. Still, other owners maintain their optimism about the long-term prospects of LNG. Speaking at a recent Louisiana industry event, Frederic Phipps, president of Shell U.S. LNG, says the long-term demand remains strong—despite recent trepidation over Covid-19and other market factors—as gas continues to be the fuel of choice for cleaner energy solutions. Shell and Energy Transfer have partnered to build Lake Charles LNG, although they
recently delayed the project to 2025. Despite the delay, Phipps says the record supply of domestic natural gas has buoyed LNG prospects locally. “A growing population and rising living standards will continue to drive the demand for energy with lower emissions.” Elsewhere, Cameron LNG is close to reaching the final stages of constructing its three-train LNG facility in Hackberry. Cameron LNG, a joint venture comprised of Sempra Energy, Total, Mitsui & Co. Ltd. and Japan LNG Investment LLC, began commercial operations in August 2019 and since then has been shipping LNG worldwide. 1012industryreport.com
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Scott says the current depressed gas prices should make LNG “significantly more profitable” because it makes the domestic supply more competitive. “They ship it to Asia, they’re shipping it to Europe, etc.,” Scott says. “These are places that don’t have any natural gas, and they’re having to import all of it. That means they’re importing it from us or they’re importing it from Russia or the Middle East. Those countries price their natural gas off the price of oil, so they’re charging prices well above what we can get for our natural gas.” Michelle Foss, an expert in energy and minerals at the Baker Institute, 1012industryreport.com
says while achieving a supply-demand balance for any commodity is a myth, “we are and have been in an extraordinary situation.” She expects some upstream natural gas producers to ultimately “throw in their respective towels.” She says an abundance of complex variables makes predicting the future inherently difficult. “It’s a combination of an enormous land rush into plays that are tough to manage, the dynamics of the underlying geology playing out into volumes much larger than the markets can absorb, accompanied by attendant risks and uncertainties across the value chains,” Foss says.
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NEWS OFFSHORE
Deepwater HORIZON 10 years later, the Gulf of Mexico is a safer place. By SAM BARNES
26 10/12 INDUSTRY REPORT • SPRING 2020
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I
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LIVES LOST: The Deepwater Horizon tragedy resulted in the loss of 11 lives and was followed by the discharge of an estimated 4.9 million barrels of oil into the Gulf of Mexico.
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t would be hard to deny that the Gulf of Mexico has become a safer place in the 10 years since the April 2010 Deepwater Horizon disaster in the Macondo Prospect. While there was an initial and sizeable regulatory backlash that some say went too far, numerous improvements in regulations, innovations and processes have successfully sought to prevent a recurrence. The tragedy resulted in the loss of 11 lives and was followed by the discharge of an estimated 4.9 million barrels of oil into the Gulf before the well was sealed later that year. Numerous investigations explored the causes of the explosion, and a U.S. government report in September 2011 ultimately blamed BP and its partners for a series of cost-cutting decisions and an inadequate safety system, as well as systemic root causes. In the days, weeks and months immediately following Deepwater Horizon, Louisiana’s oil and gas industry found itself in a whirlwind. Gifford Briggs, current president of the Louisiana Oil and Gas Association, says the federal drilling moratorium imposed by the Obama Administration had an immediate and detrimental impact on the oil-dependent communities of south Louisiana. He was the association’s director of government relations at the time. “It was a tragic accident and I will forever remember the many people that lost their lives,” Briggs says. “The industry as a whole took that as an opportunity to better ourselves from an operations standpoint. “There were operators and hundreds of service companies that suddenly had no idea what their future held because there was no time limit (to the moratorium). It was indefinite. The concern and fear were very real. It was a part of every conversation, whether at the gym, the restaurants or the dry cleaners.”
10/12 INDUSTRY REPORT • SPRING 2020 27
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BY BUILDING A COMPANY ON integrity, we’ve created a place that focuses on doing great work – and doing it safely. As the industry grows and changes, we remain a nimble, dynamic engineering and construction partner with the experience and resume to back it up. By holding true to our roots and keeping a focus on our customers’ needs, our work remains of the highest quality.
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NEWS: OFFSHORE LEADING THE EFFORT: Andreau Trepagnier is the operations manager for the LSU Petroleum Engineering Research & Technology Transfer Laboratory, a full-scale well facility on campus that tests, trains and teaches well control operation, blowout prevention and managed pressure drilling.
DON KADAIR
summer 2020, BP reached out to us and offered to create a $500 million oil spill research program,” Bowie says. “They needed a neutral party not favored by any particular state, so they reached out to us and asked us if we would administer that.” The program’s final conference was in February. “We’re hoping to continue the program in 2021 by combining it with the Gulf Summit through the Harte Research Institute for Gulf of Mexico Studies (based at Texas A&M University Corpus Christi).”
SILVER LINING Over the past decade, the oil and gas industry, federal government and other entities have worked together in myriad ways—all to enhance worker safety and environmental protections. Complementing the 1012industryreport.com
effort has been an intensified focus on learning and information sharing. “People are looking at every incident, whether it’s a near miss or whether it’s an incident,” LeBlanc says. “We’re looking at what happened, why it happened and how we could do better overall. The industry has instituted a more robust safety culture where safety is at the forefront of everything we do.” From a research perspective, the Gulf of Mexico Oil Spill and Ecosystem Science (GoMOSES) conference has served as a clearinghouse of sorts since 2013. The annual GoMOSES conference brings together hundreds of oil
spill-related experts from academia, state and federal agencies, non-governmental organizations and industry to share the latest oil spill and ecosystem scientific discoveries, innovations, technologies and policies. Laura Bowie, executive director of the Gulf of Mexico Alliance in Ocean Springs, Miss., helped organize the conference, which seeks to link fundamental research on the Gulf ecosystem to practical applications. Bowie’s organization has seen its role significantly expanded since Deepwater Horizon. “As the oil was still flowing in
WIDESPREAD IMPACT: An oil-soaked bird struggles against the side of the HOS Iron Horse supply vessel at the site of the BP Deepwater Horizon spill in 2010.
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It led LOGA to coordinate the “Rally for Economic Survival” at the Cajundome in Lafayette later that year, when the industry came together to shine a spotlight on the importance of oil and gas to their communities. It became one of the largest free events ever held in the facility. “It was just an amazing experience,” he adds. “You could feel the energy in the room and the passion for our industry and for our state and for our community. It was definitely not anything that I’ve witnessed since then.” Lori LeBlanc, current vice president of the Louisiana Mid-Continent Oil & Gas Association, was also there that day. She was deputy secretary at the Louisiana Department of Natural Resources at the time. “It was really a dark time, but the rally brought us together in an unprecedented way,” LeBlanc says. “We were all impacted on some level.”
TAKING THE LEAD No doubt research and technology will play central roles in preventing another Deepwater Horizon-like blowout. LSU Baton Rouge has been leading in that effort through its Petroleum Engineering Research & Technology Transfer Laboratory, a full-scale well facility on campus that tests, trains and teaches well control operation, blowout prevention and managed pressure drilling. PERTT is the only facility in the U.S. that can fully simulate an emergency blowout situation such as Deepwater Horizon. In fact, LSU faculty were consulted following the disaster for help in preventing similar incidents. PERTT provides full-scale well control training in “gas kicks,” which is an emergency situation where natural gas prematurely enters the well during a drilling operation. As the gas rises to the surface, it increases the wellhead pressure and can cause a blowout similar to Deepwater Horizon. Wesley Williams, a “professional in residence” at the facility, is currently managing a program funded by a $4.9 million grant from the National Academy of Sciences, Engineering, and Medicine’s (NASEM) Gulf Research Program. The research, done in conjunction with Texas A&M University and Weath10/12 INDUSTRY REPORT • SPRING 2020 29
erford, focuses on understanding the behavior of riser gas under high temperature and pressure. The testing requires using an existing well retrofitted with pressure and temperature sensors to produce data for validating riser gas models that inform design of pressure barriers and techniques for preventing uncontrolled hydrocarbon releases. The team is comprised of Williams and LSU petroleum engineering professors Babak Akbari, Mauricio Almeida, Yuanhang Chen and Paulo Waltrich. Also assisting is Andreau Trepagnier, PERTT’s operations manager. After winning the award in 2017, LSU renovated the facility to serve its expanded purpose. “We can simulate the same kind of flow parameters that you would have during an accident, e.g. uncontrolled gas blowing out of the top of the well,” Williams says. In the process, a fiber optic line allows the LSU team to visualize what’s occurring in the well. “The big precursor to the (Deepwater) accident was they didn’t know what was
coming,” he adds. “They weren’t able to see it and were doing multiple operations at the same time.” PERTT will use science to inform operational behavior, relying heavily on the gathering and interpretation of data. Given its unique abilities, the facility also provides a venue for owners to test and analyze new technologies while on land. Since analyzing the data is a huge part of PERTT’s mission, LSU’s Department of Petroleum Engineering has created three courses focused on data analysis specific to oil and gas, focusing on how to use data to create safer oil and gas operations. That makes it one of the few locations with “the backbone infrastructure” to work with startup data analytic companies for oil and gas, Williams says. “They’re not taking this straight out to the platform. They come here for proof of concept work. We have all the same equipment and a well-known service company helps us with the project.” When oil prices were surging past $100 a barrel a few years ago, nearly 1,400 students were going through
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NEWS: OFFSHORE
the program. That’s fallen to about 500. While there, undergraduates participate in “hands on” training and simulations in a fully-functioning control room. “They’re under duress, and they have to make those decisions and calculations as a team, as well as understand the data,” Williams says. “It’s just like they’re standing in the driller’s shack in the Macondo.”
“The big precursor to the Deepwater Horizon accident was they didn’t know what was coming.” WESLEY WILLIAMS, professional in residence, LSU Petroleum Engineering Research & Technology Transfer Laboratory
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‘TOO BURDENSOME’: Scott Angelle talks with reporters in May 2019 about changes to ease some of the safety rules adopted after the deadly 2010 Deepwater Horizon oil well blowout.
Q&A: Scott Angelle on how he’s working to correct the ‘over regulation’ spawned by Deepwater Horizon By SAM BARNES Scott Angelle, director of the Bureau of Safety and Environmental Enforcement, is on a mission to eradicate inefficiencies in the regulation of offshore oil and gas. Despite outcries from some environmental groups, Angelle insists BESE’s actions to date have been made “with a scalpel, not a chainsaw” and that none of the changes ignores or contradicts any of the 424 recommendations made after Deepwater Horizon. Last summer, Angelle unveiled his two-year plan, “A New Era of Management,” to call attention to BESE’s progress and future plans. Most significantly, the Bureau of Safety and Environmental Enforcement unveiled a revised Blowout Preventer Systems and Well Control rule in 2019, rectifying what many in the offshore industry say was an ineffective, kneejerk reaction to the 2010 disaster. Angelle points to other money-saving initiatives that are both innovative and collaborative, such as agency inspectors 32 10/12 INDUSTRY REPORT • SPRING 2020
limiting offshore visits and processing regulatory paperwork on land. In the process, the bureau hopes to reduce offshore inspection costs while simultaneously increasing inspection times. 10/12 Industry Report recently met with Angelle to discuss his current and future goals.
WHAT ARE SOME OF THE HIGHLIGHTS OF YOUR RECENT REPORT? As Winston Churchill has been quoted, regardless of how beautiful the strategy, occasionally you have to look at the results. We’ve got to look at the results of the last two years, let folks know what we’ve been able to do and then compare it against the baseline that we inherited. The last two and a half years have been about a course correction to make sure that as we are driving safe performance and environmentally sustainable performance at the same time … that
we’re recognizing the conservation responsibility we have. The numbers indicate that we are achieving that. When you look at the safe initiatives that we’ve introduced and the environmental initiatives that we’ve introduced, last year was the highest oil production ever in the history of the Outer Continental Shelf. Certainly, regulations are important, and it takes an appropriate amount of regulation to drive performance. But when we believe as a nation that the only way to drive performance is through regulation, then I think we’ve missed the boat. I think we’ve proven that through regulation, and by adding innovation and collaboration, we can drive better performance.
CAN YOU PROVIDE EXAMPLES? We regularly send inspectors offshore, which is the most expensive and dangerous thing we do. When we got there, we would start looking at paperwork.
I was a little surprised that we were sending a federal employee offshore to spend time looking at paperwork that was definitely available onshore. I wanted to see if we could reach out to industry—there’s only about 60 operators—and find out if they would be willing to voluntarily share their electronic records with us. In the end, 98 percent of operators agreed to voluntarily share their electronic records. Over the next five years, we’ll reduce our helicopter costs by about $15 million to $20 million and get more physical inspection time out of that, and our employees will be safer. That “win-win-win” can only happen when we have access to records in a voluntary way.
WHAT ABOUT INNOVATION? WHAT’S BEING DONE IN THAT REGARD? Companies are required to report to us every year how many hours their employees and contractors work on 1012industryreport.com
COURTESY BUREAU OF SAFETY AND ENVIRONMENTAL ENFORCEMENT
TAKING THE LEAD: Scott Angelle speaking to the Louisiana Oil & Gas Association about energy dominance for America at its fall meeting in Lafayette in 2017.
their behalf on the OCS. We learned that we worked 68 million hours last year, but maybe 90 percent of those work hours were by contractors on behalf of the operators. Unfortunately, we don’t regulate contractors. We regulate operators, and operators in turn regulate their contractors. There’s a disconnect there. When you recognize a disconnect there’s an opportunity for a fumble. We issue about 25 safety alerts every year. If the safety alerts are for the safety of the workers, why not consider a system that would allow an offshore worker to sign up voluntarily to receive a safety alert from BESE. That way we don’t have a fumble. Therefore, we announced that initiative in May and urged folks to do it. As of fall 2019, we had about 3,500 signed up for that service, and had sent out about 31,000 text messages at a cost of about $1.5 per message. We are now delivering a safety alert directly to the person that needs it.
HOW UNIQUE IS THAT APPROACH? We’re not the only workplace safety organization in the U.S. OSHA and others, such as the Mine Safety and Health Administration, and others serve the same function. But we found out that there is no other workplace safety organization on the planet that is providing text safety alerts to the group of people that they have a responsibility to.
OTHER IMPROVEMENTS? One of the things the previous administration set up is the Safe OCS Program, which is designed for companies to report near misses. When you have a near miss you can learn a lot of things in a low-frequency, high-severity industry such as offshore oil. While the previous administration spent about $5 million putting it together, only 4 percent of the companies were enrolled in the program. It’s completely voluntary, so the only way to get them to participate is through collaboration. I began encouraging folks that America 1012industryreport.com
would be a safer place if we learned about near misses. As a result, our Safety OCS participation went from 4 to 88 percent.
WHAT IS DONE WITH THE “NEAR MISS” DATA? We have a contract with the Bureau of Transportation and Statistics, which is an entity housed in DOT. When it comes to us the data has been sanitized. BTS gets it first, and they are under confidentiality rules just like the IRS. They report out on an annual basis the aggregated data. The idea is that the entirety of the industry could learn from those near misses.
WHY WOULD A COMPANY NOT PARTICIPATE? It’s because they don’t understand it or don’t trust it. We have to lay it out and explain it to industry, that here’s the process and here are the protections. If the data suggests that we need a new rule, maybe we do. We should have a conversation about it. I understand the fear associated with that, but just because you’re not reporting it doesn’t mean that it’s going to go away.
WHAT WOULD YOU CONSIDER ONE OF YOUR MOST SIGNIFICANT ACCOMPLISHMENTS? The President issued an executive order that instructed us to examine at least two rules by name, and generically other rules, for regulatory burdens that don’t produce a corresponding safety benefit. We were very selective in where we made changes, and feel we reduced overregulation that made America less competitive and did not provide a corresponding safety benefit. After all, the Gulf of Mexico is not the only game in the world. Seventy percent of the world’s surface is covered with water, and It makes no sense to have regulations that strangle investment opportunities for no reason. That’s just silly. 10/12 INDUSTRY REPORT • SPRING 2020 33
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34 10/12 INDUSTRY REPORT • SPRING 2020
24/3/20 2:04 PM
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NEWS: SECURITY
Real and present danger Industrial plants face a new level of threats from drones, cyberattacks and corporate espionage. By SAM BARNES AIR, LAND OR WATER: Industry’s biggest security challenge is simply staying one step ahead of new technology.
E
d Flynn remembers the days when he could drive unencumbered— comparatively speaking—near an industrial site, or ease through the security checkpoint at the airport. That all changed in the days, weeks and months after Sept. 11, 2001, as the nation’s security landscape was irrevocably altered. The Louisiana Chemical Association began receiving calls from the Federal Bureau of Investigation, the U.S. Secret Service, U.S. Marshalls and a host of other law enforcement agencies as they all became acutely aware of vulnerabilities in the nation’s infrastructure. Until then, site security wasn’t even on LCA’s radar. “It was a game changer,” says Flynn, the association’s vice president of health, safety and security. “All of a sudden, this failure of imagination became a very real fact of life.” LCA ultimately forged a Security Committee in the 9/11 aftermath, to be used by the various plant Facility Security Officers (FSOs) as a vehicle for communication, collabo1012industryreport.com
ration and relationship building. Additionally, regulatory programs such as the Chemical Facility Anti-Terrorism Standards gave the Department of Homeland Security clear authority to fine or shut down facilities that do not meet the program’s comprehensive security standards.
‘MALICIOUS, UNAUTHORIZED ACTIVITY’ These days, there’s never a lack of things for LCA’s Security Committee to talk about, as there has been a proliferation of threats that couldn’t have been imagined 19 years ago. The regulation of drone technology is a popular current top-
THE ASSOCIATED PRESS
EXPOSED VULNERABILITIES: The terrorist attacks of Sept. 11, 2001, irrevocably altered the nation’s security landscape.
ic—whether by air, land or water— followed closely by cybersecurity, corporate espionage, and of course, terrorism. “We continue to see malicious, unauthorized activity in regard to drones,” Flynn says. “From a chemical industry perspective, we’re also concerned about unmanned landbased vehicles and submersibles. You have a lot of sophisticated and vulnerable technologies on the docks and piers of these plants.” LCA says there have been recent incidents when unauthorized drone flights have been detected near industrial sites along the Mississippi River. “We’ve seen indicators and evidence of foreign governments using drones equipped with high resolution video cameras and other types of photographic evidence at night,” he adds. When Dow USA detected drones flying within the boundaries of its facilities, it exposed critical regulatory weaknesses for security. Federal laws provide little protection as they stand now, says Scott Whelchel, Dow’s global chief security officer, currently based in Louisiana. 10/12 INDUSTRY REPORT • SPRING 2020 35
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NEWS: SECURITY
“They’re making progress through ‘remote identification’ and other regulatory efforts, but federal regulations remain ineffective and they’re currently unable to identify or detect drone flights. They just don’t have the structure in place.” Should an Unmanned Aircraft System (UAS) be sighted at Dow’s St. Charles operations, it is immediately reported to Dow’s centralized dispatch, which in turn reports the sighting to the St. Charles Parish Sheriff ’s Office. Unfortunately, local law enforcement can do little, given a lack of clear guidance at the federal level. “And while we might be able to mobilize local law enforcement, there’s not a lot that happens because they’re preempted by federal law. The Federal Aviation Administration’s primary mission is to safely enable things to fly in the air. They don’t want to restrict air travel in any way, shape or form.” 1012industryreport.com
While drone flights are federally restricted over government facilities, airports, sports stadiums and large social events, there are no such restrictions near critical infrastructure such as industrial plants. “We see a big gap there,” Whelchel says. “All emergencies are local, so we need to enable and empower the local officials to better deal with these situations. The law is currently standing in the way of that.”
While most unauthorized drone flights are due to ignorance of the law or other innocuous reasons, there have been cases resulting in the FBI and Louisiana State Police investigating suspected nefarious actions by nation-state groups intending to gather trade secrets. “It’s imperative that local, state and federal policy makers figure out how to write legislation and regulations that give law enforcement, at all levels, the ability to stop the
“[Security is] at a different level now, and I think we’re in a much better place today than we were before 9/11.” L
EE
CE
LA
NO
JOE ANDREPONT, director of site security, Westlake Chemical in Sulphur
activity,” he adds. Joe Andrepont, who oversees site security at Westlake Chemical in Sulphur, says drones are becoming a real concern. “I think the FAA needs to address that. These drones can home in on a certain area of your plant that’s proprietary and try to capture information.” Industry’s biggest security challenge is simply staying one step ahead of the technology. “That will always be something that companies have to plan for and be ready to implement,” Andrepont says. “Like everything else, you have to stay on top of current technological trends, as well as budget for it and train accordingly.” He says cybersecurity and drones both fall under the umbrella of corporate espionage. Of course, there’s a human component as well. That’s prompted plants to go beyond mere background checks 10/12 INDUSTRY REPORT • SPRING 2020 37
NEWS: SECURITY COMMUNICATION AND COLLABORATION ARE KEY Westlake’s Andrepont says there were some undeniably positive outcomes borne out of the horrible tragedy some 19 years ago. “Today, we have an abundance of measures and regulations in place that make our plants safer, and an amazing collaborative atmosphere between the trade associations, governmental agencies at all levels, other facility security officers and law enforcement. “It’s at a different level now, and I think we’re in a much better place today than we were before 9/11,” he adds. Members of LCA’s Security Committee—comprised of the various plant FSOs—meet monthly to have conversations with representatives of the Department of Homeland Security, FBI, local law enforcement and others. They also share information with each other. “We realize that those conversations and relationships are immensely valuable,” LCA’s Flynn says. “Security from our perspective is very much a shared responsibility. But at the same time, we’re not intelligence agencies. We need robust dynamic, useful relationships with these outside agencies to be effective. “After all, the time to start reaching out is not when we’ve got a Category 3 storm in the Gulf or there’s been some sort of terror attack, drone attack or cyberattack. The
CLOSE COLLABORATION: The Louisiana Chemical Association meets monthly with the Department of Homeland Security and other federal agencies to discuss security strategies.
time to establish communications is when things are calm.” Whelchel says Dow is also being proactive by implementing a more holistic approach to security. He oversees Dow’s 130 manufacturing locations in more than 30 countries. “We’re taking more of an enterprise approach to security and emergency management. We’re incorporating a convergent model that is a complete continuum of physical security and cybersecurity.” In the process, Dow adapted Sandia National Laboratories’ Risk and Safety Assessment tool to incorporate both cyber and physical risk. Risk and safety assessments are used to determine the consequences from a set of actions and the probability they will occur.
THE ASSOCIATED PRESS
of its employees to actively tracking data as it leaves the system. “People working in the plant might have certain institutional knowledge of operations or manufacturing equipment and have complete access to the things that are most critical,” he adds. Cybersecurity threats are also a real and present danger, as evidenced in August when Gov. John Bel Edwards declared the state’s first cybersecurity emergency in the wake of a ransomware attack on state government servers. Fortunately, the state’s two-yearold Cybersecurity Commission was prepared for the moment. LCA’s Flynn, also a commission member, says the multifaceted commission “bolsters cyber defenses in this state and grows cyber capabilities and procedures, protocols, and perhaps even legislation, to protect government systems and information.” Other members represent the Louisiana National Guard, Louisiana State Police, Governor’s Office of Homeland Security and Preparedness (GOHSEP) and Louisiana Economic Development, among others. “If there is information relevant to the private sector, I share that information with our colleagues,” Flynn says.
FIRST ATTACK: Gov. John Bel Edwards declared Louisiana’s first cybersecurity emergency in August, in the wake of a ransomware attack on state government servers.
38 10/12 INDUSTRY REPORT • SPRING 2020
Policy and decision makers rely on these techniques to inform their processes, including when outcomes are uncertain. “We are tailoring the risks specific to the physical facilities in our manufacturing space,” Whelchel adds. “This is something we were doing in the physical security space already, but now we’re doing it in the cyberspace as well … together.” As for Westlake Chemicals, it performs frequent drills and exercises both as a plant and with other plants in the area. The plant also conducts numerous tabletop drills where different scenarios are acted out and conducts large-scale exercises annually and bi-annually. Everything, Andrepont says, is documented in accordance with federal regulations. “While it’s not a mandate, we do plant drills every week to keep everyone from becoming complacent,” he adds. Westlake’s guards also undergo an array of impromptu drills and tests, during which they are tested and evaluated. The guards participate in exhaustive classroom training before they even take their post and are mentored by other guards. “There’s zero tolerance for error, but there’s a great deal of training and ongoing training to get them where they need to be.” Still, none of it would be possible without inter-plant collaboration. “We get together monthly to share best practices, often in confidence,” Andrepont says. “That’s being a good industrial neighbor and it only makes us stronger.” 1012industryreport.com
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NEWS: INFRASTRUCTURE
HIGHLIGHTING DEFICIENCIES: Midstream companies are moving to add pipeline capacity in unprecedented volumes.
Pipeline economics The need to move more oil and gas will likely grow. BY SAM BARNES
L
ouisiana’s new role as an oil exporter, surging industrial investment and a corresponding need for oil as feedstock are highlighting deficiencies in the Gulf Coast’s pipeline infrastructure. To feed rising demand, midstream companies are moving to add pipeline capacity in unprecedented volumes as the shale boom sends U.S. crude exports to record highs. The impending reversal of the Capline Pipeline is providing some encouragement in that regard. As the largest U.S. crude pipeline, Capline could boost flows of Canadian and Mid-Continent crude to the St. James Parish market within a year. Owners Plains Pipeline LP, BP Oil Pipeline Co. and Marathon Petroleum Corp. announced in January that the pipeline would begin 40 10/12 INDUSTRY REPORT • SPRING 2020
light crude service by mid-2021 and heavy crude service in 2022. Better late than never, says Eric Smith, associate director of the Tulane Energy Institute in New Orleans. “We have an inadequate number of interstate pipelines,” Smith says. “We need those pipelines to transport crude.” ExxonMobil in Baton Rouge has long expressed a need for additional pipeline infrastructure, as its Baton Rouge complex and other Gulf Coast facilities need enhanced access to crude oil feedstock. As such, the Permian has become a key area of focus, where the owner has a resource base of some 10 billion oil-equivalent barrels. Pipelines are an important route for transporting oil out of the basin, says Stephanie Cargile, ExxonMobil Baton Rouge’s public and govern-
ment affairs manager, in an emailed statement. In fact, all of the company’s facilities have a need for additional pipeline infrastructure. FEEDSTOCK ACCESS: Pipelines are an important route for “Some of our Baton transporting oil out of the Permian Basis. Rouge chemical projects have had to invest in additional pipelines, which of a natural gas-only pipeline from makes new Louisiana investment the Permian as too expensive. “The more expensive and less competiprice points are too low,” Smith says. tive,” Cargile says in the statement. “It’s something they can’t avoid. If they could drill and get 100 percent NATURAL GAS – SHOW oil, believe me they would do it.” ME THE MONEY Nevertheless, some liquefied natuIt’s a different dynamic for natural ral gas owners facility are making the gas. Significantly depressed prices effort. Tellurian recently proposed have many Permian owners flaring a Permian Global Access Pipeline their associated gas instead of laying from West Texas to its pending pipelines to transport the product. Driftwood LNG facility in Lake For the most part, they see the cost Charles. Spanning a formidable 6261012industryreport.com
AD V E RT I SE ME N T
From left, William Clouatre, Fred McManus, Jonathan Batarseh, Andy Dupuy and Wayne Killion
BROWN & ROOT INDUSTRIAL SERVICES HISTORY
In 1919 George and Herman Brown partnered with their brother-in-law Dan Root to create a Texas-based construction company. On the heels of the Great Depression, Brown & Root expanded, emerging as a major U.S. construction company while the magnitude and scope of their engineering and construction projects continued to grow. Throughout the following decades, Brown & Root distinguished itself as an industrial services contractor that delivered successful on-site maintenance, turnaround, and capital construction projects in the energy, industrial, power and facility sectors. Ownership shifted to Halliburton in 1962, then merged with Kellogg in 1998, and continued operations as KBR Industrial Services of America. In July of 2015, KBR partnered with Bernhard Capital Partners, spinning off its industrial services division to establish Brown & Root Industrial Services with headquarters in Baton Rouge.
WHAT WE DO
Brown & Root proudly serves clients primarily in North America with proven experts in the fields of engineering, capital construction, maintenance, turnaround services, industrial specialty services, specialty welding, cooling towers, on-call construction, coastal restoration and disaster recovery.
GOOD WORK
One of the company’s recent projects took place at Veolia in Burnside, Louisiana—a converter replacement and capital expansion project. Brown & Root provided construction management, equipment and direct hired labor for the mechanical, scaffolding, insulation 1012industryreport.com
and E&I scopes while overseeing all of Veolia’s subcontractor scopes. The subcontractors included Deep Foundations, Heavy Haul & Lifting, Fiberglass Tank Fabrication Brown & Root has received the ABC National Excellence in Construction Award and Concrete for its Veolia Burnside project. Coatings. The Burnside facility is the largest of seven in the Veolia Regeneration Services business. Removing and replacing the converter on schedule was crucial to the company’s business needs as the converter is the heart of the plant’s operations. Brown & Root successfully executed five projects during the pre-turnaround and turnaround, integrating an existing chemical process and overcoming a historically high Mississippi River, constrained footprint and accelerated timeline. The project was completed on time with 285,195 work hours and zero recordables. It increased Veolia’s spent sulfuric acid processing capability by about 10 percent.
LOOKING TO THE FUTURE
TOP EXECUTIVES Andy Dupuy, Chief Executive Officer Fred McManus, Chief Operations Officer Jonathan Batarseh, Chief Financial Officer Wayne Killion, General Counsel William Clouatre, Executive Vice President
YEAR FOUNDED 1919
NUMBER OF EMPLOYEES 10,000
HEADQUARTERS
2600 Citiplace Dr., Suite 500 Baton Rouge, LA 70809 225.778.7655 BrownandRoot.com
OUR PHILOSOPHY
Our mission is to provide the highest quality and most comprehensive range of industrial services in the business, producing exceptional results for our customers, employees and stakeholders while safeguarding our high standard of excellence.
We are positioning ourselves to be the preeminent global partner of choice for our customers by capitalizing on the work ethic, expertise and innovation of our team. As we like to say, “The best has no equal.”
10/12 INDUSTRY REPORT • SPRING 2020 41
DON KADAIR
NEWS: INFRASTRUCTURE
“It doesn’t matter how many miles of pipeline exist today. You could have two more announcements in 15 years and you would still need more capacity.” TYLER GRAY, president, Louisiana Mid-Continent Oil & Gas Association
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42 10/12 INDUSTRY REPORT • SPRING 2020
mile swath of Texas and Louisiana, the pipeline would transport 2 billion cubic feet of natural gas per day by late 2023 or early 2024. The concept was proposed as part of the company’s wider strategy to form a $7 billion pipeline network along with the proposed Driftwood Liquified Natural Gas Terminal in Louisiana. According to initial regulatory filings, the proposed route would require 253 miles of new right-of-way while using 373 miles of adjacent existing right-of-way corridors. Natural gas pipeline prospects are significantly more likely in the Haynesville Shale Play. The current deficiency in pipelines there will likely disappear as LNG owners increasingly turn their attention to the play. That’s because Haynesville is much closer than the Permian, as well as a more economical source of natural gas. Given its Lake Charles location, Tellurian is also interested in Haynesville. In 2018, it took the unprecedented step of acquiring 1.5 trillion cubic feet of natural gas in the play to support its project. The
firm is also building a 256-mile pipeline from the shale play to southwest Louisiana in order to transport 2 billion cubic feet of gas each day. In the process, Tellurian hopes to control costs and circumvent impending pipeline shortages. “Tellurian ships a pipeline quality gas and if they can buy it at the wellhead in Haynesville, they’re better off,” Smith says. Tyler Gray, president of Louisiana Mid-Continent Oil & Gas Association in Baton Rouge, says he’s confident that additional pipeline projects will mirror any future increases in demand. “A pipeline is always filled at capacity, so every time there is an increased market requirement, you’ve got to build a new pipeline,” Gray says. “It doesn’t matter how many miles of pipeline exist today,” he adds. “You could have two more announcements in 15 years and you would still need more capacity.” As an indication of future expectations, LMOGA’s pipeline contractor/ owner membership has increased in recent months. 1012industryreport.com
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FOCUS MAINTENANCE + TURNAROUNDS
THE FUTURE IS NOW: While some plants remain hesitant, the appetite for Industry 4.0 has risen dramatically along the Gulf Goast as a means to remain competitive and viable.
Industry 4.0 is here Louisiana’s manufacturers are embracing smart facilities, digitization and the Internet of Things. BY SAM BARNES
W
hat just years ago seemed like a far-out concept now plays a central role in Louisiana’s manufacturing space. The gathering, manipulation and extrapolation of data via smart facilities, digitization and the Internet of Things (IoT)—aka Industry 4.0—is rapidly gaining a foothold among petrochemical owners. Some plants are taking a leadership role. Last summer, Cornerstone Chemical in Waggaman kickstarted its efforts by appointing process 1012industryreport.com
technology engineer Aubyn Chavez as its first digitization leader. It stemmed from a desire to turn Cornerstone’s Industry 4.0 goals into a sustainable reality. “Like the old adage, if everybody’s responsible, then nobody’s responsible,” says Tom Yura, chief operating officer. “It became clear that we needed someone with a passion for digitization and a willingness to learn, read and ask questions.” After assuming the new role, Chavez immediately began taking online classes to understand machine algorithms. She admits to
becoming a little obsessed with “PI Asset Framework,” a repository that integrates, contextualizes, refines, references and analyzes data from multiple sources. She even attended the “PI World” conference and talked to people who use the program to collect process data. “PI AF can support a lot of functions that enable process engineers to make their data work for them,” Chavez says. “It’s great for building out condition-based maintenance for equipment and for building out KPIs (Key Performance Indicators) for processes.”
At Cornerstone, Chavez encourages the adoption and sustainability of digital methods through a mix of education and coaching. “It’s not going to do all the work for you,” she adds. “Instead, it enables the process engineers to become more intimate with their processes and develop some real insights so that we can be more agile.” Somewhat counterintuitively, Cornerstone implemented its digitization effort from the ground up. Yura says it’s far too easy for companies to roll something out, then let it die on the vine. 10/12 INDUSTRY REPORT • SPRING 2020 45
“I’d say we have a better chance to be a global leader because we’ve grown the capacity from within,” he adds. “We’ve learned from within, so we can turn this into a fundamental manufacturing concept.” There was some resistance in the beginning, but Chavez worked closely with engineers to help them understand how digitization tools and connectivity could make their lives easier by providing data-driven solutions. Another obstacle—effectively integrating IT (Information Technology) and OT (Operational Technology) in the same digital space. In the beginning at least, Cornerstone is targeting two areas—overall equipment effectiveness and raw material consumption. “Are we making the most out of our raw materials onsite? The operations engineers will have real time data and it will allow them to focus on driving production value,” Yura says. He expects Cornerstone’s equipment uptime to improve and cost of manufacturing to go down as a result.
OUTSIDE ASSISTANCE Paul Plauche, director of digital services at Turner Industries in Baton Rouge, says digitization leaders such as Chavez are needed everywhere, as many plants are too decentralized to implement an effective strategy. Turner offers a suite of programs via its MobilOps brand that helps plants manage and use their data. “I might have a great relationship with the maintenance person and they’ll clearly see where this would be a fit,” says Plauche, who is also general manager at MobilOps. “But then I’ve got to deal with procurement, which is a completely separate organization. Then it’s the plant manager, and then I might get pulled in with a cybersecurity team. And so I have to go through all those different gates. “If you really want to see movement, there needs to be an overarching embrace by the entire organization, along with clear initiatives. You need to communicate that this is where we’re heading—everybody get on board.”
JORDAN HEFLER
FOCUS: MAINTENANCE + TURNAROUNDS
“If you really want to see movement, there needs to be an overarching embrace by the entire organization, along with clear initiatives.” PAUL PLAUCHE, director of digital services, Turner Industries in Baton Rouge
Turner has had a digital strategy of sorts, for years, with some technologies dating back to the early 1990s. “We’ve won awards for various products to put technology in the field or to digitize our space,”
Plauche says. “All the while, we’re staying true to our core competencies of maintenance, construction, turnarounds, etc.” MobilOps’ suite of programs, which has become increasingly pop-
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DON KADAIR
ular as Industry 4.0 concepts gain a foothold, can be packaged with other Turner services. Still, Plauche says outsourcing the digitization process is not everyone’s cup of tea. “Some clients are ‘do it yourselfers,’” he adds. “I know of one company that likes to build all its stuff in-house, yet another who realizes that there’s no way they could do it in-house, given the size and complexity of the process.” While some plants remain hesitant, the appetite for Industry 4.0 has risen dramatically along the Gulf Coast “due to this phenomenon that’s going on, and everybody seeing the need.” While the adoption of these technologies may seem daunting and a bit risky for some, they’re still taking the plunge in order to remain competitive and viable. Plauche says digitization can have a direct and significant impact on a company’s ROI. “We always say you can’t run a report from a filing cabinet,” he adds. “If you’re capturing that information digitally, you can do dozens of things with that data.” Local universities are also offering
“More people are talking about those kinds of things because we are getting more and more globalized.” JONATHAN SHI, director, LSU Industrial Assessment Center
help. The Industrial Assessment Center at LSU provides free industrial assessments to small and medium-sized manufacturers in the areas of energy efficiency, productivity, sustainability and competitiveness. Additionally, LSU’s Industrial
Innovation Center, funded by the U.S. Economic Development Administration, supports technological advances in chemical manufacturing. LSU is one of 34 organizations providing the service. “Our approach is to work with our industrial partners
including plant operators and industrial contractors,” says Jonathan Shi, center director and LSU industrial construction professor. “The LSUIIC will work with them to identify their technological needs and then match them up with an innovator to develop the technology.” The LSU-IIC leverages existing industrial partnerships established through the Louisiana Chemical Manufacturing Initiative, or LCMI, which is comprised of more than 90 local partners representing stakeholders from different sectors of Louisiana’s chemical manufacturing industry. It also utilizes and expands the innovation resources available at the LSU Innovation Park and Louisiana Business and Technology Center. “When information is digital and is structured, it can be searched and analyzed and then used to give the project manager useful information,” Shi says. According to the professor, Gulf Coast companies might be a bit slow to adopt new things, but he’s noticed a sizeable shift toward digitization
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FOCUS: MAINTENANCE + TURNAROUNDS and Industry 4.0 in recent months and years. “More people are talking about those kind of things because we are getting more and more globalized,” he adds. “It is important to educate the public and the community about this kind of new technology.” CONSTRUCTION CATCHES UP Industrial contractors, often late to the game in adopting new technology, are also testing the digitization waters. In July, the Construction Industry Institute began researching a new platform dubbed Operating System 2.0 near its headquarters at the University of Texas in Austin. The OS 2.0 platform will also promote standardization, digitization and automation, and support a greater reliance upon off-site modular construction in a manufacturing setting, all of which will reduce drags on productivity. Also to be addressed—blockchain and smart contract technologies that could more efficiently manage transactions and encourage a more timely payment process.
48 10/12 INDUSTRY REPORT • SPRING 2020
Ultimately, they hope to achieve a 35% reduction in project cost, 50% reduction in schedule duration, and 60% improvement in ROI. As direct beneficiaries, ExxonMobil, Shell, Canada-based Suncor Energy, Australia’s BHP and Saudi Arabia-based Sabic have contributed $2 million in support of the research. John Fish, director of project support services at design firm Ford, Bacon & Davis in Baton Rouge, was an early proponent of the effort. Fish serves on CII’s board of advisors and assists with research and technology, and says the OS 2.0 concept has been a long time coming. He says the name of the platform denotes a desire to take the construction industry to the next level. “Over the last 50 years, the construction industry has not had any significant productivity gains at all, while manufacturing has improved by some 200 percent,” Fish says. “We’re just coasting along, doing business like we always have. Some argue that we have even become less productive.” A consortium of investment
AN OS FOR THAT: The Construction Industry Institute’s OS 2.0 platform will promote standardization, digitization and automation, and support a greater reliance upon off-site modular construction in a manufacturing setting, all of which will reduce drags on productivity.
partners launched a private entity— PrairieDog Venture Partners—to actualize and deploy OS 2.0, even as research is getting under way at UT’s Cockrell School of Engineering. The standalone company is financed by the Construction Users Roundtable (CURT), along with other private shareholders. In 2020, PrairieDog hopes to deploy a “minimally viable product” to be used in various pilot projects.
The product can then be augmented as new research is completed. “The research and development go hand in hand,” says Peter Dumont, executive advisor at Premier Resources Group in Houston and one of the principal investors in the platform. “We’ve got the research at UT and the PrairieDog business to test these research concepts as they come out of the laboratory.” Dumont is currently scouting for contractors and industrial owners interested in supporting the pilots. He’s also in negotiations with a Baton Rouge-area technology company that could play an integral role in the platform’s deployment.
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FOCUS: MAINTENANCE + TURNAROUNDS
AHEAD OF TIME: Planning for small surprises along the way, factoring an allowance for discovery work and establishing a collaborative mindset for a team are just a few of the strategies Louisiana companies deploy for turnaround success.
Stumbling Blocks Many factors can send a turnaround into a tailspin, but most are avoidable. By SAM BARNES
T
here are a lot of things that can send a maintenance turnaround spiraling out of control and cause a plant to miss its mark, both in time and money. The availability of parts, labor, weather and poor productivity are all potential threats, but are they always impactful? That depends on the level of planning, says Richard Reeves, maintenance manager at Eastman Chemical Co. in St. Gabriel. Reeves joined Eastman more than three years ago
50 10/12 INDUSTRY REPORT • SPRING 2020
and coordinates with a maintenance supervisor, two full-time maintenance planners, a scheduler and year-round turnaround coordinator to manage his plant’s turnarounds. “The biggest obstacle is poor planning,” Reeves says. “If you don’t plan early enough and don’t plan properly, everything else is affected. You won’t have the materials that you need, and you really can’t recover from that.” While many companies struggle to hit their goals, Eastman has failed to run long or exceed budget in its
last 44 turnarounds. Much of that can be credited to the repetitive, consistent nature of the work, but the local availability of parts—particularly heat exchangers—also plays a role. “Our business rhythm is such that we initiate a turnaround every year,” he adds. “As soon as we finish one, we’re already starting planning on the next one.” That, in turn, minimizes the unexpected and makes the process more predictable. Nonetheless, Eastman plans for small surprises along the way and includes an allowance for discovery
work. “We typically expect 10 to 15 percent discovery work, so we build in manpower to cover those issues.” Shell Chemicals in Geismar hits most of its milestones, even on the larger turnarounds, and gives much of the credit to a unique collaborative approach to planning and execution. The plant also develops a “collective resilience” by practicing the plan during walkthroughs and tabletop drills. However, Shell’s first step is to address the mindset of the team. Depending upon the size and 1012industryreport.com
complexity of the turnaround, that process could begin as early as 12 to 18 months ahead of the project. “That includes everyone leading the effort,” says Ryan Schmidt, Shell’s manager of maintenance and turnarounds. “It starts much earlier than the tactical stuff. While we want to have a high-quality plan, we also understand that we’re going to need to work together in a collaborative manner to address those unplanned things that come up.” After all, turnarounds are highstress events with a significant level of complexity and include a host of teams and companies. Everything is coordinated by Shell’s turnaround planning team. “If we go in with the right mindset, and we determine how to make a situation better versus blaming someone else, that creates a positive path forward when those challenges crop up,” Schmidt says. Chris Vaughn, operations manager at Nouryon in Mobile, Ala., says involving operations in the planning process is also critical. Vaughn, a frequent speaker on the subject, says operations “owns the scope,” so maintenance should work with them to develop a more realistic scope and game plan. “The first step in a turnaround is to make sure you have a good decontamination and decommissioning plan, and that’s mostly operations that does that,” Vaughn says. “And then you have a small window where you have maintenance contractors, and then you hand it back over to operations again. “I’ve seen turnarounds where they were derailed from the outset because they didn’t decommission the unit on time. They didn’t decontaminate on time. They didn’t do ‘lock out, tag out’ on time, etc.” PROVERBIAL MONKEY WRENCHES Some things have little bearing on the overall schedule and budget— minor weather events, discovery work etc.—as a certain number of contingencies are expected. However, more significant events such as local manpower strains, material delivery delays and major weather events pose bigger threats. “Skilled craftsmen availability continues to be a challenge,” Shell’s Schmidt says. “If you can’t get the 1012industryreport.com
A POSITIVE PATH: Involving operations in the planning process is critical in developing a more realistic game plan.
number of skilled people that you need to do the work most effectively in an optimal amount of time, that certainly impacts the schedule and the duration of the outage.” Of course, there are other extenuating circumstances that can put a sizeable strain on the local labor force, such as other area plants having their own turnarounds or capital projects at the same time. “Usually, we have resident contractors that man up when a shutdown happens, and they have pre-negotiated rates with us,” Eastman’s Reeves says. When that’s not possible, Eastman finds other contractors to fill the need or staggers its turnarounds to avoid hitting peak turnaround periods in the fall and spring. “We’ll do
the work in July at times. It’s hot and creates some issues with productivity, but we’re not competing with the other plants.” Nouryon’s Vaughn says supply chain problems can also throw a monkey wrench into a plant’s turnaround plans. “I’ve seen supply chain problems push out turnarounds because of raw material availability,” he adds. “I’ve seen it go both ways, where the supply chain has pulled in the turnaround 30 days early, and then where they push it out 30 to 45 days. That’s a critical piece of it, but ultimately they’re a significant partner in the production planning for a site or production unit.” Having well-established, specific
milestones can be particularly helpful, as they can help sidestep and manage unexpected changes as they occur. “Have the resource allocation plan developed and identify your mid- and long-term goals within the turnaround, either by task or by resource allocation,” he adds. “You need to get very granular and have everything visible and open. Also, have daily and weekly meetings to see how you are meeting the milestones that you set.” That way, a plant can more readily allocate resources should the critical path begin to slip. “You need to have that schedule built and fully defined so you know where all the players are going to be throughout the turnaround,” Vaughn adds. “That’s 10/12 INDUSTRY REPORT • SPRING 2020 51
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probably the best way to have that traceability and visibility that you need.” Nouryon also develops contingency plans and risk assessments to minimize the impact from scope growth or discovery work. Cross-functional team consisting of mechanical integrity specialists, mechanical engineers and process engineers are brought in to perform the risk analysis. “Based off of past history, they might determine a certain risk level for discovery work in a particular vessel,” Vaughn says. In that regard, discovery work is one variable that Shell Geismar feels it can control, with the help of its exhaustive planning regimen and the digitization of its work processes. “We take the mindset that there should never be any discovery work,” Schmidt says. “We hope to put ourselves in a position where we’re not surprised by anything that we can ultimately control. Certainly, that’s difficult to accomplish, but that’s our vision.” It can be an attainable goal, he says, given the increasing digitization of the industry, whereby data can be captured and interpreted more effectively. “There’s definitely a connection there,” he adds. “With advancing technologies that give us better data, 1012industryreport.com
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INSIGHT
Irreparable changes are coming to the American oil and gas industry
DAVID DISMUKES
F
or 35 years, 1986 has served as the bellwether year against which all U.S. oil and gas industry downturns have been
measured. This is no longer the case. From this point forward, 2020 will stand as the year in which fundamental changes, likely more widespread than those that occurred in 1986, will be remembered. These changes are the result of dual crises that are an existential threat to American oil and natural gas producers and their service and support company counterparts. The first is the onslaught of a global pandemic that has led to an unprecedented economic dislocation that rivals events not seen in centuries around the globe. The contraction of economic output arising from the closure of factories, businesses, and normal daily life around the globe has led to an estimated reduction in global oil demand of almost four million barrels per day. Secondly, this pandemic would be bad enough if it did not arise at a time when two of the world’s most significant crude oil producers are at economic odds against one another. Both Saudi Arabia and Russia are engaging in predatory supply and 1012industryreport.com
pricing strategies that will not only do considerable damage to U.S. producers, but their own energy economies. The timing of these events could not be any worse since most oil and natural gas companies were already under siege as we entered into 2020. Most energy producers were already struggling with global energy pricing “softness” generated by the Sino-American trade disputes of the past year. In addition, a large number of oil and gas companies were struggling with high debt shares that re-directed cash flow away from drill bits and into covering high interest payments that were becoming more difficult to pay given lower energy commodity price. As if this weren’t enough, the oil and gas industry has been feeling increasing environmental, social, and governance (“ESG”) pressures from investment funds, pension funds, private financial endowments, and other sources of capital that are divesting themselves of fossil fuels shares as well as the shares of companies actively working with and for fossil fuel interests.
Thus, the twin catastrophes of a pandemic and an all-out global crude oil price war has created a collective chaos that will lead to several fundamental and unavoidable industry changes. First, it is highly likely that many American oil and gas companies will cease to exist. There are several firms that are operating in the oil and gas industry that were born in the environment $100 per barrel crude oil price. Many of these newer firms survived the 2014 downturn as that dip was short-lived and was offset in large part by banks and other sources of capital that were willing to gamble on the market and the industry’s ability to regroup. Over the past several years, there have been many oil and gas companies that have taken advantage of cheap debt to acquire relatively pricy mineral positions, while still others purchased asset-heavy companies outright, such as Occidental. Now the twin threats of a global pandemic and an international crude oil price war are forcing a “calling in” of bets placed by these companies during far better times.
As such, the future of the oil and gas industry will likely be comprised of a lot fewer, and potentially significantly larger companies. There is also the very real possibility that new industry players will emerge that include private equity and other sources of capital that can take advantage of what will likely be numerous cheap deals in the market. Second, U.S. crude oil production will start to contract: the issue is not really when, but by how much. Some estimate that as much as one to three million barrels per day of production decrease will be attributable to market players that will no longer exist once the devastation is played out. This would reduce U.S. crude oil production from recent rates of around 13 MMBbls/d to less than 10 MMBls/d. It will also lead to a contraction in U.S. world crude oil market share to levels not seen in three years, if not more. There is, however, a measure of hope in this entire morass: The U.S. oil and gas industry is not going away. While the industry may change, it will retool and reconfigure in a fashion that will have to be leaner and more competitive. Bad financial positions will be cleared, lower cost providers will emerge, and the vast unconventional resource base, and intellectual capital that underlies that resource base, will survive. This hope comes as poor consolation for those losing their jobs or being placed on extended furlough over the weeks and months ahead, but fortunately, with enough leadership, and even luck, our country’s recovery from this devastation will be speedy and robust, and driven by the energy produced from a revived U.S. energy sector. David Dismukes is the executive director of the LSU Center for Energy Studies. 10/12 INDUSTRY REPORT • SPRING 2020 55
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INSIGHT
Industry’s portrayal as villains is a distortion of reality
I CONNIE FABRÉ
ndustry plants in South Louisiana have been targeted and portrayed as villains for many years, probably dating back to the discovery of oil, which occurred in 1859 in Pennsylvania. Its discovery made kerosene a much cheaper and more available resource to heat and light homes and brought on the demise of the whale oil industry, previously used for those purposes. Roughly 40 years later in 1901, oil was discovered in Louisiana and then the first refinery was started up in 1909. During this time span the uses of oil and its co-conspirator, natural gas, have changed Louisiana and the world in so many ways. Changes due to the discovery of oil and natural gas as medical, energy, and useful materials include a litany of positives despite the constant vilification. We are now living much longer than in 1909 when the average life span was 52 years of age. Today’s life expectancy in the U.S. is about 79 years.1,2 Advances in medicine have contributed largely to this increased life expectancy as well as ease of access to food. When taking a closer look at the improvements in medicine, two of the most key advances were the ability to do surgery using anesthetics and the discovery of penicillin to kill harmful bacteria. Petrochemicals are used in the direct manufacture of anesthetics and penicillin, as well as aspirin and other drugs that use organic molecules such as cumene, phenol and benzene as building blocks.3 Ease of access to food has improved dramatically through improved transportation, which is totally intertwined with our food supply.
In addition, fossil fuels make modern farming possible, from fertilizers and pesticides to the energy used to power farm equipment.4 There are so many other positives that have come about for society from harnessing fossil fuels. Improved materials for clothing, housing, construction, transportation, safety, and more things have come to be. Even Smartphones rely on fossil fuels. A vast supermajority of people the world over create the demand for the products, clamoring to buy the incredible goods that fossil fuels are made into and help deliver to market. People are also desperate to get the medical benefits of sanitation, disposability, and medicines made possible by fossil fuels. Graduates from almost every kind of education program can also get good paying jobs in the industry, from skilled technical workers, office professionals, engineers and marketing and media people to information technology workers. Petrochemical manufacturing companies contribute to the communities where they locate with donations to charitable organizations, employee volunteers in schools, community festivals and much more. Employees who work inside Louisiana plants are exposed to everything the community is exposed to and it has been proven that overall they live long, healthy lives and achieve better health outcomes and lower deaths than the general population.5 My father, a retired chemist of the industry, is turning 95 years old this year, and he still drives between New Jersey and Baton Rouge twice every year and enjoys a great quality of life. During the last 111 years in Louisiana there was much to learn in the industry, but industry has and continues to learn. Granted, there
were mistakes, misunderstandings and messes made out of ignorance and greed. Every industry has its challenges. From corrupt Louisiana politicians, unscrupulous financial companies, dishonest reporters and assassins, our state has had its share of people who ruin things for everyone else. However, those instances are few and far between in all of these industries and the petrochemical industry is no different. Our citizens and industries have responded to each situation and improved. In 2020, a mere 161 years after the discovery of oil, so much has changed … for the good. Distorting reality to vilify industrial manufacturers is not helping anyone. Recent news series using purported “research” that attempts to use half-truths and reminders of bygone mistakes serves only those doing the reporting. Industry employees are the most passionate about caring about our earth and the people who live in it, so if activists seek change, and if newspapers seek revenue from sensational headlines that just bore people and turn them off, then propose solutions that industry and its employees will gladly work together to solve to make some news that’s actually exciting. For example, here are a few headlines that might be exciting: “St. Gabriel Industrial Plants Struggle to Give Away Scholarships to Local Residents” or “Baton Rouge Industrial Plant Interviews Thousands to Find Only 20 Qualified Candidates.” Help industry solve these issues, which in turn will actually help communities instead of wasting time on headlines people don’t believe anyway. Connie Fabre is the executive director of the Greater Baton Rouge Industry Alliance.
1) https://u.demog.berkeley.edu/~andrew/1918/figure2.html 2) https://www.cdc.gov/nchs/products/databriefs/db328.htm 3) https://sciencenotes.org/petrochemicals-in-medicine/ 4) https://www.resilience.org/stories/2005-04-01/why-our-food-so-dependent-oil/ 5) https://www.ncbi.nlm.nih.gov/pmc/articles/PMC1740632/
1012industryreport.com
10/12 INDUSTRY REPORT • SPRING 2020 57
CLAIBORNE
CLOSING NOTES: PROJECT MAPS
Project by project
BOSSIER
WEBSTER
CADDO
($25M-$250M)
BIENVILLE
Active Louisiana industrial projects announced or proposed since Jan.1, 2014, with projected capital investment of $25 million to $250 million. Second line shows projected capital investment and direct new jobs. List is representative, not complete; statuses and costs change frequently. 1 Linde World-Scale Hydrogen Plant
$250M | 15 jobs Location: St. James Parish Status: Construction begins late 2019
2 Entergy
$211M | 20 jobs Location: New Orleans East Status: Online by 2020
3 Nucor upgrade
$200M | N/A Location: St. James Parish Status: Completion end of 2019
4 Kinder Morgan Louisiana Pipeline expansion
$151M | 0 jobs Location: Southwest Louisiana Status: Permitting
5 IMIT terminal upgrades
$150M | N/A Location: St. Charles Parish Status: Construction begins Q4 2019
6 Delek Refinery
$150M | 30 jobs Location: Krotz Springs Status: Pending
7 BASF
$150M | 15 jobs Location: Ascension Parish Status: Under construction (first phase of larger MDI production expansion)
8 Shell Norco
$150M | NA Location: St. Charles Parish Status: Under construction
9 Praxair
$150M | 10 jobs Location: Ascension Parish Status: Completion set for 2020
10 Occidental Chemical
$145M | 12 jobs Location: Ascension Parish Status: Near completion
58 10/12 INDUSTRY REPORT • SPRING 2020
11 Air Products (Geismar)
20 Eastman Expansion
12 Westlake Chemical PVC Expansion
21 Dow/Union Carbide production and packaging
13 Advanced Refining Technologies
22 ExxonMobil upgrades
$145M | 7 jobs Location: Ascension Parish Status: N/A
$140M | N/A Location: Ascension Parish Status: N/A
$135M | 30 jobs Location: Calcasieu Parish Status: 50% complete in mid-2019
14 Dow polypropylene production expansion $119 M | 8 jobs Location: Plaquemine Status: In production by the end of 2021
15 Dow polypropylene production expansion $119 M | 8 jobs Location: Plaquemine Status: N/A
16 Cornerstone hydrogen cyanide plant
$100M | N/A Location: Jefferson Parish Status: Permit revoked; litigation pending
17 BASF Phase 2 MDI Expansion
$87M | Jobs N/A Location: Ascension Parish Status: Begin in 2020
18 Huntsman/Rubicon
$78M | 17 jobs Location: Ascension Parish Status: On hold awaiting construction
RED RIVER
DESOTO
$70M | 5 jobs Location: St. Gabriel Status: Pending
NATCHITOCHES SABINE
$61.9 M | 2 jobs Location: St. Charles Parish Status: Q1 2020 start $50M | N/A Location: Baton Rouge Status: Q1 2019 start
23 IGP Methanol Plant
$45M-$48M | 325 jobs Location: Plaquemines Parish near Myrtle Grove Status: Late 2019 start
VERNON
24 Epic Piping unnamed expansions $40 M | N/A Location: Louisiana, Texas, Abu Dhabi Status: N/A
BEAUREGARD
25 Veolia Regeneration Plant Expansion
$40 million | 29 jobs retained Location: Burnside Status: Pending
26 Port of South Louisiana improvements
13
$37.8M | N/A Location: Port of South Louisiana Status: In progress
CALCASIEU
27 Air Products
$25M | N/A Location: Ascension Parish Status: Under construction
CAMERON
4
19 Florida Fuel Connection LLC
$75M | 50 jobs Location: Orleans Parish Status: Pending
BLUE = ADDED SINCE PREVIOUS EDITION
1012industryreport.com
J
UNION
NE
MOREHOUSE
WEST CARROLL EAST CARROLL
LINCOLN
OUACHITA
RICHLAND MADISON
JACKSON
FRANKLIN
CALDWELL
TENSAS WINN
Sponsored by
CATAHOULA LASALLE GRANT
CONCORDIA
RAPIDES
AVOYELLES WEST FELICIANA
WASHINGTON
EAST FELICIANA
ST. HELENA
6 EVANGELINE ALLEN
POINTE COUPEE
24
ST. LANDRY WEST BATON ROUGE
15
ST. MARTIN
LIVINGSTON
20 IBERVILLE
27 18 10 17 11 12 25 7 26 ION NS
LAFAYETTE
22 9
14
ACADIA
ST. TAMMANY
CE AS
JEFFERSON DAVIS
TANGIPAHOA
EAST BATON ROUGE
ST. JAMES
1
3
IBERIA ASSUMPTION VERMILION
19
ST. JOHN THE BAPTIST
ORLEANS
21 16
8 ST. CHARLES
5
ST. MARTIN
2
JEFFERSON
23
ST. BERNARD
ST. MARY
LAFOURCHE IBERIA
Sources: LED, LEO, GBRIA, 10/12 research
1012industryreport.com
PLAQUEMINES
TERREBONNE
10/12 INDUSTRY REPORT • SPRING 2020 59
CLAIBORNE
CLOSING NOTES: PROJECT MAPS
Project by project
BOSSIER
WEBSTER
CADDO
($250M and up)
BIENVILLE
Active Louisiana industrial projects announced or proposed since Jan. 1, 2014, with projected capital investment of $250 million or more. Includes projects that are underway, awaiting FID, and proposed. Second line shows projected capital investment and direct new jobs. List is representative, not complete; statuses and costs change frequently. 1 Sabine Pass LNG
$19.5B | 400 jobs Location: Cameron Parish Status: Train 6 FID complete
10 Lake Charles Methanol
$4.4B | 200 jobs Location: Calcasieu Ship Channel Status: Permitting complete; financing pending
2 Driftwood LNG
$15.2B | 498 jobs Location: West bank of the Calcasieu River, south of Lake Charles Status: FID anticipated late 2019/early 2020
11 Magnolia LNG
$4.35B | 70 jobs Location: Calcasieu Ship Channel Status: Full permitting and regulatory approval; financing pending
3 G2 LNG
$11B | 250 jobs Location: Lake Charles Status: Production anticipated early 2021
12 IGP Methanol
$3.6B | 325 jobs Location: Plaquemines Parish near Myrtle Grove Status: Site geotechnical work complete
4 Lake Charles LNG
$11B | 250 jobs Location: Lake Charles Status: Royal Dutch Shell delayed project to 2025
13 Pointe LNG
$3.2B | N/A Location: East Bank of the Mississippi River in Plaquemines Parish Status: Construction begins after 2022
5 Formosa
$9.4B | 1,200 jobs Location: St. James Parish Status: FID in 2021
6 Delta LNG + Delta Express Pipeline
14 NOLA Oil Terminal
$2.5B | N/A Location: Plaquemines Parish Status: Initial approval from Louisiana
$8.5B | 300 jobs Location: Plaquemines Parish Status: After 2021
7 Delfin LNG
$7B | 400 jobs Location: Off the coast of Cameron Parish Status: Positive decision from Maritime Administration
8 Monkey Island LNG
$6.5B | 200 jobs Location: Monkey Island Status: Not yet in FERC review process
15 South Louisiana Methanol $2.2B | 75 jobs Location: St. James Parish, across from Nucor Steel Mill Status: Pending
16 Commonwealth LNG
$2B | N/A Location: Cameron Parish Status: FID Q4 2020
17 Yuhuang Chemical
$1.8B | 400 jobs Location: St. James Parish Status: Phase I project completion in Q3 2020
9 Venture Global LNG Calcasieu Pass $5.8B | 130 jobs Location: Calcasieu Ship Channel Status: Commercial operations in 2022
18 Proman Big Lake Fuels
60 10/12 INDUSTRY REPORT • SPRING 2020
$1.6B | 243 jobs Location: Lake Charles Status: Restart Q2 or Q3 2020
RED RIVER
DESOTO
19 EuroChem amonia/urea plant
$1.5B | 200 jobs Location: St. John Parish Status: Pending
NATCHITOCHES
20 Port Cameron deepwater port
SABINE
$1.5B | 9,930 jobs Location: Calcasieu Ship Channel Status: Pending
21 Shintech Louisiana chlor alkali and vinyl choride monomer production facility
$1.49B | 120 Location: Plaquemine Status: Operations in early 2021
VERNON
22 Haynesville Global Access Pipeline
$1.4B | N/A Location: DeSoto Parish to Gillis Louisiana Status: Submit FERC permit application in 2020
23 Methanex Corp., Methanex 3
BEAUREGARD
$1.4B | 25 jobs Location: Geismar Status: Operations in second half of 2022
24 Wanhua Chemical Group $1.25 billion | 170 jobs Location: St. James Parish Status: Delayed
25 Shell Chemical Monoethylene Glycol plant
30
$1.2B | 23 jobs Location: Geismar Status: FID 2020
32
26 Diamond Green Diesel refinery expansion $1.1B | N/A Location: Norco Status: Online late 2021
27 Port of New Orleans
$1B | 6,000 jobs Location: New Orleans Status: Pending
1
CALCASIEU
33
22
4 10 18 11 2 3 9 16 20 7
CAMERON
8
28 ExxonMobil polypropylene expansion $500M-$1B | 65 jobs Location: Baton Rouge Status: Startup in 2021
BLUE = ADDED SINCE PREVIOUS EDITION 1012industryreport.com
J
UNION
NE
MOREHOUSE
WEST CARROLL EAST CARROLL
LINCOLN
29 Energy World USA
RICHLAND
OUACHITA
MADISON
SPONSORED BY
JACKSON
$400M | N/A Location: Plaquemine Status: Operations in early 2021
30 Entergy power plant + transmission interconnections
36 Valero Refinery alkylation expansion
31 Renewable Energy Group
37 Flopam
32 Southern Cross Transmission Project
38 Syngas Energy
33 Enable Midstream Partners Gulf Run Pipeline
39 Formosa Plastics PVC plant expansion
$872M | 30 jobs Location: Westlake Status: Operational in 2020
FRANKLIN
CALDWELL
35 Shintech ethylene expansion
$888M | 150 jobs Location: West of Belle Pass in Lafourche Parish Status: FERC pre-filing stage
TENSAS
$400M | N/A Location: St. Charles Status: Startup in 2020
$660M | 29 jobs Location: Geismar Status: N/A
WINN
$375M | 110 jobs Location: Plaquemine Status: N/A $350M | 100 jobs Location: St. James Parish, south of the Sunshine Bridge Status: N/A
$600M | N/A Location: South Louisiana Status: N/A
CATAHOULA LASALLE GRANT
$550M | N/A Location: Westlake Status: Projected in service by 2022
CONCORDIA
$332M | 15 jobs Location: Baton Rouge Status: Construction in 2020; operations by 2022
34 Westlake Chemicals expansion
$450M | 15 jobs Location: Geismar Status: Completion in 2023
RAPIDES
AVOYELLES WEST FELICIANA
WASHINGTON
EAST FELICIANA
ST. HELENA
EVANGELINE ALLEN
POINTE COUPEE
TANGIPAHOA
ST. LANDRY WEST BATON ROUGE
21 37 ACADIA
35
IBERVILLE
ST. TAMMANY LIVINGSTON
31 34 25 23 17 26 24 ION NS
LAFAYETTE
ST. MARTIN
28 39
CE AS
JEFFERSON DAVIS
EAST BATON ROUGE
15
IBERIA
ST. JAMES
38
ASSUMPTION VERMILION
ST. JOHN THE BAPTIST
5
ORLEANS
19
27
36 ST. CHARLES
JEFFERSON ST. BERNARD
ST. MARTIN
12
ST. MARY
6
LAFOURCHE
PLAQUEMINES
IBERIA
13 Sources: LED, LEO, 10/12 research
1012industryreport.com
TERREBONNE
29
14
10/12 INDUSTRY REPORT • SPRING 2020 61
CLOSING NOTES: MY TOUGHEST CHALLENGE
Bill Fenstermaker BY SAM BARNES
THE CHALLENGE In the Gulf South, nothing was quite so consequential as the bottoming out of the oil market in the mid-1980s. Oil prices plunged to below $10 a barrel, and the death knell sounded loudly for many energy companies. For those with all their eggs in one basket, it was a dismal time. It made for some hard decisions at Fenstermaker, as the firm had to prepare for the worst. The company had 30 employees at the time. “I would talk to my employees and say, ‘Look, if we have to take the next step, you might be on the chopping block,’” says current Chairman and CEO Bill Fenstermaker. “But we’re going to do the best we can to keep you employed.’”
62 10/12 INDUSTRY REPORT • SPRING 2020
POSITION: Chairman/CEO COMPANY: C.H. Fenstermaker & Associates Inc., Lafayette WHAT THEY DO: Engineering, survey/mapping and environmental firm offering a combination of services to a variety of markets and clients to complex contemporary challenges. Experienced in collaborating with many types of organizations and government agencies, the firm understands the requirements and goals of public work from procurement to project completion. CAREER: In 1971, Bill Fenstermaker joined the company his father founded, working summers on the field surveying the operations side of the business while attending college at the University of Louisiana at Lafayette. He later took over field operations, then ultimately moved into management roles. Today, as chairman and CEO, Fenstermaker works with the board of directors and the executive management team to provide strategic leadership for the company. In his position, and previously as president of the firm, Fenstermaker’s entrepreneurial talent transformed a small, regional company into a multi-disciplinary consulting firm. Active in numerous professional organizations, he is chairman of IBERIABANK Corp., and has served as chairman of the Greater Lafayette Chamber of Commerce and Lafayette General Medical Center.
THE TAKEAWAY The big “lesson learned” from the years and decades of ups and downs? Keep your clients and your people happy. “I think everybody wants to be happy, and we always strive for that,” Fenstermaker says. Happiness, however, is not achieved by telling people how great they are, but by creating a pathway to success.” When someone takes on a project, does a good job and makes a client happy, that makes them happy. A job well done is the key,
as well as helping those around you accomplish things.” That means giving employees the tools they need to do their job. The company excels in that regard. Fenstermaker points to a sizeable line item in his company’s budget for technology. “I would say that we are very innovative. We love technology here. If you don’t like to change, this might not be the company to work for.” In fact, the company has its own development shop, and has created patented software that assists oil and
gas companies in doing their jobs. Now at 300 employees, Fenstermaker realizes that “reasonable, sustainable” growth is critical for retaining employees and providing a pathway for advancement. Still, while somewhat counterintuitive, he says a successful business shouldn’t focus solely on making money. “Instead, I think about solving client problems,” he says. “If we can stay relevant and we can solve problems, then we’ll be fine. The rest will take care of itself.” 1012industryreport.com
TERRI FENSEL
THE RESOLUTION To make that happen, the company turned to geographic expansion. “We had to adjust during that time, traveling to different parts of the country and telling a lot of engineering firms that if you need help, we’re here to help you,” he adds. Fenstermaker’s purchase of a New Orleans firm proved fortuitous, as the acquisition eventually caught the eye of the U.S. Army Corps of Engineers’ New Orleans District. Ultimately, the Corps awarded them a sizeable contract to map the Atchafalaya Basin. It was a veritable lifeline. “We were very big into automated mapping at the time,” Fenstermaker says, “so we were able to keep most of our people busy.” Today, the company is better equipped to handle the energy market’s ups and downs—including the most recent downturn—thanks to its sheer size and diversified skill sets. Ironically, much of their current success sprang from those dark days in the 1980s. Nonetheless, Fenstermaker calls himself the “worrier in chief,” as he never takes tomorrow for granted. “I can’t think of a day that goes by that I don’t make sure that we can easily cover our payroll,” he says. “My job is to look to the future and make sure we’re prepared for it.”
Success of SEACOR AMH, LLC’s container-on-barge services at the Port leads to major expansion of container storage capacity. The public/private partnership between the Port of Greater Baton Rouge and SEACOR AMH, LLC continues to produce increases in the number of containers handled at the Inland Rivers Marine Terminal at the Port’s North Line Road facility. In 2017, SEACOR AMH handled 8,018 containers there. In 2018, that number increased to 13,685 and continued to rise in 2019 to 14,000 containers. Due to this increase in container movement, the Port has undertaken an expansion of the Inland Rivers Marine Terminal’s container storage yard. The expansion is estimated to cost approximately $4.5 million and will include 3.5 acres of concrete poured to expand the Port’s container storage capacity. Port Executive Director Jay Hardman said, “We are excited about the success of the COB service and the opportunity to expand our capacity. Every container that goes down the Mississippi River to New Orleans for export is one less 18-wheel truck on our roads and bridges.” For more information, contact Greg Johnson: 225-342-1660.
2425 Ernest Wilson Drive • P.O. Box 380 • Port Allen, LA 70767-0380 PH: (225) 342.1660 • FAX: (225) 342.1666 www.portgbr.com
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