The petrochemical industry has billions in projects on tap, but not enough workers to build them

The petrochemical industry’s struggle to find enough welders, pipefitters and skilled laborers to build the billions in new projects slated for the Gulf Coast is a problem of its own making, the head of a construction education foundation said this week.

Craft laborers require years of training to become minimally qualified and up to a decade to acquire the skills that make them top performers, but the industry has failed to consistently invest in developing that workforce, said Don Whyte, president of NCEER, which develops curriculum and assessments for construction and maintenance workers.

“I’ve seen five or six downturns now and it seems like when we hit that downturn we think we can simply slow down or turn off that pipeline and then when the recovery hits, turn that pipeline back on,” he said. “What we’re seeing today in our current labor market is some of the results of trying to constantly turn the pipeline off and turn it back on.”

The industry must stop treating craft laborers as a commodity, said Whyte said in a webinar this week addressing the challenges associated with building multi-billion petrochemical projects on the Gulf Coast.

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After years of stagnation, U.S. petrochemical plants are revving up again and expanding as they scramble to take advantage of the vast supplies of cheap gas unleashed by the shale boom.

At the epicenter of the building spree is the Texas Gulf Coast, where major companies including Chevron Phillips Chemical, LyondellBasell and Exxon Mobil Chemical are spending billions on new ethylene crackers, propylene production units and other expansion projects.

In Freeport, Dow Chemical is investing billions to build a new ethylene cracker and new propane dehydrogenation unit, construction projects that are expected to require thousands of construction workers.

“I remember leaders in Dow saying, ‘We’re never going to be building another cracker on the Gulf Coast,'” Jeff Patterson, who oversees site engineering groups at various manufacturing sites for Dow Chemical, said in the webinar. “That whole dynamic has changed.”

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But because it has been years since petrochemical companies invested in the United States, the recent flurry of activity caught companies flatfooted, struggling to figure out how to manage the massive new projects and find enough workers to complete the construction.

“A lot of these owner companies have not done major projects in quite a while and they really have lost that capability,” said Manuel Junco, vice president of Houston operations for Jacobs Engineering, said in the webinar. “They struggle significantly to get projects off the ground and properly set up and doing even just the basic things you need to do for a project.”

Some companies, including Dow, have looked for project management expertise from workers outside the United States, bringing in international people who previously worked on mega projects overseas, Patterson said.

“If you come to Freeport and listen to some of the Dow leadership, you hear a lot of Dutch spoken,” he said.

But when it comes to hiring craft workers who will actually build the project, the competition is fierce in the United States. Companies are hiking wages and sweetening benefits packages to lure welders, pipefitters and other skilled laborers, which can lead to more expensive projects and high turnover as workers jump from project to project chasing a higher pay, Whyte said.

The same situation played out during the recoveries from Hurricanes Rita and Karina in 2005, when demand for skilled laborers exceeded supply and some projects saw 600 percent turnover, Whyte said.

“I actually think this future market is going to be worse than that one,” he said. “The one good news in that highly competitive market is when the wages go up, typically what we see is our recruiting greatly improves. So if there is a silver lining, that’s a silver lining on a competitive market.”