The list of megaprojects breaking ground in the industrial corridor running between Baton Rouge and New Orleans is long and getting longer. While the tsunami-sized wave of investment—currently pegged at some $7.5 billion—will bring unprecedented economic benefits, it also raises significant questions about the region’s ability to provide the manpower needed to build them.
“What we’re seeing is so weird and off the charts that it has changed how we look at projects,” says Loren C. Scott, an economist in Baton Rouge. “Now we think that $1 billion is not that much.” Much of the work will likely hit the area in late 2019 and early 2020, with projects by Yuhang Chemical, ExxonMobil, Formosa, Shintech, Valero, Diamond Green Diesel and others expected to overlap.
Why is it happening now? Scott puts it succinctly: “cheap and abundant natural gas.” Most of the plants will use the product for fuel or as a raw material. “They’re coming to the place that’s got the cheapest natural gas in the world,” he says. “That’s driving most of the big ones, especially between Baton Rouge and New Orleans.” Much of that cheap supply is coming out of the Permian Basin and other shale plays, where the cost of natural gas in the past 12 months has been incredibly low and is expected to remain that way.
That’s undoubtedly the reason for the proliferation of Liquefied Natural Gas facilities in the state, which accounts for $77 billion in potential investment. Scott says a handful of LNG projects in the Lake Charles area will pull additional manpower from the Baton Rouge region as those facilities break ground later this year. Several of the projects have been accelerated thanks to a streamlined Federal Energy Regulatory Commission approval process.
The impact of methanol projects can’t be ignored either. “China is getting strong pressure to switch over to some form of fuel other than coal,” says Scott. “One of those is methanol.” That has led to an explosion of $1 billion-plus projects in St. James Parish, including a $1.85 billion investment by Yuhang Chemical, $1.25 billion by Wanhua Chemical, $2.2 billion by South Louisiana Methanol and $3.6 billion by IGP Methanol.
A current lull in industrial construction is merely the calm before the storm, says Lee Jenkins, vice president at Performance Contractors in Baton Rouge. He expects the bulk of the work to hit later this year, and if all projects come to fruition—as most expect—it will put a strain on the state’s industrial construction sector.
“While we have a strong resident workforce in this area, additional manpower from outside the area will be needed to supplement local manpower,” Jenkins says.
By comparison, southeast Texas faced a similar confluence of industrial work in the past five years, causing manpower woes there despite its proximity to Houston. “Even a market the size of Houston couldn’t support having those three projects (ExxonMobil, Enterprise, ChevronPhillips Chemical) within about five miles of each other,” Jenkins says.
“They’re coming to the place that’s got the cheapest natural gas in the world. That’s driving most of the big ones, especially between Baton Rouge and New Orleans.”
LOREN C. SCOTT, economist, Loren C. Scott & Associates
David Helveston, president and CEO of Associated Builders and Contractors Pelican Chapter in Baton Rouge, says as many as 8,000 construction workers could be needed for the St. James projects. The parish’s total population is only about 21,000.
“Our members say we need to fill up every classroom and every lab, and if that means running at a deficit for the next year, run at a deficit, because the work’s coming,” Helveston says. “They’re putting heavy pressure on us to ramp up our educational programs. They see the wave coming from Baton Rouge to New Orleans over the next couple of years and they’re feeling that workforce pressure.”
In fact, the contractor group is running out of training space, and plans to strengthen its partnership with Louisiana’s Community and Technical Colleges system for additional classrooms and training opportunities. ABC-Pelican also runs daytime educational programs with area high schools, including a mid-afternoon welding program, as it has “maxed out” traditional evening training slots.
To gauge future needs, the association gets input from its Education and Manpower Committee, then ramps up or scales down course offerings based upon member feedback. “Obviously, they’re going to be pulling from a broad area and they’re going to need a lot of trained workers out there,” he adds. At present, nearly 3,000 are trained annually at Pelican Chapter facilities in Baton Rouge and Lake Charles. Between the two facilities, ABC employs more than 100 instructors.
Since St. James lies squarely between Baton Rouge and New Orleans, the Pelican Chapter is also collaborating with ABC-Bayou Chapter in New Orleans to augment training and create a bigger pool of workers.
In particular, Helveston is seeing a significant demand spike for pipefitters. “Our members are putting a lot of pressure on us to get down into the high school level to encourage students to think about pipefitting,” he says. “Welding is the sexy thing in the area right now, but in the industrial field there’s a one-for-one need for pipefitters to welders.” He credits the Louisiana Department of Education’s Jump Start program for incentivizing high schools to offer meaningful career pathways.
Jenkins says Performance monitors market potential to determine its workforce needs, then focuses on what it feels are the more attractive projects based upon the client, project type, schedule, contractual structure and current strategy. “We look at what makes the most sense for us from a timing standpoint to manage our resources most effectively,” Jenkins says. “After all, no one contractor is going to go do all this work.”
Performance is “training like crazy” through ABC, while also working internally through its Training and Evaluation Department. “A major part of what we do is evaluation,” he adds. “We have hands-on evaluators that are part of the hiring process that allow us to identify what we feel like is the true skill level of a craftsperson.”
Looking ahead, Performance hopes to fill a majority its manpower needs from Louisiana. Nonetheless, the contractor has a large pool of workers to pull from, as its projects have spanned from California to Florida over the last 10 years.
The contractor employs an average of 8,000 craft employees and performs about 16 million man hours of work per year. “We’re excited about the potential of having some significant long-term projects right here in our backyard,” Jenkins says.