THE Houston (Texas) Port Region features explosive growth that is being driven by the oil-and-gas sector, but also faces issues related to the regulatory environment and workforce shortages.
Two speakers addressed the latest developments and opportunities at the Port of Houston during the 2014 Intermodal Bulk Liquid Symposium, held October 23 in Kemah, Texas. This was the sixth year for the symposium, which was arranged by the Intermodal Tank Container Association.
“It’s a unique time,” said Chad Burke, president/CEO of Economic Alliance. “It’s a once-in-a-lifetime time here in the Houston Ship Channel and all of Texas. We have a great opportunity and great prosperity, and we also have challenges. The political environment keeps us always on our toes to make sure we continue to operate safely, but also efficiently without slowing down the progress. We also have to chip in and solve the problem of the workforce.”
In his presentation, “Economy and Intermodal Growth for the Second-Largest Port,” Burke said Houston had the fourth-largest US metro economy in 2012, with gross domestic product (GDP) of $449 billion, trailing New York, Los Angeles and Chicago. And it had the second-fastest-growing economy, with a 5.3% change in GDP between 2011 and 2012, trailing only San Francisco’s 7.4%.
“Obviously, things are going well here, as opposed to different parts of the country,” he said. “There are a lot of great things going on. Houston leads Texas in job creation, and Texas leads the nation, which is largely because of the oil-and-gas industry and manufacturing, and the downstream side of that business, which is centered in the Houston Ship Channel area.”
He said US shale gas is abundant, and the basins are really what’s driving our economy in the downstream manufacturing side of the business. Natural gas is now at $3.85/MMBtu in the United States, while Europe is at $11.37 and Asia is at $15.65.
“The good news is that the Gulf Coast sits in the middle of the largest petrochemical complex in America and the second-largest in the world,” he said. “I’ve heard people say that once we finish the plant expansions that are currently underway, we will rival the largest in the world.”
He said technology unlocks natural gas supplies, and natural gas will be the fastest-growing major fuel through 2040, with demand rising by more than 60%.
There are 188 shale gas production projects underway domestically in 2014, with a capital investment of $116.9 billion (up from 97 projects and $71.7 billion in 2013), and 62% is foreign direct investment. The US is now the leading global producer of natural gas liquids (ethane, propane, and butane).
Along the Houston Ship Channel, the projected investment for the three years ending in 2015 was $35 billion, with 111,700 construction jobs and 154,100 induced and indirect jobs, and $12.3 billion in labor.
But it’s not all good news.
“Any time we talk about prosperity and growth that’s happening, I want to point out potential concerns in our little slice of heaven here,” he said. “You’re always concerned about the regulatory environment: Can you get your permits in a timely fashion? Does it take a year to get that environmental permit for that $6 billion project, and what does that cost translate to?
“The second major concern: Do we have enough skilled craftsmen and people within our reach to be able to not only construct but eventually operate and maintain these facilities? That trickles down from owner-operators and contractors into the transportation and logistics industry that moves those products in and out of the port. The short answer is that we do not have enough skilled workforce, whether it’s truck drivers or welders or mechanics or process technicians or instrumentation techs.”
He said there are 31 active sales projects in 2014, which would equate to 900 jobs and $3.7 billion in capital investment. Five have chosen to expand here, which accounts for 230 jobs and $1.72 billion in capital investment.
“These numbers are staggering,” he said. “This will be the fourth year in a row that projects we’ve worked on that have been announced will be over $1 billion. This is a tenfold acceleration of capital investment in this region over the last four years. Total nonfarm payroll for 2005-2015 in the Houston metro area is 407,300 jobs created since the peak of the recession.”
But a concern over the ability to supply that demand with a workforce that’s trained and ready has caused the Economic Alliance to form the Workforce Development Committee. It involves 11 school districts, Lee and San Jacinto community colleges, and member companies interested in improving the supply of skilled workforce.
The objectives:
• Regional coordination of programs and stakeholders.
• Creating a marketing program for students, teachers, counselors and parents to expose career paths, jobs, and opportunities to all.
“This is where the rubber meets road for us in terms of making a difference,” he said. “We talk to any group that has an interest in improving or being trained to improve their lot in life. We’re working primarily with high school students. We’ve made 26 presentations throughout the region since January to school districts and community groups.”
• Inventory of jobs/careers available and qualifications and requirements for employability.
Petrochemicals vs refining
Bill Diehl, president of the Greater Houston Port Bureau, pointed to the methane, propane, and butane that are coming out of the shale play wells along with crude oil. He delivered a regional ports forecast.
“Everyone wants the ethane here because that’s the real expansion and where things are going crazy, because they can turn it into ethylene,” he said, “and then ethylene margins are so great that they’re going to make a fortune off it as soon as they can get it to market. So the chase is on, and the question is can you get to the market before anyone else?”
There is over $100 billion in planned US petrochemical investment over the next four years, with most of it involving the Houston Ship Channel and surrounding areas.
“We can’t go back to companies and ask how many ships they’re bringing to port, because they will give us an inflated number,” Diehl said. “We said, ‘Let’s figure out what the actual market will be and then we can figure out the ships needed.’
“We asked the Department of Energy and Department of Commerce what their global forecast is for fuel. Then we backed it down into the Port of Houston to figure out what our forecast would be.”
He said that in US waterborne foreign trade, US exports have increased four straight years in metric tons, and it won’t be long before the United States is exporting more than it’s importing. And the outlook is identical for Houston.
He said US domestic oil production is increasing and foreign crude oil imports are decreasing commensurately.
“There’s an infrastructure imbalance—an oversupply in the mid-continent—perhaps migrating to the upper Texas Gulf Coast as various pipelines have reversed direction: Seaway–Cushing, Oklahoma, to Houston and Pegasus–Patoka, Illinois to Nederland, and the completion of the terminal leg of Keystone from Cushing, Oklahoma, into Beaumont-Port Arthur, with eventually a spur into Houston under construction,” he said. “In addition, the HO-HO (Houma to Houston) has been reversed and is now HO-HO–Houston to Houma to carry Eagle Ford, Bakken, and West Texas crude oils east to the Louisiana refining area.”
He said ship numbers are only going to increase by 1-2% a year, and not by 10%, as some think.
“The faster we grow, the faster they’ll grow into bigger ships,” he said. “We’re actually going to grow cargo-wise faster. But when you’re moving 11,000 ships a year, that’s 100-200 ships extra a year. That’s significant for a port to plan for. We have work to do to figure out how to do that, congestion-wise.”
He said that by type, gas carriers are experiencing the largest percentage gain in arrivals because of the increase in propane shipments out of US ports. Between 2011 and 2018, that number will more than double.
Although container ship numbers look flat, he said that over one-third of containers leaving are filled with plastic resins, and that is going to keep accelerating. Ship numbers may not increase, but ship sizes will.
“At the Port of Houston, our container terminals have a depth of 40 feet in those two slips,” he said. “The ships are three feet deeper going out than coming in because they’re loaded with plastic. They are getting close to bottom. They are digging out to 45 feet, and then container companies will go to bigger ships that are wider and deeper.” ♦