Is The Natural Gas Boom A Jobs Creating Engine?

January 2013, Vol. 240 No. 1

Richard Nemec, Contributing Editor

When Nick Stavropoulos, executive vice president in charge of natural gas operations at San Francisco-based Pacific Gas and Electric Co. (PG&E) looks back on his 33 years in the industry that have spanned the country, he remembers all the oil burned in homes and businesses throughout the Northeast where he grew up.

From those earlier years to more recently there was no way Stavropoulos could envision the natural gas boom that has broken out nationally and most particularly in his home region.

And for sure, he told a reporter in a recent interview, there is certainly no way he could see the natural gas industry as a potential economic engine, a job creator in these economically challenging times.

“These are American jobs that we’re creating,” said Stavropoulos, outlining the gas bandwagon that is growing more crowded by the day with business and political leaders alike. “It is just so great to see that all this is happening here; not in some oilfield in some unstable country in another part of the world.”

For industry and government officials alike it is axiomatic today when announcing any new energy capital project to quote the number of new jobs such construction will generate during the building and permanently, and the sorts of tax and general revenues the assets will produce for local communities.

A privately held new oilfield services company, Fairfield, TX-based Green Energy Oilfield Services LLC, announced last summer it was opening new maintenance facilities and offices in the Freestone Trend area in central-northeast Texas for its 60 liquefied natural gas-powered trucks that collect, haul and dispose of 50,000 bpd of wastewater for XTO Energy’s 3,500 gas wells in the sprawling basin. As part of the announcement, Green Energy’s COO Roger Nevill touted the project’s economic multipliers of 150 new jobs and $24 million in new revenues generated locally around the gas play.

Such is the state of today’s socio-economic landscape that when Congress addressed energy in proposed legislation last year, the bill was christened the “Domestic Energy and Jobs Act” (HR 4480), and the National Association of Manufacturers (NAM) whose members use about a third of the energy consumed in the U.S., were firmly backing the measure for the prospects it carried for lowering industrial energy bills, boosting the production of more domestic goods and services, and creating more jobs along the way.

More affordable domestic oil/gas production means a growing economy, which will produce more jobs, said NAM’s Aric Newhouse, a senior vice president for policy and government relations, in a letter last summer supporting the proposed federal legislation.

Backing up NAM’s contention were reports from various parts of the nation where manufacturing is perking up again. In places like Louisiana there is a quiet boom mentality to the momentum that low-priced natural gas seems to be building.

In June, MECO Inc. President George Gsell, with Gov. Bobby Jindal at his side, announced a new fabrication and office facility in Mandeville creating 127 new direct jobs, retaining 81 existing jobs and resulting in 158 new indirect jobs. This is music to the governor’s ears and cash in the pockets of American workers.

In the meantime, PG&E’s senior executives and other companies have been bending ears on Capitol Hill in Washington, DC regarding the need for training and skill development programs for pipeline welders and pipeline workers.

“These are great jobs, and we need to get the right federal agencies involved so the Departments of Energy, Transportation and Labor are working together with the unions nationally that represent workers in this space and develop comprehensive sets of training/development programs,” Stavropoulos said. “This is going to be a fantastic employment opportunity.

“These are jobs requiring skilled workers. You are talking about all sorts of sophisticated heavy equipment – backhoes, cranes and others. You need to have experienced people that know what they are doing.

“It is not only going to be the gas industry that needs to create more pipeline infrastructure; we’re also going to be replacing aging pipe, building new pipelines, and also we’re seeing announcements from the chemical industry to build new plants that use natural gas as a feedstock for the products they are going to produce.”

Stavropoulos said more cohesive work needs to be done nationally to fully respond to the opportunities presented by the shale boom. “We need as an industry to figure out how to work more effectively with our government.”

Another sign of the domestic energy supply boom’s economic-multiplier effect is found in global conglomerates such as Honeywell International Inc., which recently created an entire new business unit focused on what it called “natural gas as the world’s fastest-growing fossil fuel.”

Worldwide annual consumption was projected at the160 Tcf level for 2035 as part of Honeywell’s strategic outlook.

Obviously, companies like Honeywell are seeing new products and new markets being spawned by the sudden plentiful energy supplies in North America.

Honeywell’s new natural gas/hydrogen business unit was created to provide solutions for the industrial uses of natural gas liquids and hydrogen, according Rajeev Gautam, president/CEO of Honeywell’s UOP LLC, the company in which the new energy-driven unit is operating. UOP, based in the Chicago suburb of Des Plaines, IL, is a global supplier and licensor of process technology, catalysts, adsorbents, process plants, along with consulting services to the petroleum refining, petrochemical and gas processing industries, which are all centers of job growth in North America these days.

“UOP has been working with the natural gas industry for more than 50 years, providing a range of gas purification technologies and products,” Gautam said. He sees the new business unit “deepening” this long-term commitment to many existing gas and hydrogen customers, but also identifying what he called “new opportunities to help address the growth in global demand.”

Different segments of the energy sector have been the subject of jobs studies, particularly since the recession and the national stimulus program passed by Congress in 2009 that included funding for renewables and other energy segments. Early in 2012 the Interstate Natural Gas Association of America (INGAA) released a comprehensive look at the midstream segment including the interstate gas pipelines. Shale-focused producers, such as the ANGA, have contributed more to the body of work, and government agencies like the California Energy Commission (CEC) have looked at parts of the alternative energy sector.

The mosaic can be confusing, but a common thread is that with or without a recession re-emerging, one of the best hopes for the U.S. economy to finally rebound can be found in the prospects for the broad domestic energy space. And, in turn, energy-dependent industries are following suit. That same optimism cannot be found in the housing or service sectors.

A Washington, DC-based spokesperson for INGAA said its report, “Jobs & Economic Benefits of Midstream Infrastructure Development: U.S. Economic Benefits Through 2035,” has been received “quite favorably” during the first half of 2012 – particularly when viewed in context of other studies looking at the impact of shale gas on the economy.

“Our study looked at midstream jobs only,” says INGAA’s Catherine Landry. “As a whole, the studies show that energy development – oil, gas and liquids – represent a bright spot in our economy and they have the potential to play an even bigger role.”

Tougher to predict now is the future for so-called “green” or clean tech jobs tied to various alternative energy sources. While the Obama administration put a large part of the 2009 stimulus funding in play in the renewable energy or clean/green energy space, high hopes have given way to more sobering numbers, but various sources see this segment of the overall energy field continuing to grow. The estimates for how many future jobs this will equate to can vary widely.

In California, a CEC environmental economist in the agency’s alternative fuels division, Pierre duVair, told a workshop last spring that energy-related job-years created in California out to 2020 could total anywhere from 483,000-770,000 job-years (a new job that lasts at least one year). Another researcher from the University of California, Berkeley, Carol Zabin, came up with maybe 200,000 added jobs from clean energy through 2020.

In a macro-economic context, the recent boom in oil/gas-related jobs and the projections for much more to come are still relatively small when adding up activity in all of the nonfarm labor markets. The U.S. Bureau of Labor Statistics (BLS) employment outlook through 2020 reflects this fact. In January 2012, U.S. jobs were expected to rise by 20.5 million in the period of 2010 to 2020 – from about 143 million to 163.5 million. During that same period, what the BLS identifies as the oil/gas extraction industry will account for 23,200 new jobs, rising to 182,000 in 2020.

A BLS economist and author of the forecast, Richard Henderson, noted that real output for oil and gas over the decade would increase by $9 billion or 0.4% annually. On the surface, this is not staggering growth, but Henderson goes on to cite shale’s potential.

“Further increases in shale gas production, in which the new technologies of horizontal drilling and hydraulic fracturing make production more economical, are expected over the next decade,” while noting that increased energy demand should spur more E&P activity, but stiffer environmental regulations could slow that growth a bit.

In an assessment of the oil/gas industry rebound in New Mexico released in late June 2012, the independent, nonprofit consulting firm Headwaters Economics noted that even with strong recent performance from oil operators in the state, the oil/gas sector’s share of New Mexico’s employment is 1%, compared to health care services (11%), for example. Green jobs, on the other hand, represented 2.1% of the state’s employment in 2010.

A bottom-line consideration for the energy sector to keep in mind, even among its own bullish growth projections, is the fact that BLS and others have projected that employment in the goods-producing part of the economy is expected to grow. But that will mostly be making up for some severe employment cutbacks experienced over the past 10 years.

“The loss of manufacturing jobs also will slow, compared with the previous decade’s loss of jobs in the same sector,” Henderson said. Eventually, that equates to good news for the energy space and particularly the pipeline systems carrying more domestic fuel to newly growing markets.

Richard Nemec is West Coast Correspondent for P&GJ and can be reached at

Sasol Investment In Gas Processing Expected To Create Thousands Of U.S. Jobs

On Dec. 3, 2012, Louisiana Gov. Bobby Jindal and Sasol Ltd. CEO David Constable announced that Sasol plans to invest up to US$21 billion in an integrated gas-to-liquids and ethane cracker complex in the town of Westlake that is expected to create 1,253 direct jobs paying an average salary, at full employment, of nearly $88,000, plus benefits, and resulting in an additional 5,886 new, indirect jobs, for a total of more than 7,000 direct and indirect jobs. Sasol also will retain 435 existing direct jobs in Westlake as a result of the project.

Sasol’s board recently approved proceeding with front-end engineering and design (FEED) for the project, following successful feasibility studies.

Including direct and indirect effects, the Sasol project will produce a total economic impact over the next 20 years of $46.2 billion, according to an economic impact study by the LSU Division of Economic Development. The project is also expected to create roughly 7,000 construction jobs.

According to a division of The Financial Times Ltd., Sasol’s facility will be one of the largest foreign direct investment manufacturing projects in the history of the U.S. Once the project is completed, the facility also will become the largest economic driver in southwest Louisiana, and Sasol will become one of the top 10 economic-driver companies in Louisiana.

According to Dr. Loren Scott, Professor Emeritus of Economics at LSU, Sasol’s planned facility will be the largest single manufacturing investment in Louisiana history.

Jindal said, “Today is a great day for Westlake, Calcasieu Parish and our entire state. Today’s announcement is not only one of the most exciting announcements in the history of southwest Louisiana, but one of the most significant economic development wins our state – and our nation – has ever recorded. Sasol is one of many energy companies that is expanding in Louisiana because of our world class energy infrastructure, strong business climate, and incomparable workforce.

The GTL facility, the first of its kind in the U.S., will produce high-quality transportation fuels, including GTL diesel, as well as other value-adding chemical products.

The project will consist of an integrated, 96,000-bpd GTL facility representing a capital investment of between $11-14 billion, as well as an ethane cracker representing a capital investment of $5-7 billion. The GTL project will be delivered in a phased approach, with phase one delivering the first 48,000 bbd and phase two delivering the remaining production capacity. The ethane cracker will produce 1.5 million tons per annum Mtpa of ethylene, one of the chemical industry’s key buildings blocks for alcohol- and plastics-based products, including solvents, surfactants and polymers.

Based in Johannesburg, South Africa, Sasol has been an innovator in coals-to-liquids and gas-to-liquids processes since the 1950s. Through its Sasol North America Inc. subsidiary, the company supports more than 550 existing direct and contract jobs at its Westlake Chemical Complex, where Sasol is completing a $175 million capital investment to build the world’s first ethylene tetramerization unit.

To secure the project, Louisiana offered Sasol a custom incentive package that includes a performance-based grant of $115 million for land acquisition and infrastructure costs associated with the facility. Sasol also will receive the services of LED FastStart™, the nation’s No. 1 state workforce training program. In addition, the company will qualify for Louisiana’s new Competitive Projects Payroll Incentive (up to 15% payroll rebate for each GTL job) and Quality Jobs Program (up to 6% payroll rebate for each ethane cracker job).

To support the project’s workforce needs during construction and operations, the state will be investing $20 million for a new training facility and associated equipment focused on industrial technology at SOWELA Technical Community College in Lake Charles. Finally, Sasol is expected to utilize the Industrial Tax Exemption Program for both the GTL and the ethylene facilities.

The new training center initially will focus primarily on meeting the training needs of Sasol; once Sasol’s initial needs have been met, the facility will serve the broader needs of growing manufacturers throughout the region.

Hiring for the GTL and ethane cracker facilities will begin in 2014. Operations of the first plant are expected to start in 2017, with full employment reached within two years after commercial operations begin.

M3 Midstream, a Houston-based company, is building a $ billion natural gas processing plant in eastern Ohio in partnership with Chesapeake Energy and Texas-based EV Energy Partners. This is the first of several large gas processing plants being considered in eastern Ohio which is the heart of the burgeoning Utica Shale play.
“We believe we are in the heart of the rich gas area,” said Les Smith, an engineer and vice president of business development with M3 Midstream. The plant in Kensington will be connected through a 24-inch pipeline to a sister plant about 40 miles south in Leesville in Harrison County. The two plants will be able to process 800 MMcf/d.

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