HOUSTON -- The good news – that Texas is home to the country’s largest concentration of construction workers – is offset by the bad news: It won’t be nearly enough to handle the next round of LNG plant construction.
“The forecasted labor hours that we need are going to increase from about 105 million two years ago to about 184 million hours in 2016, a 77% increase across the Gulf Coast region,” said Jay Norcross, Houston-based senior vice president of LNG technology for Kiewit Energy Group Inc., at Hart Energy’s recent North American LNG Exports conference in Houston.
Research from IIR Energy shows a labor shortage in seven of eight Gulf Coast regions already, with a shortfall of between 21,000 and 25,000 in the Lake Charles, La., area alone as early as 2016.
Dominion Resources’ Cove Point LNG in Lusby, Md., is Kiewit’s flagship project. That import-to-export conversion is scheduled for completion in September 2017. Other projects that Omaha, Neb.-based Kiewit is handling include Jordan Cove LNG in Oregon, Lake Charles LNG in Louisiana and Kitimat LNG in British Columbia.
Norcross anticipates a tight labor market driving up costs.
“We expect that, if it’s as tight we expect it to be, we could have an all-out wage war,” he said. “We’ve seen this before – could be an owner, could be a contractor who is willing to pay a little bit extra either to attract or retain their people – and then we’re going to get into a bidding war across the Gulf Coast.”
Norcross cited research from IHS Chemical predicting that wages would increase by 5% to 7% through 2017, with pay for unskilled workers rising by 4% to 6%. Kiewit considers those projections to be conservative.
“Our recruiters have looked at supply and demand of skilled labor and we think it could hit 10% without a whole lot of trouble,” Norcross said. “We use 10% as our [planning] number.”
But the workforce dilemmas cannot simply be resolved by rounding up extra cash. Aging workers are retiring and taking their experience and job skills with them. Those that are still on the job tend to have families and are “not quite as nomadic as they used to be,” he said.
“Not only are we losing people, we’re losing a huge amount of inherent knowledge so it’s really incumbent upon the contracting community to make sure that we invest as much as we can in the new people that we’re bringing into the trades to try to get them up to speed on the learning curve as quickly as we can,” Norcross said.
Among the suggestions to mitigate the labor shortage that Norcross brought to the conference:
- Work with community colleges to develop training programs;
- Aggressively recruit outside the region, tapping into labor pools in other parts of the country; and
- Maximize and increase benefits, including health insurance, improved living arrangements, higher supplemental pay and paid time off.
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