Fluor challenged by shortage of skilled labor amid US shale boom
By BEN KESLING
Fluor has been a prime beneficiary of the US shale oil and gas boom as the engineering and construction group starts to build out energy infrastructure, but like rivals, it faces the challenge of navigating one big possible bottleneck: the availability of skilled workers.
Big chemical companies plan an array of new and expanded facilities along the US Gulf Coast to handle the surge in gas and liquids supply, and Irving, Texas-based Fluor reckons its can use some "home-field advantage" to avoid its projects being delayed by the squeeze on craft labor such as electricians, welders and riggers.
"We've seen a lack of willingness on the craft part to travel more than one state away. I think we're going to see a change in that," Fluor CEO David Thomas Seaton said on an investor call last month. He also said he thinks craft labor could be a "pinch point" for new projects.
"So we're going to have to be careful about craft labor, but I don't see that being an Achilles' heel to the schedules people are thinking about or cancel in any way the projects we are focused on," he said.
The shale gas boom is touted by many economists as a transformative event for the US economy, generating an $88 billion in infrastructure spending over the next decade, according to Macquarie Group Ltd.
Fluor, which posted $27.6 billion in revenue last year, estimates the need for 20,000 to 50,000 craft workers for construction of US oil and gas projects over the next decade, depending on how many projects move forward.
The aging workforce of US engineers is a well-known issue for companies such as Boeing, but the shortage of craft workers is less publicized. Craft workers are two of the top 10 most difficult types of jobs for companies to fill, according to temporary hiring specialist Manpower Inc.
Fluor is the prime contractor for the new ethylene cracking plant being built for Dow Chemical in Freeport, Texas. The project is already underway and is expected to require 2,000 workers at its peak, with both companies counting on first-mover advantage to avoid being caught in a labor-shortage trap as rival plants seek regulatory approval.
Fluor is beginning the Dow cracker project ahead of a potential rush in petrochemical construction, said Richard Meserole, the company's vice president of energy and chemical construction.
He said this will help it attract workers and establish a beachhead with the supply of labor. Fluor also has a network of factories in the Philippines, Mexico and Canada that can allow it to build modular components off-site and then assemble them on site.
The company also works closely with local schools and governments to recruit and train local labor rather than trying to woo workers from around the US.
"Fluor, in particular, has a lot of initiatives set up with local junior colleges for apprenticeships and training programs," said Sameer Rathod, an analyst with Macquarie Bank. "Being a large player lends itself to attracting more people. Fluor is a name that everybody knows, maybe others don't have that."
Fluor had almost 36,000 salaried staff and 8,601 craft and hourly employees world-wide at the end of 2012. In North America, it employs 5,000.
"We have a fairly well-established network of technical colleges," Mr. Meserole said in an interview. "We take a large portion of those who come out of high school and see construction as a long career." Fluor lists more than a dozen universities on its website with which it shares official partnerships, including specialty training support and scholarships.
Crackers -- plants that break natural gas into its component parts -- are popular projects for contractors to chase because of the increase in gas volume available and the continuing low cost of domestic gas feedstock. Crackers are the first step in a long processing, storage and distribution chain, as well as further production of other gas derivatives, much of which remains to be built.
By establishing themselves early in the process, Fluor has said it will position itself for major contracts as projects ramp up further down the chain.
"Everything is sort of focused around crackers, of course, because you need to build crackers first before you can build downstream units," said Peter Oosterveer, president of Fluor's energy and chemicals group, at a recent investor conference.
"A lot of people get excited about the prospect of maybe as much as 10 crackers, which have been on our radar screen... I'm quite happy to say that I will be disappointed if we can't win or at least have a share on 50% of those crackers," he said.
Dow Jones Newswires