US Annual Plant CAPX Construction Starts 2010 – 2015 (USD bn)
$109$147 $163
$140$185 $177
$0
$50
$100
$150
$200
2010 2011 2012 2013 2014 2015
USD
Billions
• Industrial CAPX Annual Project Starts value is up 62% from 2010. The number of projects being executed has almost doubled from 2010 – up 82.4% with 3,861 projects starting in 2015.
• Although oil prices have had an impact on the upstream markets, cheap gas is the primary driver behind today’s CAPX investments.
• In 2015, $177 bn in large CAPX project started construction representing a realization rate of 55%.
• The current wave of industrial CAPX investments is concentrated in the Energy & Chemical sectors
27%
28%8%
37%
Oil & Gas Midstream Power Chemical All Others
28%
20%14%
38%28%
29%10%
33%
2,117
2,5402,420
2,633
3,341 3,861
201563%
201462%
201367%
Midstream includes: Gas Processing, LNG Export and Micro Scale, GTL and NGL.All others include: Ind. Mfg., Food & Bev, Pulp & Paper, Pharma, Metals & Minerals
Historical Spending Trends
$25.69
$28.95
$16.22
$26.23
$35.68
$39.41
$74.34 $69.01
$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
$200
2010 2011 2012 2013 2014 2015
West Coast
Southwest
Southeast
Rocky Mountains
Northeast
New England
Midwest
Mid Atlantic
Great Lakes
Grand Total
Annual U.S. Industrial CAPX Construction Starts
• (1) Industrial CAPX construction has built up in the Southwest Region representing approximately 40% of the country’s investments in 2014 and 2015. The majority of the investments being made in Texas ($49bn in 2015) and Louisiana ($12.5bn in 2015).
• (2) 2012 was a pivotal year leading into labor shortages for the country. The execution of Nuclear projects at Summer & Votgle stations and the launch of Cheniere’s Sabine Pass LNG Trains 1 & 2.
USD
Billions
2
1
2
Historical Spending Trends
The U.S. mega‐projects are creating a wave of labor constraints. The US Gulf Coast region has gone from an average of (2) billion dollar projects per year to (10) billion dollar projects in 2014 and in 2015.
Annualized U.S. Labor Demand Hours for Industrial CAPX
47 48 53 59 6674
58 6472 72
80
92255
274
308 312
349
407
0
50
100
150
200
250
300
350
400
450
2010 2011 2012 2013 2014 2015
Millions OPERATOR
INSTRUMENTINSULATORPAINTINGSCAFFOLDINGELECTRICIANBOILERMAKERMILLWRIGHTIRONWORKERCARPENTERPIPEFITTERWELDERTotal
Historical Craft Labor Hours (CAPX)
© 2016, Industrial Info Resources, Inc., 2277 Plaza Drive Suite 300, Sugar Land, Texas 77479
Labor demand in 2016 will increase by 8% as mega‐projects reach peak construction over the next two years. IIR expects 2018 to 2020 to be lower demand years as current economics do not support the continuation of sector build outs occurring around the country.
59 6674 80 84
69
72
80
92104
82
55
312
349
407
440420
335
0
50
100
150
200
250
300
350
400
450
500
2013 2014 2015 2016 2017 2018
Millions
OPERATOR
INSTRUMENT
INSULATOR
PAINTING
SCAFFOLDING
ELECTRICIAN
BOILERMAKER
MILLWRIGHT
IRONWORKER
CARPENTER
PIPEFITTER
WELDER
Total
Forecast
U.S. Forecast for Labor Hours (CAPX)
$4.6$3.3
$1.8$2.9
$1.8 $1.5 $1.5$2.4
$3 $5
$16
$18 $21$20
$12 $9
$10.8 $10.7
$9.5
$8.3 $6.1$6.3
$5.5$7.1
$19 $20
$28
$30$29
$28
$19 $19
$0
$5
$10
$15
$20
$25
$30
$35
2013 2014 2015 2016 2017 2018 2019 2020
TIV
Billion
s
U.S.A.*04*Natural Gas Liquids
U.S.A.*04*LNG
U.S.A.*04*Crude Petroleum &Natural Gas
U.S.A.*03*N/G Pipelines
U.S.A.*02*Petroleum Storage
Grand Total
Midstream Production Breakdown
7
The Gulf Coast Region poses the highest threat of labor constraints than any other region of the country during 2016 and 2017. The challenges lie in Texas Zones of Houston and Corpus, & Lake Charles LA.
118mm to 192mm Hours 40mm to
118mm Hours
16mm to 40mm Hours
16mm to 40mm Hours
The graph above compares current industrial labor demand forecast to industrial craft labor supply. Supply and Demand statistics are based on twelve crafts that represents Electricians, Welders, Instrumentation Techs, Insulators, Iron Workers, Operators, Pipefitters, Scaffold Builders, Millwrights, Boilermakers, Carpenters and Painters.
2014 2015 2016 2017 2018 2019 2020Industrial Labor Demand (Union + Non‐Union) 67,278 90,332 91,587 95,189 94,683 71,695 65,978Industrial Labor Supply (Union + Non‐Union) 74,312 76,288 76,950 77,230 78,823 80,104 81,392Utilization Rate Upper Estimate (%) 100% 100% 100% 100% 100% 100% 91%REAL Utilization Rate (%) 97% 100% 100% 100% 100% 96% 87%Utilization Rate Lower Estimate (%) 93% 100% 100% 100% 100% 91% 83%
97% 100% 100% 100% 100%96%
87%
0%
20%
40%
60%
80%
100%
120%
‐
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
% Utilization
Peop
le
People Required ‐ Supply, Demand & Utilization (Union + Non‐Union)
USGC Labor Supply and Demand AssessmentAll Gulf Coast Zones
Utilization rates for craft labor, the coastal regions from Brownsville, Texas, to Lake Charles, Louisiana, will be in short supply over the next 5 to 7 years.
Those areas highlighted in red indicate labor shortages or tight situations where utilization rates exceed 75%. Quality of work starts to diminish at 75% utilization.
Travelers will migrate from northern Texas regions or from Mexico to satisfy demand in Brownsville and Corpus Christi, then from eastern coastal regions such as Baton Rouge, New Orleans and Lafayette, and possibly from Mississippi to populate the Lake Charles and Beaumont areas.
Low 0 ‐ 59%Medium 60 ‐ 74%High 75%+
Utilization Rates by Region and Year
Region 2015 2016 2017 2018 2019 2020LA‐01 Lafayette 21% 14% 18% 16% 15% 17%
LA‐02 Baton Rouge 72% 70% 79% 71% 66% 59%
LA‐03 New Orleans 66% 98% 85% 90% 72% 70%
LA‐06 Lake Charles 100% 100% 100% 100% 100% 100%
MS‐01 Pascagoula 64% 53% 54% 100% 100% 100%
MS‐02 Jackson 100% 62% 38% 48% 49% 55%
MS‐03 Greenville 84% 86% 76% 85% 83% 90%
TX‐04 Brownsville 79% 49% 100% 100% 100% 100%
TX‐05 Corpus Christi 100% 100% 100% 100% 100% 100%
TX‐07 Houston 100% 100% 100% 100% 84% 68%
TX‐10 Beaumont 100% 100% 100% 100% 100% 100%
USGC Labor Supply and Demand AssessmentAll Gulf Coast Zones
People Required ‐ Supply, Demand & Utilization (Union + Non‐Union)
PEC_ZONE Description = GULF COAST (LA-01 + LA-02 + LA-03 + LA-06 + MS-01 + MS-02 + MS-03 + TX-04 + TX-05 + TX-07 + TX-10)
CraftBoilermaker
2014 2015 2016 2017 2018 2019 2020
0
5,000
10,000
15,000
20,000
Carpenter
2014 2015 2016 2017 2018 2019 2020
Electrician
2014 2015 2016 2017 2018 2019 2020
20%
40%
60%
80%
100%
Instrumentation Tech
0
5,000
10,000
15,000
20,000
Insulator Ironworker
20%
40%
60%
80%
100%
Millwright
0
5,000
10,000
15,000
20,000
Operator Painter
20%
40%
60%
80%
100%
Plumber + Pipefitter
0
5,000
10,000
15,000
20,000
Scaffold Builder Welder
20%
40%
60%
80%
100%
2015 ended the year with a fallout rate of 50% of Total Investment Value (TIV). Fifty percent of what was proposed to start construction at the beginning of 2015, actually went to construction.
From 2014, IIR saw the 2015 labor demand growth rate increase by 32.14%. At peak, labor hour growth is expected to increase by 3.93% from 2016. (165.98 million hours in 2016 to 172.5 million hours in 2017).
Wage rate changes over a 12 month period, the average wage rose slightly at 1.1% across the Gulf Coast. The average base wage rate for Louisiana increased by 1.5%, while Mississippi rose by 0.6% and Texas rose by 1.1% .
11
1.5%
0.6%
1.1% 1.1%
0.0%0.2%0.4%0.6%0.8%1.0%1.2%1.4%1.6%1.8%
LA MS TX Gulf Coast Overall
Gulf Coast Zones– Percent Change 1Q2015 ‐ 1Q2016 Average Wage RatesNon‐Union Base Wages
USGC Labor Supply and Demand AssessmentAll Gulf Coast Zones
© 2016, Industrial Info Resources, Inc., 2277 Plaza Drive Suite 300, Sugar Land, Texas 77479
12
Mitigating Against Shortages and Wage Rate Inflation
Wage Enticements• Bonuses‐ Sign On and Job Completion• Incentives‐Milestone and Safety• Per Diem‐ 7 days, ½ the rate to locals and paying at an hourly rate.• Mentoring Pay‐ Offering extra pay to skilled craftsmen to train under skilled workers and helpers.
Shortage Mitigation• Improving job site experience‐ Better lunch and restroom accommodations, better parking and transportation to the job site
• Training‐ Classroom training on the job site, better crew mix for hands‐on training.• Recruiting‐ Increase recruiting centers that reach out to local high schools, college and military centers.
• Better coordination between the contractors‐ Understanding that the workforce is shared and it benefits everyone to keep the skilled labor working and have them mentoring less skilled personnel.
• Companies working with local and state agencies and colleges building training programs to meet
SPONSORED BYUSGC Labor Supply and Demand AssessmentAll Gulf Coast Zones
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