Western PA Opportunities in the Petrochemical Industry
By: Robert Johnson, President of ADK, LLC.
On August 22nd, the Beaver County Chamber of Commerce along with the Ellwood City and Butler County Chambers hosted a program titled Doing Business in the ERA of Shell.
This program featured three presenters who discussed economic opportunities in the Petrochemical Industry across Western Pennsylvania.
Chet Mroz, former President and CEO of Yokogawa Corporation of America, kicked off the program by talking about digital transformation. Mr. Mroz talked in detail about digital transformation in a petrochemical facility including a description of plant functions. He discussed potential opportunities in additive manufacturing for testing or developing new products, advanced analytics for selecting materials, developing SMART products for chemical applications, offering data services to augment existing revenues and building new revenue models by forward integration into customer operations.
Mr. Mroz completed his presentation by reviewing needed workforce skills in this age of digital transformation. He emphasized the need for organizations and people to be agile in adapting to these many changes in the workplace.
Next on the program agenda was Sarita B. Scheufens, Sr. Vice President, Retail Market Manager for IBERIABANK in Southwest Louisiana. Sarita has more than twenty-five years of banking experience, and she discussed opportunities around major industrial investments like cracker plants.
Sarita presented a slide show heavy on demographic data concentrated on the current petrochemical industry in Louisiana. There are sixteen chemical plants, three gas/oil processors, two refineries and one LNG export facility in her Louisiana region. ALCOA, PPG, Conoco, GraybaR and CITGO are among the companies located there.
Louisiana is experiencing a significant increase of LNG Export terminals currently underway or announced. Venture Global, Sempra, Cheniere Energy, G2 LNG are among the companies developing these LNG export terminals.
Sasol has an Ethylene Cracker and Derivatives Project (Gas to liquid) currently underway. This facility will cost $11 billion to build, permanently employ five hundred twenty-eight workers, and three hundred fifty-eight contract workers with a fifty-eight-million-dollar annual payroll.
Sasol has dozens of suppliers creating a major supply chain. The Southwest Louisiana region is experiencing solid growth in non-farm employment, population, increasing property values, higher monthly taxable sales and higher sales tax revenue.
Sarita ended her presentation by highlighting some of the challenges moving forward around the petrochemical industry. She provided the audience with excellent data highlighting the many economic benefits of cracker facilities to a region.
R.B. Smith, Vice President of Business and Workforce Development for Southwest Louisiana, was the final speaker. Mr. Smith’s presentation focused on secondary business around cracker facilities, small business benefits and business networking. Bechtel is the Main Works Contractor (MWC) for the Shell project. Bechtel is the largest construction and civil engineering company headquartered in the United States. Mr. Smith emphasized the importance of sub-contractors demonstrating a comprehensive safety plan, a documented safety record and a specified score of less than one on their Experience Modification Rate (EMR).
Requirements for suppliers/vendors of goods and services are not as stringent, but there must be a demonstrated track record of doing business with the industry. This will be a challenge for some businesses. All local businesses must meet vendor qualifications.
Bechtel has a manual outlining their standards for all suppliers. What is needed for construction of a cracker facility? Small tools, safety supplies, janitorial services, medical and first aid, transportation services and trucking are among the needed goods and services. Other needs include environmental materials, landscaping, fencing, railroads, concrete, anchor bolts, paving, site preparation and civil work. Mr. Smith explained the need for pipes, valves and fittings as well as many forms of electrical equipment. Cable, paints, coatings, insulation, scaffolding, catering, office equipment and signs are needed.
To obtain contracts directly from Shell, vendors must comply with the Shell Supplier Qualification System (SQS) on-line publication. Opportunities exist for local contractors seeking to perform work on the construction site by forming a consortium of contractors or sub-contracting to an approved MWC subcontractor. Any local vendor, supplier or sub-contractor not working on the cracker construction site is required to follow procurement processes for their respective businesses.
According to Mr. Smith, small businesses with the largest potential for success must understand they are selling to the new people in the area created by the petrochemical industry. Smith is recommending small businesses be creative in marketing, particularly with millennials who use technology to purchase their goods and services, not a telephone directory or newspaper. Consider on-line shopping and home delivery. Mr. Smith encouraged the audience to form and utilize business-to-business networks. Training sessions for procurement from Bechtel and other major companies can be held thru business-to-business networks. Louisiana formed a Business Connections website for mega-project contractors to access when seeking local vendors for goods and services.
In his summary, Mr. Smith believes the local Chambers of Commerce should be the facilitator for business-to-business networking opportunities. Businesses must understand the needs associated with the petrochemical industry. Most importantly, understand the needs of new customers.
Overall, this was an excellent program and the three Local Chambers (Beaver, Ellwood City, and Butler) are to be commended for sponsoring this event.