11-11-13 Meeting of the La Porte Development Corporation Board of Directors

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Heat treattirent strengthens the pipe to handle harsh drilling conditions. Finishing involves threading the ends or attaching custom connectors for special appliCatiODS, "The surge in horiZODtal drilling and hydraulic fracking has really increased the need for higher perforniance downhole pipe," says Bill McWhorter, vice president of operations for OCTG Tubular Finishing. "When we drilled vertical holes, gravity worked fine to help us drop Well casing in place. But with horizontal wells, a joint Of easing May have to be pushed a mile or more. That's intro- duced a whole new level of stress on today's pipe." "There is a global land rush to be right here if you're in the downhole pipe business," says OCTG Tubular's owner David Siverling. "This is the spot on the planer on the cutting edge of downhole pipe technology." Workforce Challenges The upswing in economic activity has increased the de- rnand for skilled workers in the area, Many companies are forced to lure talent away from each other or train new people in-house. "It will take us four to six months to train an operator," says Meredith Zauflik of Oxiterro. "We want to retain our talent and avoid retraining as much as possible by offering a great work environment. What we don't want to be is some other company's training ground." "Unfortunately, Ailierica has a inissing generation in the skilled labor pool," says Me- Whcater . "We've been forced to bring in older talent,, some of them retired, to get by until The dISCOR younger folks call be trained to fill the void. I spend a lot of and the resulti,t irry time recitriting, and I can tell you that finding good labor is a real problem.." natural gas pi With its perception as A, blue-collar area, the cast side changed the g1c of Harris County has not tra- ditionally been a. place young people arc drawn to. "These the petrochev are not sexy jolts, " says Ohl- niansiek. "But they pay quite well And, with the shortages, there is a lot of opportunity to move Lip the ladder quickly." The bulk of new -hires picked up by the major industrial employers will have two years in a trade school or the equiva- lent in on-the-job experience. Sort Jacinto College (SIC) offers a number of technical training programs, However, SJ'C reports that compairies that overprojected labor needs in the last down- turn remain hesitant to communicate their exact staffing needs. Conflicts of Interest Over LNG A big unknown in the petrochemical and manufacturing sec_ tors is how large the effect of exporting Us. liquefled natural gas (LNG) to other countries would be on the domestic price Of natural gas. The concern is that out Advantage of cheap fuel and feedstocks for local industrial uses could disappear if the price of gas increased too much. Currently, only one LNG export facility, Cbeiiiere Energy's Sabine Pass location, has completed the Federal Energy Regula- tory Commissions jFERC) authorization process And obtained signed long-term contracts frons global buyers. The facility's first two stages, under construction since last August, will have an export capability of about 2.6 billion cubic feet (BCF) Icer day. Natural gas production in the lower 48 states averages About 65 BCF per day, Twenty-five Applications for permission to construct LNG export facilities have: been filed as of March 2013, According to an April 2013 report by the Congressional Research Service. Energy analysts believe it is highly Unlikely that all 25 projects will be built. Chenicre Energy's CEO, Charif Souki, has described the 25 export applications as "20 ideas Arid four or five true projects," if all 25 projects were to be constructed, they would represent a total export capacity of 29.7 BCF per day according to the congressional report. Proponents of natural gas as a transportation file] Argue that it rnakes no sense: to export our clean doniestic natural gas while continuing to import dirty crude oil. Most companies involved in U.S. petrochemical and manufacturing agree. Alternatively, exploration companies argue that exporting LNG could help bring the price back to a level sufficient to en- courage drilling for natural gas Again, drought to be somewhere around five dollars per MCF. Interest in drilling for natural gas declined significantly in the last year due to a steep drop in price. Tire U.S. natural gas rig count fell from more than 800 in. 2012 to less than 400 today, a level not reported since 1999. The decision rega rdi ng how much U.S. LNG to export 'y of shale gas will ultimately be decided by politicians. However, IFIS Global Insight reports that g dro.p in U. S. the I.J.S. petrochemical sector is ramping up to spend $95 ces has tota Ily billion fox, plant expansions and new projects. This would indicate that they believe the )al dynamics of" eventual natural gas price increase will be manageable. ical Indus try. over the next 15 to 20 years. These expansions also will immediately create construe - tion jobs and increase full- tirric emi)loyment as well. Marie McDermott, vice president of business development for the EAFIPR, agrees, "In 2012 we had six major specialty chemical or manufacturing companies commit to spend store thin $1.5 billion in our area for new capital investment. That makes us pretty, optimistic about the filtUTC of our industrial sector", -P* Dr. Htinr(hhunt@tamu.edu) is a research ecommist udth rhe Real Estate Colter at']'�=s A&M (,Aniversft� Y, The U.S. petrochemical industry is benefiting from cheap And plentiful natural gas feedstock that allows it to corn- pete with countries that derive their feedstock from crude oil. Indications are that the boom created by low-cost natil- r.d gas will not bra short-term phenomenon.