January 11, 2009 at 4:49 am #3241
Motiva lets loose some contractual workers
Published January 09, 2009 07:04 pm – Some contractual workers have recently been laid off from the Motiva Refinery expansion project due to an ongoing cost review by the company.
By David Ball The Port Arthur News
PORT ARTHUR Some contractual workers have recently been laid off from the Motiva Refinery expansion project due to an ongoing cost review by the company.
Were sending some contractual workers home. We have enough (workers) to meet the need. We have the cost review going on and we want it to be accurate, Motiva spokeswoman Verna Rutherford said.
Rutherford said she wanted to dispel rumors thousands of contractual workers were laid off from the project. The numbers arent that high, she said. Were having a close review to assure we have a tighter cost control on the projects, she said.
Rutherford didnt have a total number of workers idled because there is a different number of workers on different days. Theres a lot of anxiety out there and we want to give assurance, but we cant tell unless we get a clear picture, she said.
Motiva Enterprises announced on Christmas Eve changes are being implemented to assure tighter control of costs on the $7 billion refinery expansion project that began in December 2007. Demand for Motivas products is down, and with lower demand, margins are also down, making tight cost control essential.
The resulting downside includes fewer contractual workers on the job for the next several months when cost analysis are evaluated. The bright side is the construction will continue and the project has made a significant economic impact in the area, Rutherford said.
She said it was a combination of issues why the company is doing the cost analysis the overall economy and the response and demand of products are down as well as margins are down.
January 12, 2009 at 8:49 am #6354
I wonder if anyone will make a play on expainsion during this down time with contractor cost and material cost going down, it would be a great time to negotiate a expainsion contract.
Demand will come back and when it does someone could make big bucks now in this downturn turns into a upswing…..
January 12, 2009 at 5:23 pm #6352
My experience tracking the coker projects suggest the opposite, one the reasons that contractor & material cost are going down is that several projects are being either delayed or cancled. Ones like Motiva that are already well into EPC /Construction stage – are doing what they can to reduce expensive expansion cost by reducing the concentrated work & high manpower loading that was set when they basically had to make maximum use of limited resources to time that was dictated by the contractors availability. It is good move.
The lower materials & manpower are coming amid economic crisis when refinery margins have collapsed, demand is at lowest levels since 1983, and all Refineries are looking at earnings hits to 4Q2008 & likely 1Q2009 and reductions capital spending budgets. The better projects are still going ahead but any with financial challenges are being cancled or delayed. And there are several that are looking canceling/delaying as a chance to Re-negotiating the project cost that had escalated to 2-3X original estimates….payback is always a bitch.
There is also a big question on several unknown strategic elements due to potential Democratic Environmental legislation that make US Refining expansion a losing proposition – Carbon Tax, higher gasoline taxes, already mandated higher Ethanol blending (no reason to add +10% gasoline capacity if it is going to be taken up by Ethanol instead of gasoline), push for larger fleet share of alternate electric vehicles & the near term rapid reduction of SUV’s in fleet (reduced consumption)……. none of these make good ROI case for expansions.
And although I also believe demand will eventually come back – it isnt going to be in next year or so (& we have enough EPC projects that finish by 2010-2011 to handle demand). We have 2 MM workers just laid off in 2008 & 2-3X that many that have just given up looking for jobs – so until next new industrial cycle develops to put them to work, they are not likely to be driving 2 or even 1 vehicles at the levels they were.
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