In 2020 and the first half of 2021, finding work was the biggest problem in the oil patch. Now, finding workers is a greater challenge, but longtime firms like Saulsbury Industries are holding their own as the construction field roars back to life.
Jeremy Nelson, vice president of operations for Saulsbury Industries, said the company saw construction activity pick up significantly in the second half of 2021. The most common jobs involved “gathering and compression projects as some of the rig counts came back. And then we were able to pick up quite a few nice projects in the gas processing space.” Specifically gas processing plants,” he said.
Overall, the company has expanded its reach in recent years to include all facets of heavy industrial construction, Nelson noted. Typical projects include “well hookups, flowlines, infield gathering pipeline facilities, compression and treating, and then the full gamut of your midstream-type facilities.”
The Bakken is another active area, as the father of the frac revolution comes back from a long price-related hiatus. Saulsbury’s office in Bismarck, N.D., oversees those projects. “We’re seeing the Bakken start to pick back up,” he said. “We’ve been building some smaller compressor stations pretty regularly over the past two years and are now starting to see some larger projects come to life.”
Even the seemingly abandoned Eagle Ford play is stirring to new life. Saulsbury’s Corpus Christi-area field office is overseeing some smaller projects such as relocations and small-facility expansions in the region. “Nothing big down there yet, but the small projects start before the bigger ones do,” he observed.
As 2022 gains traction, Saulsbury’s gas processing projects continue in all the above basins, along with buildouts along the entire upstream and midstream sectors.
During 2020s’ COVID shutdowns the company joined the rest of the world in belt-tightening in order to stay afloat. Their number one focus was retaining as many employees as possible. “We pivoted from what were, really, large projects going on through 2018-2019, to a lot more smaller, tactical type projects so we could keep our key resources—field supervision, engineers, things like that—busy through that time.”
Their efforts did keep layoffs to a minimum, which allowed the company to quickly bounce back as markets reopened.
As usually happens, the era of stronger oil prices in 2018-19 brought more competition into the construction market—which then evaporated in the downturn, as newcomers either failed or moved out. “From a market standpoint, it definitely got much more competitive over the last few years, but at the same time the competition landscape is smaller now. Unfortunately, the downturn took its toll.”
Now the biggest challenge lies in finding workers to participate in the new opportunities fostered by more activity and less competition. “It’s made for a very challenging landscape, where we’re working with our clients and our employees as well, to try to make sure we’re structuring the best deals to make sure we stay market-competitive, but also make sure we stay out in front of the commodity environments,” he said.
Oil and gas commodities are not the only ones the company is planning around. Nelson noted that markets for nickel, needed for stainless steel pipe, as well as copper for wiring, and other supplies are rising almost daily, and Saulsbury’s buyers are racing to keep up. The Russia-Ukraine conflict has stifled exports of many key metals used in construction. So not only are prices rising, availability is becoming more and more limited, which creates issues with scheduling projects.
The company’s longevity and its history of keeping as many people as possible during downturns have helped them sustain a ready workforce, Nelson said. “We’ve got a fairly large database of current and prior employees that we’re able to draw on.”
With the rise of interest in renewables, in and out of the oil industry itself, Saulsbury has expanded their range of projects to include solar, with a facility in Arizona, as well as a hydrogen liquefaction plant in Nevada, among other efforts. “The ESG space started, really, with inquiries from our clients about two years ago,” he recalled. At that time the company began searching for ways to reduce emissions, starting with flare gas solutions, along with upgrades and changing over to electricity as a power supply instead of fossil fuels. Some of the electricity is produced by using former flare gas or produced gas in the field.
Saulsbury is making their facility designs “as ESG friendly as possible, while meeting the needs of our clients,” Nelson said. Other projects include renewable natural gas projects from landfill methane or other sources. They are helping oil and gas clients with a renewable transition.
“As you can imagine, the oil and gas arena is one of the few industries that has enough cash flow to be able to lead the charge to ESG or the renewable space,” Nelson said. Those clients are very interested in this move.
Planning for the future in these times is necessary—but the crystal ball itself is proving to be cloudy with a chance of rain. “The current environment is going to be kind of interesting to watch and see what happens,” Nelson said. Even with oil prices sky high, he noted that upstream and midstream sectors have both focused on capital constraint. “In previous times, everybody jumped in and started spending money very quickly” when prices rose. “If prices continue to stay where they are, I think activity’s definitely going to pick up. But it will be interesting to watch and see how quickly that occurs as there’s been a lot of focus on shareholder value versus new capital investments.”
How that capital constraint affects the labor market and drilling activity remains to be seen, but Nelson feels that measured and consistent growth is better for the industry as a whole. If growth were to explode and if supply chain companies increase their competition with E&Ps and service companies for the already tight labor market, problems add up for all concerned, he said.
With large new projects in the Permian and LNG expansions on the Gulf Coast on the horizon, he sees that competition already heating up. Will everyone be able to staff up to a reasonable level on those jobs?
“Timing is everything,” he said.
By Paul Wiseman