The third quarter of the calendar year 2023 begins with the debt ceiling crisis behind us; whether good or bad remains in the eyes of the beholder. One bright spot for the energy market is that the legislation essentially ensures construction of the long-delayed, $6.6 billion Mountain Valley Pipeline that will transport natural gas through Appalachia, supported by Sen. Joe Manchin of West Virginia.

In addition, the legislation tweaks environmental regulations and streamlines federal permitting; however, Republicans were unable to reach a comprehensive agreement to overhaul environmental regulations and federal permitting that delay and increase project costs.

The debt ceiling deal also includes provisions to speed up infrastructure projects under the National Environment Policy Act (NEPA). It does not, however, clear the way to build large-scale electricity transmission lines; instead, the legislation orders a two-year study.

Saudi Arabia and other OPEC+ countries planned to reduce oil production by more than one million barrels per day beginning July 1, with no end date stated. The production cuts are intended to shore up prices. The Saudis — the largest supplier of crude to China — are seeking to raise the world pricing to $81/barrel for Brent to balance its books.

As of this writing, WTI is at $72.93/barrel and Brent is at $77.31/barrel, indicating that the reduction announcement has yet to impact the world market. 

Refinery Projects

Industrial Info is tracking around $560 million worth of refinery maintenance projects across the country set to start up in the third quarter. U.S. refineries are operating at approximately 95.8 percent of their full capacity, per the U.S. Energy Information Administration; thus, maintenance is key to keeping our facilities operating in peak condition. More than 50 percent of the upgrades will be projects in Texas and Louisiana.

Phillips 66 has more maintenance projects and related investments than any other parent company in the third-quarter turnaround season. Its largest valued turnaround is at its Lake Charles Refinery in Westlake, La. The refinery produces 105,000 barrels/day (BBL/d) of gasoline and 115,000 BBL/d of distillates from 264,000 BBL/d of crude oil.

French multinational TotalEnergies is scheduled to begin two turnarounds at its refinery in Port Arthur, Texas; its fluid catalytic cracking unit (FCCU) and sulfuric alkylation units; and its Crude Unit No. 2 and Vacuum Distillation 2 units. Both projects are set to start in August, with completion targeted for September.

Flint Hill Resources, a Koch Industries subsidiary, is second to Phillips 66 on total dollar spending, with two turnarounds set to start in September with completion in mid-October. One will be at its Pine Bend Refinery in Inver Grove Heights, Minn., which includes a 50,000 BBL/d crude unit and a 25,000 BBL/d gas-oil hydrotreater. The other will be at its East Refinery in Corpus Christi, Texas, which includes a 67,000 BBL/b crude unit and a 55,000 BBL/d FCCU.

The Cushing Economic Development Foundation and the City of Cushing, Okla., announced that Southern Rock Energy Partners selected Cushing as the site for the United States’ next-generation, full-conversion crude refinery. The project is expected to have $5.56 billion in capital investment and more than 423 full-time employees for operations. The first decade of operation is expected to bring an estimated total economic impact to Cushing and the state of Oklahoma of more than $18 billion.

The refinery complex intends to reduce and eliminate 95 percent of greenhouse gas emissions while producing approximately 91 million barrels, or 3.833 billion gallons, annually of cleaner gasoline, diesel and jet fuels. They are created from domestically sourced crude from the Anadarko, Permian, Denver and Julesburg, and Bakken Basins. Construction will be a projected 36-month project beginning in 2024, with commercial operations commencing in 2027.

Data Center Projects

Texas is anticipating $3.3 billion in third-quarter manufacturing starts consisting of the data centers sector projects and cargo ports, accounting for 75 percent of the total investment value.

The data center projects account for approximately $1.8 billion of the $3.3 billion in project worth that is expected to start construction in July for completion through September.

Microsoft Corp.’s $215-million, Phase 1 construction project of the SAT15 data center and a $175.9 million expansion of the SAT40 data center, both in San Antonio, are scheduled for completion in 2024.

Stack Infrastructure’s data center in Fort Worth, Texas, is expected to begin construction of a $280-million Phase 1 of its campus in September, with completion anticipated in late 2024.

Large Backlogs for Mechanical Contractors 

 I recently attended the Mechanical Contractors Association of America (MCAA) Manufacturers/Supplier Council governing board meeting in Orlando, Fla., the host city for the 2024 MCAA Annual Convention.

The consensus of those in attendance indicated that mechanical contractors generally have large backlogs for the remainder of the year and well into 2024. As a result, suppliers are also experiencing high levels of demand for their products.

Many of the contractors have seen their projects being pushed back due to supply chain issues, lack of skilled labor and lack of adequate power supply for the projects.

In general, mechanical contractors see their backlogs for construction being pushed back into the second half of 2023 and into 2024. They see, however, the brakes put on the bidding of new projects in 2024.

Generally, they see 2023 ending well and backlogs being burned through in 2024, generating another good year. With this in mind and the slowing of new project bidding, they foresee 2025 looking to be a lean year for the industry.

PVF Availability At High Risk

Pricing for the carbon steel butt-welding fitting and forged-steel flange sector remains stable and should remain stable in the ensuing quarter, barring any unforeseen disruption in the supply chain or raw material increases.

The continued aggressive posture of China in the Trans-Pacific region, as
evidenced by the recent incident involving a Chinese vessel dangerously cutting across the bow of a U.S. Naval ship in the Taiwan Strait and close encounters with Chinese military jets with U.S. aircraft, should pose concern for supply chain disruptions. 

Availability of offshore PVF fitting, flanges, pipe, valves and other raw materials are particularly at high risk.

PVF Roundtable News

The PVF Industry is in desperate need of qualified, skilled workers required to populate our workforce that is consistently exposed to the attrition of experienced workers. The PVF Roundtable continues to work diligently to support the education and training of young associates for the PVF sector through the PVF Charitable Foundation.

This year, The PVF Roundtable will exceed $2 million in total scholarships that have been distributed by the PVF Roundtable Charitable Foundation, since its inception, to universities and trade schools for the development of a skilled labor force to meet the increasing demands of the PVF industry. 

Distributions for the first half of 2023 will be announced at the October meeting.

The October meeting will include a guest speaker and the presentation of the scholarships, in addition to the networking session. Please add this meeting to your calendar and register early. 

The name of the speaker and the venue will be announced on the PVF website (www.pvf.org). Please check the website regularly.

The PVF Roundtable Golf Tournament and TroutBlast are the major fundraising events scheduled for 2023. The Weldbend Corp., Ferguson Industrial and MRC Global are key sponsors of these events. 

As a member of the board, and I speak for all members, we thank you for your participation in these events.

With the uncertainties in the current turbulent PVF market, networking meetings are a unique venue for you and your associates to network with your PVF peers. These events provide the platform to share information, discuss pertinent issues, meet new contacts, develop long-lasting friendships and pursue new opportunities in the industry.