Tuesday, September 06, 2005

"People Are Our Most Important Resource"
For years oil companies have included words like the above quote in their annual reports and other communications, but this cliche has never been more apt than now. One of the biggest challenges facing the companies attempting to repair and restart their refineries, pipelines, and oil and gas production facilities will be gathering up their workforces, which have been scattered throughout the South and Southeastern US. This article from the Houston Chronicle describes the problem in more detail. Based on reports of displaced refinery workers who are seeking jobs near the shelters in which they are living, this process could take some time. If so, finding or replacing missing employees could turn out to be the key factor in resuming normal operations.

Current indications suggest that about half the idled refineries, representing 5% of US capacity, will restart within days, while the other half could be laid up for weeks or months. If the latter all require major repairs, locally-available resources would be strained in the best of times. It's important to realize that over the last couple of decades, oil companies have responded to the same competitive pressures as other industries, outsourcing many functions--including most non-routine facility maintenance and repair--and trimming operating staffs to a point of lean efficiency. But that also means that if the hurricane created more than a few vacancies in key operating positions on vital units within a refinery, managers will be hardpressed to undertake the complicated procedures required for a safe startup.

After a disaster of this magnitude, refiners will likely have to employ the same approach as the affected electric utilities: bringing in employees and contractors from unaffected facilities all over the country, in order to fill the gaps. This adds complexity to an already arduous task, and likely adds further delays. As a result, deft management of existing inventories and expected imports remains critical. This burden falls on another group of key people.

Because the impact of refined product imports from Europe and elsewhere won't be felt for at least another week, the task of rebalancing the crippled products distribution system and minimizing localized outages rests with the oil company supply and distribution groups, which will need all their resourcefulness to respond to unpredictable changes in delivery schedules. I vividly recall dealing with this on a much smaller scale, when a single refinery or pipeline shut down unexpectedly, and I can only imagine the hours these folks have put in since Katrina hit. If you live east of the Mississippi and your region hasn't experienced runouts, it is probably the result of some very fancy footwork by a small number of stressed-out oil company traders and pipeline schedulers in Houston. Lets hope they can continue their magic until the cavalry arrives.

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