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Avondale Shipyard set to transition into energy manufacturing market

18th February 2013   ·   0 Comments

By David T. Baker
Associate Editor

Huntington Ingalls Industries (NYSE: HII), the company that owns and manages Avondale Shipyard in Avondale, La., is moving out of shipbuilding and into the energy market.

The company announced early last week that it is opening an office in Houston, Texas, to explore opportunities in energy manufacturing, and HII executives say they’re already in discussions with companies in the oil and gas infrastructure market with hopes of bringing new energy manufacturing contracts to the shipyard.

“It’s really just a business development office in Houston because that is really the center of the market for oil and gas market,” said Chris Kastner, HII’s corporate vice president and general manager, corporate development, who’s leading Avondale’s transition.

Kastner says the Houston office, which is scheduled to officially open by March 1, will staff three or four employees, and while the establishment of the office is an integral component in the company’s plan to transition the facility, Kastner asserts that the shipyard will remain the center of the manufacturing work. “We have about 2,000 people there now and we’d like to maintain that level of workforce and grow it a bit.”

For years, HII has held defense contracts to design, build and maintain nuclear and non-nuclear ships, as well as “provide after-market services for military ships around the globe.” The Avondale Shipyard—a 268-acre facility locat­ed on the Mississippi River — purports to have over 30 years of modular engineering and construction expertise and nearly 75 years of experience in heavy manufacturing, all of which the company plans to put to use in the energy market.

“We have a great workforce at Avondale with unique engineering and manufacturing capabilities that have been demonstrated for many decades,” Mike Petters, HII’s president and chief executive officer said in a statement released to the press.

The transition from ship design and building into manufacturing for both upstream and downstream oil and gas markets is one the company expects to flow smoothly since the equipment and skills used in shipbuilding, metal bending for example, are comparable to those required in building equipment used by oil and gas companies for offshore projects such as oil rigs, subsea structures and platforms.

“We’ve satisfied ourselves that the engineering and construction elements of these projects are very comparable to shipbuilding,” Kastner said, “and we are working very hard, both internally and with prospective customers, evaluating and competing for new opportunities. These upcoming large projects should be made in America by American craftsmen and craftswomen.”

Another cost-saving benefit to the company is that the facility doesn’t need to undergo any upgrades or redesigns in order to transition into the new market. “There’s no requirement for that,” Kastner said. “The facility is fully capable.”

In 2011, the company came under fire for plans to shut down operations at the shipyard permanently, a move that would leave thousands of Louisianians unemployed. U.S. Sen. Mary Landrieu and U.S. Rep. Cedric Richmond of New Orleans called on the Obama Administration for assistance in keeping Avondale open. In an open letter to Secretary of the Navy Ray Mabus, the two chided the Navy for offering incentives to HII for the permanent closure of the shipyard and requested that funding instead be used to “convert the shipyard to take advantage of commercial opportunities.”

Upon HII’s announcement of the opening of the Houston office, both Landrieu and Richmond issued written statements expressing their approval of the company’s plans:

“Oil and gas infrastructure manufacturing at Avondale would be a welcome addition to our strong energy industry in Louisiana,” Sen. Landrieu said. “As we have for years, Rep. Richmond and I will continue working with Huntington Ingalls and the other involved stakeholders to keep Avondale open for business and contributing to our country.”

While he admits that challenges still lie ahead, Rep. Richmond issued assurances that he is committed to continuing working to ensure new streams of revenue are found to maintain the massive facility and its 2,000 employees.

“I look forward to working with the business community and officials at all levels to ensure that Avondale continues as one of Louisiana’s leading employers and manufacturers,” Richmond said. “Today’s announcement is a testament to the work product of thousands of Avondale employees and the dedicated efforts of state officials, local officials and our congressional delegation.”

Locally, HII has been working with economic development agencies Greater New Orleans Inc. (GNO Inc.) and Jefferson Parish Economic Development Commis­sion (JEDCO), as well as with the Jefferson Parish president John Young to keep momentum going and to ensure that that any jobs resulting stay within Louisiana. “We’ve been working behind the scenes with JEDCO and John Young’s office,” said Michael Hecht, president and CEO of GNO Inc.

“Huntington now realizes that there’s a real opportunity with the site working with the energy industry,” said Hecht.

According to an HII analysis, various organizations have announced plans for Gulf Coast projects that will take place over the next two to five years, the total worth of which is an estimated $60 billion. The company says it’s hoping to capture some of that business but can’t predict how much.

Hecht says that GNO Inc. along with JEDCO and Young’s office will be convening with the Houston-based business development team to help them market to manufacturing companies for modular manufacturing contracts.

Hecht lauded HII’s decision to base the business development office in Houston as a wise one: “To understand why HII is putting an office in Houston, you have to understand why Bonnie and Clyde robbed banks: it’s because that’s where the money is.”

Though both Kastner and Hecht recognize that while Houston is the center of the market for the oil and gas, they also believe that the real gain will be to Louisiana.

“What I do see,” says Hecht, “is that Avondale’s shift into the energy sector portends the benefit that the region has to gain from the oil and gas boom.”

Those benefits will partly be in terms of good-paying jobs for skilled industry and manufacturing workers in the Southeast Louisiana region. “We’ll see new investment and reinvestment in upstream and downstream fields,” Hecht said. “We’re going to see the refining jobs not the headquarter jobs.”

Even though he doesn’t expect there to be an immediate increase in the number of corporate jobs brought to the state as a result of the boom, Hecht is hopeful about the longterm implications having an energy manufacturing outlet such as HII’s could signal about the region’s potential to be a leader in the energy market:

“Huntington’s decision to explicitly reconfigure and rebrand for the energy sector is great news for the Avondale site,” Hecht said, “but, moreover, it’s indicative of the overall level of increased activity that the region should see in energy over the coming decades.”

You can follow David T. Baker on Twitter at @Tadfly.

This article was originally published in the February 18, 2013 print edition of The Louisiana Weekly newspaper

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