Huntington Ingalls Industries said Tuesday it is opening an office in Houston to pursue energy infrastructure projects for its Avondale shipyard that’s been under the threat of closure in New Orleans.
Chris Kastner, the corporate vice president and general manager of corporate development who is leading HII’s effort to retool Avondale, said he is confident the company can get enough work from energy companies to support the 2,000 employees who still work at the shipyard.
“We think we can even grow the work force a bit,” Kastner said.
Avondale, long Louisiana’s largest private employer, had been scheduled to shut down at the end of the year. Northrop Grumman, the former owner, announced in 2010 it would close down the facility, because cutbacks in defense spending dried up the market for the military vessels built at the shipyard. Finding a new use for the shipyard that would continue to provide thousands of good jobs was one of the goals of HII and state and local economic development officials.
Kastner said HII has spent the past “six to eight months” determining if it could transition into the market of building things for the energy industry.
HII will look for business building topsides for upstream oil drilling and portions of refineries for downstream consumption, Kastner said. The recent boom in the energy industry along the Gulf Coast, driven by ample supplies of cheap natural gas and robust oil exports, made HII confident about going forward with changing its mission, he said.
“All of these projects have been announced,” Kastner said. “We’re ideally located to fabricate major modules and ship them on our floating dry dock. It’s kind of a perfect storm, with this market appearing.”
HII won’t need to make any capital improvements to the shipyard to accommodate the change in mission. The engineering and construction elements of building for the energy industry are “very comparable” to shipbuilding, Kastner said.
Making the transition from working for the Department of Defense to commercial clients may result in “slight changes” to wages and benefits at Avondale.
“We have to be competitive,” Kastner said.
HII officials will meet with unions to discuss any changes, he said.
The Houston office will have fewer than five employees working on business development. HII hasn’t landed any contacts for energy sector work, but Kastner said he hopes something can happen this year.
If the company can’t get energy work, then it will have to close Avondale. “We’ll asses this as we move though the year,” he said.
Michael Hecht, president and CEO of Greater New Orleans Inc., a regional economic development alliance that serves the 10 parishes around New Orleans, said he was “thrilled” to hear that HII is moving into the energy industry.
“This is great news for the future of the site and the future economy of the region,” he said.
For more than a year GNO Inc., Louisiana’s economic development department and Jefferson Parish officials have been talking to HII about potential alternative uses for Avondale. One of the first projects suggested was manufacturing blowout preventers for offshore drilling rigs at the site, but that didn’t work out, Hecht said.
“There’s been a theme of the energy industry as potential uses for the site,” Hecht said.
Sen. Mary Landrieu and Rep. Cedric Richmond, two Democrats who represent New Orleans in Congress, issued a joint news release saying they were encouraged by HII’s move.
“Oil and gas infrastructure manufacturing at Avondale would be a welcome addition to our strong energy industry in Louisiana,” Landrieu said in a statement.
Richmond said while “obstacles to a ‘new’ Avondale remain” he looks forward to working with business leaders and elected officials to ensure the facility remains one of Louisiana’s leading employers and manufacturers.
Landrieu and Richmond noted that the Navy said in 2011 any money set aside to pay for the closure and conversion of Avondale could be used for partnerships designed to bring more work to the shipyard. Previous interpretations indicated the money for closure and conversion would only be given to HII after the shipyard shut down. This allows HII to apply the money to conversion of the yard for commercial purposes while it pursues other business opportunities.