The ripple effects of low oil prices continue to have serious impacts on Louisiana’s economic prospects, at least in the short term.
Cancellation of a big upgrade of the Marathon Petroleum refinery in Garyville is one of the latest consequences. And it is a big loss — industrial construction that was expected to cost between $2.2 billion and $2.5 billion.
The project was intended to allow the refinery to convert heavy residual oil, a refinery by-product, into roughly 1.2 million gallons of ultra-low-sulfur diesel every day.
Announced last spring, it was among the stream of major projects driving a boom in industrial construction along the Mississippi River’s petrochemical corridor between Baton Rouge and New Orleans.
The St. John the Baptist Parish project would have created 65 new direct jobs, with an average annual salary of $115,000 per year, plus benefits, Louisiana’s economic development department reported in 2014. The project would have supported 3,000 construction jobs.
The project would have been the second massive expansion at the Garyville refinery. In 2009, Marathon completed a $3.9 billion project to nearly double its capacity. The refinery now can handle 522,000 barrels of oil per day.
A decision to cancel the expansion because of “market conditions” does not mean that the refinery is in danger. It employs 850 workers and 650 contract employees, according to the company’s website.
This disappointment goes along with worse effects for Louisiana families, as many companies in the exploration and extraction end of the energy business are laying off workers and cutting costs because of last year’s collapse in the price of oil.
Nevertheless, Louisiana continues to score well in the competition for new industrial construction jobs. The demand for skilled construction workers is likely to continue for a while, and many Louisiana refineries and petrochemical manufacturers benefit from low prices of oil and natural gas, the latter a key feedstock for many plants.
Additionally, Louisiana will continue, we hope, to be a welcoming location for new industrial facilities. A lot of places will see such facilities as a threat and not an employment boon. We believe that, with proper and effective regulation, these facilities can contribute in an environmentally safe manner to Louisiana’s economy as well as the nation’s.
We look forward to the day when major projects get off the drawing boards and into construction and operation.