En­ergy firms wres­tle with set­backs from Har­vey

Houston Chronicle - - FRONT PAGE - By Collin Eaton

By the time the storm lifted, flood­wa­ters nearly crested over the top of the turn­stiles in the lobby of BP’s main of­fice tower in Hous­ton.

Wa­ter filled the base­ment and brought down the elec­tri­cal sys­tems. Con­tract work­ers had to pile thou­sands of sand­bags around the 949,000-square-foot build­ing be­fore they could be­gin pump­ing out the rush­ing wa­ter.

Two weeks af­ter one of the costli­est storms in U.S. his­tory moved out of the Hous­ton area, BP ex­ec­u­tives don’t know the full ex­tent of the dam­age. But they do know this: Their West­lake One of­fice in Hous­ton’s En­ergy Cor­ri­dor won’t re­open un­til early 2018, and more than 2,000 of the Bri­tish oil ma­jor’s 5,500 lo­cal em­ploy­ees will work from home as the com­pany makes re­pairs.

“We just got back into the

base­ment a few days ago,” said John Mingé, chair­man and president of BP Amer­ica. “There are still pock­ets with wa­ter.”

The flood­ing of BP’s build­ing is just one of many set­backs dealt to Hous­ton’s en­ergy in­dus­try by the un­prece­dented rain­fall that dam­aged re­finer­ies, chem­i­cal plants and pipelines, and dis­rupted op­er­a­tions all along the Gulf Coast. But these set­backs are un­likely to spur an ex­o­dus of oil and gas com­pa­nies or threaten the city’s stand­ing as the world’s en­ergy cap­i­tal, a po­si­tion built on an un­matched con­cen­tra­tion of tech­ni­cal tal­ent, ready ac­cess to cap­i­tal and global mar­kets, and a net­work of multi­bil­lion-dol­lar fa­cil­i­ties pro­duc­ing and trans­port­ing pe­tro­leum prod­ucts, an­a­lysts said.

Har­vey’s rains and flood­ing set records, but en­ergy com­pa­nies have weath­ered the Gulf ’s de­struc­tive hur­ri­canes for decades.

“Weather dis­as­ters hap­pen across the coun­try,” said Andy Lipow, president of Lipow Oil As­so­ciates in Hous­ton. “It hasn’t stopped this state from grow­ing.”

Threat to growth

Econ­o­mists and Hous­ton bank ex­ec­u­tives be­lieve Har­vey’s de­struc­tive jour­ney across the Texas Gulf Coast has done far more dam­age to homes than to of­fice build­ings, apart­ments and in­dus­trial sites. Still, the episode shows ma­jor hur­ri­canes can dole out costly eco­nomic set­backs to even some of the world’s largest oil com­pa­nies, play­ing into con­cerns about whether Hous­ton can keep at­tract­ing new busi­nesses — and peo­ple to work in them — against the back­drop of in­creas­ingly fre­quent nat­u­ral dis­as­ters, and TV images of flood­wa­ters sluic­ing through homes and high­ways.

It also high­lights the dam­age Hur­ri­cane Har­vey did to Hous­ton’s com­mer­cial real es­tate, which the con­sul­tancy Moody’s An­a­lyt­ics be­lieves will top $20 bil­lion, more than dou­ble the $9 bil­lion in es­ti­mated dam­ages to com­mer­cial real es­tate left by Hur­ri­cane Irma in Florida. In ad­di­tion to the sub­stan­tial re­pair costs, com­pa­nies typ­i­cally lose some pro­duc­tiv­ity from em­ploy­ees work­ing at home or in other scat­tered lo­ca­tions.

“The real risk is res­i­dents and busi­nesses say enough is enough — three years of con­sec­u­tive flood­ing — they can no longer stom­ach it,” said Adam Kamins, a se­nior econ­o­mist at Moody’s An­a­lyt­ics in Penn­syl­va­nia. “You may see peo­ple start to move out and pop­u­la­tion growth slow.”

On Thurs­day, hun­dreds of con­tract work­ers in yel­low vests and or­ange hard hats filed in and out of BP’s of­fice tower, driv­ing fork­lifts and step­ping around dis­man­tled wa­ter-pump­ing equip­ment. The crews had pumped out mas­sive amounts of wa­ter over the week­end, leav­ing rows of sand­bags and waders scat­tered by a nearby park­ing garage.

West­lake One is the cen­ter of BP’s sprawl­ing 64-acre cam­pus, where its U.S. sub­sidiary is head­quar­tered. Most of the other build­ings, which are at higher el­e­va­tions than West­lake One, sus­tained far less dam­age, if any.

Grad­ual re­turn to site

On Mon­day, about 1,000 BP em­ploy­ees, or about 20 per­cent of its lo­cal work­force, will re­turn to other of­fices in the com­plex. Up to 60 per­cent of the com­pany’s lo­cal work­force will re­turn to the cam­pus as re­pairs are com­pleted.

Re­pairs at West­lake might end up cost­ing a few mil­lion dol­lars, but for a $120 bil­lion oil com­pany, it’s a man­age­able amount. The flooded base­ment — where crews are pump­ing out wa­ter — held file stor­age, mail rooms and a li­brary. The com­pany is as­sess­ing the dam­age to its elec­tri­cal sys­tems. And con­tract work­ers are clean­ing the cafe­te­ria, a gym and of­fices on the first floor, the com­pany said.

The 28-story West­lake One tower houses key parts of BP’s U.S. pro­duc­tion busi­ness, which in­cludes its mas­sive op­er­a­tions in the Gulf of Mex­ico. Some of its work­ers were hit hard by the storm.

Some 850 em­ploy­ees called the com­pany’s hu­man­i­tar­ian as­sis­tance pro­gram, seek­ing help pay­ing for ho­tels and rental cars and con­nect­ing with re­lief ser­vices.

The com­pany, mean­while, has been co­or­di­nat­ing ef­forts to keep the busi­ness run­ning smoothly even as thou­sands work from home. Mingé said he doesn’t an­tic­i­pate any ma­jor hic­cups in com­ing months.

“It’s about busi­ness con­ti­nu­ity,” he said. “We still have a busi­ness to run, mak­ing gaso­line and things like that.”

Yi-Chin Lee / Hous­ton Chron­i­cle

Re­sponse crews clean up BP’s U.S. head­quar­ters af­ter Har­vey left the cam­pus un­der­wa­ter for over a week.

Marc Mor­ri­son

Re­sponse crew mem­bers are clean­ing up BP’s low-rise of­fice build­ing, front, and the West­lake One tower, rear, af­ter the build­ings flooded.

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