Energy firms wrestle with setbacks from Harvey
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.”
Response crews clean up BP’s U.S. headquarters after Harvey left the campus underwater for over a week.
Response crew members are cleaning up BP’s low-rise office building, front, and the Westlake One tower, rear, after the buildings flooded.