Shipbuilding becomes newest border boom
Construction of two LNG-powered vessels creating highly skilled jobs
PORT OF BROWNSVILLE — Keppel AmFELS has built offshore drilling rigs and platforms here for decades. But the last few years have not been particularly kind to the offshore energy companies, which in the face of low oil prices and competition from shale, has delayed, canceled and scaled back projects.
Now, Keppel AmFELS is entering a new line of business: shipbuilding. At the company’s facility about 14 miles from the U.S.-Mexico border, crews are constructing two 775-foot-long container ships that will be powered by liquefied natural gas and carry cargo from the West Coast to Hawaii.
In doing so, Keppel AmFELS joins a small fraternity of companies that build merchant ships in the United States. It’s a fraternity that’s vital to Hawaii since a nearly 100-year-old law, known as the Jones Act, only permits American-made ships with American crews to operate between U.S. ports.
Keppel AmFELS’ move into shipbuilding is also important for the Brownsville area and the U.S. maritime industry. The construction of the two ships will create some
700 jobs paying $18.48 an hour, more than double the average wage in one of the poorest regions in the state and the nation.
For the maritime industry, it’s an argument against weakening or repealing the Jones Act, which has come under fire from energy and other industries. The lack of U.S.-flagged merchant ships, for example, has kept LNG produced along the Gulf Coast to from being shipped to New England, which instead must import if from other countries.
But Matt Woodruff, president of the American Maritime Partnership, which represents and lobbies for a broad array of domestic maritime companies, said Keppel AmFELS shows that the domestic maritime industry can provide the ships to serve U.S. ports, providing jobs for American workers and crews.
“When you have the people, the facilities and the skill sets to build marine structures, they can adapt and scale to a lot of different vessels,” he said. “When the market signals that it needs a particular kind of vessel, that’s the kind of vessel that gets built. I hope its the start of more to come.”
Economic impact
Shipyards in Texas make everything from tugboats to barges to offshore oil rigs. About 56,000 people work in the domestic maritime industry in the state, according to a study for the Transportation Institute, a transportation policy group in Washington. Commercial and military ship construction generates about $2.6 billlion in economic activity a year, according to the U.S. Maritime Administration.
Keppel AmFELS, a unit of the Singapore company Keppel Corp., the world’s largest builder of offshore oil rigs,is building the ships for Pasha Hawaii, an ocean cargo company headquartered in Honolulu. Once completed next year, the ships will join Pasha’s fleet of six vessels to haul everything from food and consumer products to cars and private airplanes to the Hawaiian Islands.
The companies declined to disclose the financial terms of the contract.
The ships will include engines that can run on liquefied natural gas, a clean burning fuel that will put them in compliance with new rules from the International Maritime Organization aimed at reducing pollution by the global shipping industry. The rules go into effect in January.
“Operating fully on LNG from day one in service, the container ships will dramatically reduce environmental impact, while increasing fuel efficiency,” said Ed Washburn, senior vice president at Pasha Hawaii. The ships, named the George III and Janet Marie, are being constructed with American-made steel plates hauled by train from Chicago and Alabama. Crews cut the first plate for the George III in September and the first plate for the Janet Marie in April.
The project is supported by a $1.8 million grant from the U.S. Economic Development Administration to finance the construction of a pad for moving ships into the water once they are completed. The Greater Brownsville Incentives Corp. will also provide $2.8 million to Keppel for training costs and wage subsidies.
With the ships to be built in pieces and assembled on the pad, Mario Lozoya, CEO of the Greater Brownsville Incentives Corp., said the work requires advanced welding and other skills that require a lot of training.
Scaling up
“You have one crew that is building one part,” Lozoya said. “A hundred yards away, you have another crew making another part. You can see how they all fit together, but you’re talking about parts that are half a football field in size.”
Eduardo Campirano, CEO of the Port of Brownsville, called the shipbuilding contract “historic” for both the border region and the state.
“We’ve never had a shipbuilding operation of this scale,” Campirano said. “We’ve made shrimp boats. We’ve made tug boats. We’ve made barges. But never ships of this size.”