Newsletter

world is slowing down
By Steve Schappell
Tale of Two Cities could be the
A book title that describes Houston
right now. Houston is regarded
globally as an oil town, and given the
current market conditions it would
be easy to assume that the city’s
economy is in free fall. For those of us
who work in the oil and gas industry,
the anxiety is palpable. When we
meet fellow workers in the industry,
talk quickly turns to the stacking of
rigs and a further round of layoffs
in the city. The statistics offer no
relief: a 59.2% year-on-year reduction
in the number of operating rigs
in the US and a 62.8% reduction in
oil exploration do not generate much
enthusiasm.
Given these numbers, it makes no
sense for construction cranes to be as
common a sight as mosquitos in our
city, which is built on a swamp. An
oil town must surely suffer through
this market. Ask anyone who was
here in the 1980s, and they’ll tell you
about vacant homes and the exodus
of people from the city.
Energy is the driver
But Houstonians are resilient, and
they have been determined not to
allow a repeat of the 80s. Many think
of Houston as the energy capital
of the world, and with 4.2% of the
population working in the oil and gas
industry, that sector is certainly the
leading economic driver. However,
the city has been able to diversify its
economy by expanding the manufacturing,
chemical and health care industries
over the past three decades.
Houston’s port is also the largest
one in the region, handling over $250
billion in imports and exports annually.
To put it in GDP terms, at $525.4
billion Houston would have the 26th
largest economy in the world, behind
Belgium and ahead of Norway.
Although the diversification
has helped, there is no doubt that
Houston is still an energy town that
depends on the oil and gas industry
to drive its long-term economic success.
Houston’s economy has slowed
from a growth rate of 6.5% in 2013
to 1.8% in 2014. Estimates for 2015
range from 1.5% to 3%. The slowdown
reflects the direct impact of the
oil price on the Houston economy.
Without the diversification of the
last 30 years, these figures would be
significantly worse.
Mix of people
Given all the negative news, it would
be natural to assume that a black
cloud must hang over the city. Yet
that is not the case. I believe that
the diversification of the citizenry
has helped Houston just as much as
the diversification of its economy.
A surprising 23.1% of Houstonians
are foreign-born. The mix of people
having diverse backgrounds and
experiences means that Houston’s
atmosphere is ever-changing.
Maersk Drilling, USA seems to be
a microcosm of Houston’s situation.
On one side is the positive story of
the Viking and Valiant, which are
one year into operation on strong
contracts, driving high uptime and
revenues. On the other side is the Developer,
which is coming off contract
with very few work prospects in the
Gulf of Mexico. Much like Houston’s
response to the downturn in the
80s, at Maersk Drilling, USA we are
urgently reviewing our policies and
procedures to ensure that we are
fully prepared to weather this storm.
We must build an organization that
will not only be able to get through
it, but will have the capability and
capacity to grow after the market
changes. It seems clear that the Gulf
of Mexico will be the first region to
drill a 20k well, and our team has to
be poised to move quickly into this
new frontier and beat the competition.
Hoping for change
Given the resilient nature of Houstonians
and the cyclical nature of the
oil industry, one can only hope the
current situation matches the local
weather in the spring: “Just wait a
little while and it will change”.
As I look out through my work
window and watch the ongoing
construction of the new Phillips 66
global headquarters and a high-rise
apartment building across the street,
I can only pause and think, “We are
Houstonians. Not only will we get
through this, we will come out of it
even stronger”.
Photo: Henry Han
Who’s who
Steve Schappell is Location Director at Maersk Drilling, USA.
He has been with Maersk for more than seven years.
Before joining the Maersk Group Steve spent ten years in the US Army.
In Maersk he spent three years in procurement roles supporting US flag vessels, two years as a
program manager in Japan overseeing a maintenance and procurement program, two years as
Head of Supply Chain, Americas, supporting Maersk Drilling. Steve has been Location Manager
Maersk Drilling, Houston for five months.
Maersk Drilling Newsletter 02·2015
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