Shutdown of Shell refinery in Convent: Negotiations for job transfers and severance begin
By the end of 2022, Shell told investors it wants to cut up to 9,000 jobs in a corporate restructuring to save roughly $2.5 billion. It had 83,000 employees worldwide as of December 2019. So far, only 1,500 workers agreed to voluntary buyouts…
About 1,100 workers at the Convent oil refinery, a combination of company and contract workers ranging from plant operators to maintenance crews, will be looking for new jobs as rolling layoffs are expected in the coming months, but only about one-third of those workers are unionized.
A representative of the United Steelworkers union expects to begin negotiations on Monday with Shell about the layoffs and severances and potential buyouts there and at a sister refinery in Norco that could help free up some jobs for displaced Convent workers.
After failing to find a buyer for its refinery in Convent, Shell is shutting down the plant as it consolidates its international assets from 14 sites into six energy and chemical parks. The survivors include the Norco refinery near New Orleans, in conjunction with Shell’s chemical complex in Geismar. The goal is for the refineries to be more integrated with the chemical complexes and produce more biofuels, hydrogen and synthetic fuels as Shell positions itself for a transition to a low-carbon future because customers are asking for lower carbon products.
Early retirements, or buyouts, by others would be key for hundreds of Shell’s union workers looking to stay in their careers who would not likely be looking at sizable severance packages based on their time with the company. More than half of the Convent oil refinery workers represented by the union have less than 10 years of service with Shell, though they might have decades of experience in the field.
Those workers will be looking for a job amid an economic recession in an industry that’s been under pressure to consolidate operations and cut expenses during a global pandemic that’s reduced the demand for refinery products. In Louisiana, there are 128,500 workers in manufacturing across the state as of September, which is about 8,600 fewer jobs than last year.
Royal Dutch Shell’s subsidiary in Louisiana expects to fully shutter the 240,000 barrel per day oil Convent refinery by April 2021. The refinery, built in 1967 by Texaco and capacity doubled during the 1980s, will begin the closure process in mid-November.
There are 700 Shell employees at the site, which straddles Ascension and St. James parishes, but only 340 workers are represented by United Steelworkers Local 13-750. Another 400 workers are contractors who are employees of independent businesses, most of which in the petrochemical industry are mid-sized companies with headquarters in Louisiana.
USW Shell workers at Convent last negotiated a contract in February 2019 that doesn’t expire until January 2022. A union representative expects to hash out voluntary buyouts and potential severance packages, but financial details were not immediately available. Norco has its own separate contract, but is represented by the same local union.
A typical severance package from Shell is a calculation of roughly three weeks hourly wages multiplied by years of service up to a maximum of 78 weeks pay, according to Houston wealth management business Willis Johnson & Associates whose clientele are oil industry workers and is not affiliated with Shell. That could mean roughly $100,000 severance for an individual with 20 years of experience, with a cap of no more than $125,000 per employee, according to the wealth management company’s sample calculation.The situation at Shell is unique and “not a common deal,” said Marty Poche, the USW representative for Local Union 13-750.
“It’s been years since they’ve even entertained a severance from Shell,” Poche said. “We’ve had several layoffs where they hadn’t gone through any of that in years. There’s been a drastic turnover in the last 10 years, a lot of folks have (already) retired and moved out, not to say it’s a young workforce.”
That’s because Shell has been offering self-described “voluntary severance” across the company since May as it sought to reduce its overall ranks around the world and offered to cut checks.
By the end of 2022, Shell told investors it wants to cut up to 9,000 jobs in a corporate restructuring to save roughly $2.5 billion. It had 83,000 employees worldwide as of December 2019. So far, only 1,500 workers agreed to voluntary buyouts, which does not include those who left the business because of divestments as of Sept. 30.
It was not immediately clear when the majority of workers would leave the company or finalize transfers, considering the refinery must be shut down and decommissioned safely. There is an incentive to do it sooner rather than later given that wages alone cost the company tens of millions of dollars each year and the margin for gasoline is below profitability.
“From my experience, they are going to want to get people off the books as soon as possible,” said Poche, who expects it to happen by January 2021. “They’ve been very open with us and we’d been very hopeful that they would find a buyer (for the refinery). We’re going to begin negotiations and I suspect we’ll come out with some favorable severance packages and find some spots we can relocate some of those folks who don’t have the years, the time and the age to take some type of severance (and retire) completely.”
The average wage for an experienced plant operator at Convent is $40 an hour, which could be upwards of $80,000 a year. That can be a difficult wage to sustain in many other manufacturing plants outside of refining oil, which would be the “best case scenario” for the workers, Poche said. Most of the other petrochemical plant wages are lower, he said.
Poche himself is a former machinist who worked at Norco and whose tenure dates back to the late 1980s in Louisiana.
“We are having discussions with both the Norco facility as well as the Geismar facility, which is not union,” Poche said. “We’re still going to have communications to see if there’s a possible position open so we can place some of these guys from the Convent site.”
But it’s unclear how many jobs would be open without sweeping early retirements. Most of the available positions posted at Shell’s Louisiana sites are for internships as process operators. There was one process technician job posted at Geismar in recent days. About a month ago, the Geismar site posted openings for a control systems engineer, facility security officer, senior rotating equipment engineer, pressure equipment integrity inspector and IT business data consultant. Likewise, there was only internship opportunities advertised at the Norco site as of this week. About a month ago, Norco was hiring an environmental air program coordinator, a turnaround and project organizations buyer, control systems engineer and operations support engineer, according to job advertisements.
Norco does have some expansion plans and expects to start up new units, but isn’t anticipating a lot of new jobs there and it might not happen.
“But the fate of the economy as well as the coronavirus has a lot of that on hold,” Poche said.
The union is reaching out to other petrochemical plants outside Shell, which may need plant operators or process engineers across Louisiana. Some of the workers facing layoffs are laboratory technicians, electrical instrumentation, along with mechanical machinists crafts people.
The oil refinery has been subsidized by state tax breaks for decades. There are 10 existing contracts tied to $262 million in capital investment under the Industrial Tax Exemption Program that are still under contract and potentially eligible for subsidies.
Since 2000, Shell has signed 15 contracts through ITEP with the state for a total of $624 million of capital investment at the Convent refinery. In exchange, the company has been eligible for up to 100% property tax abatement with some contracts and up to 80% property tax abatement for others up to 10 years amounting to millions of dollars in tax breaks over the years.
The last major expansion at the Convent oil refinery dates back to 2005 when the company invested $272 million and added 43 new jobs. Since then, there’s been more minor investments but nothing near the $100 million mark.
The state’s top economic development leader noted that more than 50 years of operation is a significant economic windfall and “should not be glossed over,” citing that roughly one out of every nine jobs in Louisiana are supported by oil and gas operations as touted by an industry-led study.
“As Shell works through the decommissioning of the Convent refinery, LED will evaluate the company’s eligibility for incentives and address issues as provided by law,” said Don Pierson, secretary for LED.
Much of the state’s economic incentive structure, which includes ITEP, is a reimbursement program once milestones are met in each respective contract such as receipts for payroll or machinery purchased.
“Performance-based provisions of LED incentive programs help protect the financial interests of the state and taxpayers,” Pierson said.
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