Comment

Leonard Le Blanc

Exploiting discontinuities

Discontinuities in supply and demand rarely go long without attention. One sizeable discontinuity exists right now - and at least one firm has moved on the opportunity. The Canadian province of Newfoundland (& Labrador) has a very high unemployment rate. The time gap between the recent completion of the Hibernia platform and construction of future offshore production facilities for the Grand Banks has stranded a large number of construction workers.

Contrast this situation with the struggle to find or train shipfitters and welders along the US Gulf Coast, and the relatively low unemployment rate in the US. Every US Gulf fabrication facility is severely short-handed. Wages are the highest since the early 1980s. The result is that bids on offshore projects and vessels are being pushed up as much by wages as capacity constraints.

Up steps a firm with growth intentions - Friede Goldman International - to purchase Newfoundland's Marystown fabrication facility. Was this a sympathetic gesture or a long-term business strategy? Neither - it was an exploitation of discontinuities.

Three months after the purchase, Friede Goldman has already placed a construction order for a semisubmersible drilling unit with the almost idle yard. More work is destined for this facility, for two reasons:

(1) Long-term shortage of both deepwater drilling units and fabrication capacity for production structures.

(2) Ease of transporting project components globally.

Five years ago, in the depths of the petroleum industry recession, there was little expectation that Canada's investment in training Newfoundland workers for the Hibernia project would yield more than short-term relief for the unemployed. This contract and the promise of more to come are proof that effort was prophetic. Marystown is one of the obvious discontinuities - there are others.

Beyond this apparent success, however, is a downside. What goes up - oil prices and fabrication contracts - can come down. Newfoundland and Canada must diversify this fabrication capability to ride out varying global economic and technical cycles, otherwise the investment will be lost.

Beyond global warming

Providing developed-nations energy standards for the entire globe while avoiding global warming or environmental degradation revolves around three dynamics - technological progress in either benign energy forms or combustion effluent disposition, the collective aspirations of people, and global population growth. Each dynamic has constraints:

• Technology progress: Breakthroughs in finding new energy forms or carbon dioxide conversion catalysts will be difficult to come by. The last energy breakthrough - nuclear - brought a new set of problems. Science aspires to revolution, but must accept evolution. That is why we rely heavily on fossil fuel powered transportation and heating, rather than nuclear fusion or solar energies.
• Collective aspirations: Mankind's desire for such things as fresh water, healthy food, adequate clothing, temperature maintenance, and convenient transportation - all inexpensively provided by petroleum products in some fashion - are growing, not receding. Consumer marketing, now beginning to penetrate most under-developed countries, is designed to meet and build these aspirations.
• Population growth: This dynamic gets sparse treatment when the subject of environmental degradation comes up. Contentious religious, ethnic, sexual, and political issues are bound up with it. Yet, at the present rate of growth, the earth will have to support 40% more people by 2050. Unless we find new planets to inhabit or develop new attitudes, things are going to get a tad crowded.

International conferences on global warming and environmental degradation deal with the first dynamic in a predictable way, have no way to handle the second dynamic, and ignore the third completely. Yet, if countries are serious about combating global warming, and this assumes that science can prove that mankind is a contributor, some work on behavioral modification will have to begin soon. Business and technology make the easiest targets for influencing change, but they cannot assume the burden alone.

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