Thread: Chinese labor eyed

http://www.rockymountainnews.com/drmn/b ... 00,00.html

Chinese labor eyed
EnCana explores bringing in workers for Colorado gas fields

By Gargi Chakrabarty, Rocky Mountain News
July 6, 2005

EnCana, Colorado's top gas producer, is exploring the option of hiring Chinese companies to build and operate oil and gas drilling rigs in Garfield County's sprawling Piceance Basin.

Hiring Chinese rigs and crews would cut costs for the Calgary, Alberta-based company at a time when drilling rates have nearly doubled since last year. But it also could raise immigrant labor concerns.

EnCana, however, says it has no immediate plans to bring in Chinese contractors.

"This is not something that EnCana is actively pursuing," said Doug Hock, spokesman for the company's U.S. subsidiary, EnCana Oil and Gas (USA), headquartered in Denver.

"And if we did, it would serve as a short-term solution to deal with increasing demand for rigs and crews in the Piceance Basin."

EnCana executives told analysts during a recent tour of the company's gas fields in the Piceance Basin, which covers thousands of acres in Garfield County, that drilling rates have jumped to $14,000 a day from $8,500 a year ago. Those executives mentioned the hiring of Chinese companies as an option, Hock said.

EnCana has 23 operating rigs in the Piceance Basin.

A Canadian newspaper recently quoted a spokesman saying that EnCana is exploring the possibility of having rigs built in China and then imported to the United States, along with crews to run them.

Tom Clark, executive vice president of the Metro Denver Economic Development Corp., likened the Chinese entry into the U.S. energy industry to the Saudis buying farmland here in the 1970s and the Japanese buying high-tech companies in the 1980s.

"This is the emergence of an economic competitor for America that is to be watched and competed with," Clark said. "American workers are increasingly comfortable competing in international marketplaces. This would come as no surprise to them and certainly would be something they will respond (to) in kind."

However, a labor union representative cautioned that hiring of Chinese crews could raise issues much like the controversy raised in the 1800s when Chinese laborers were used to build most of the West's railroads.

Chinese participation was limited after 1882, when Congress passed the Chinese Exclusion Act, which prohibited Chinese workers from entering the country and declared Chinese immigrants ineligible for citizenship. The law was repealed in 1943 when China became an important ally against Japan in World War II.

"If American people are losing jobs (to the Chinese), I could see some form of labor unrest," said Howard Arnold, business representative of the United Association of Pipefitters Local Union No. 208. The union represents roughly 1,800 members, mostly employed by contractors in and around Denver.

But most of the crews on rigs don't belong to unions.

"China exports labor and equipment everywhere; it won't surprise me to see them in oil rigs," Arnold said. "However, everybody would be affected directly and indirectly if they import Chinese labor.

"If Americans lose jobs, we won't have money to pay taxes that support our schools and hospitals. The list goes on and on."

Duane Smith, professor of Southwest studies and history at Fort Lewis College in Durango, said American labor unions in the 1800s had fiercely resisted Chinese immigrant laborers in the mines of Colorado, including those in Leadville and Silverton. In fact, unions physically drove out Chinese workers from the mines in Caribou, near Nederland.

"One of the bases of that was certainly racism," Smith said. "But there were economic reasons, too. The Chinese worked for less. There was a feeling that if Chinese men came to a mining district, there wouldn't be much ore left, and white men couldn't make a living anymore."

As a member of the WTO, we would have to hire them, if this company wanted to bring in the Chinese.

Thought I would bump this old thread with an updated article.

www.rockymountainnews.com

Chinese rig at work
Politics, cost-cutting clash over imported workers in Colorado

By Gargi Chakrabarty, Rocky Mountain News
August 10, 2005

The first wave of Chinese workers and their rigs are up and running in the Piceance Basin in Garfield County, the state's oil and natural gas hot spot.

Last week, a rig built in China's Sichuan province - set up by Chinese engineers and managed by a company run by Pakistani immigrants - began drilling its first well near Parachute, west of Rifle.

And next month, two more Chinese rigs and workers will start drilling wells in Garfield and Moffat counties.

A U.S. shortage of labor and equipment is driving local energy companies to seek out partnerships with the Chinese.

"It is a matter of price and time," explained Bill Croyle, a partner in Western Energy Advisors.

Denver-based Western Energy Advisors helps China National Petroleum and its subsidiaries sign drilling contracts with U.S. companies. It has contracts to import two Chinese rigs and crews in September.

"Since energy prices are up, the cost of acquiring leases and drilling is up," Croyle said. "On the time side, every lease acquired has a time limit on it that costs the operator, the Bureau of Land Management and the public money if the lease isn't exploited."

As of Aug. 2, Colorado had 80 rigs, reports the Colorado Oil and Gas Conservation Commission.

Croyle said there's an estimated shortage of 200 rigs in the region. As a result, the cost to run a rig has jumped to anywhere from $13,000 to $16,000 a day from $8,500 a year ago, industry executives say. A rig takes between 10 and 20 days to drill a well.

"So companies are going all around the country, and now all around the world, to find equipment and people to exploit the opportunity," Croyle said, adding that Chinese rigs are paid competitive rates.

Meanwhile, the Colorado Oil and Gas Commission will talk to the companies to make sure "they are taking necessary precautions for imported rigs," said Tricia Beaver, the commission's hearings manager.

The deals have raised political hackles in Colorado.

Rep. John Salazar, D-Colo., whose district includes some of the state's largest gas fields, held meetings with energy companies and community leaders in Garfield and Moffat counties last week. Salazar is not happy with the Chinese imports.

"There are plenty of people in rural Colorado who need good paying jobs and could do the job if we just took the few months to train them," Salazar said. "These companies are trying to cut costs at the expense of American jobs."

Calgary's EnCana Corp., a top gas producer in Colorado, considered hiring Chinese companies to drill wells in Garfield County but backed off those plans.

The controversy comes in the wake of Chinese energy company CNOOC Ltd.'s decision to abandon its $18.4 billion offer to acquire Unocal Corp. following an outcry from inside the Beltway.

Political backlash against Chinese companies didn't have anything to do with EnCana's decision, said Roger Beimens, president of EnCana Oil and Gas, the Denver-based U.S. subsidiary of EnCana.

The local energy industry pointed out that anti-Chinese sentiments run contrary to America's economic interests.

"The rest of the world, including China, is catching up with the U.S. in terms of technology and skilled workers," said Fred Julander, founder of Denver-based Julander Energy Co. "At the end of the day . . . we have to rely on each other to improve our economies and our standards of living."

For The Woodlands, Texas-based Presco Inc., contracting a rig from China was simply a solution to the long-standing problem of a shortage of rigs and crews in Garfield County.

Presco leases 8,000 acres in Garfield County, some of it near a controversial area called Project Rulison where an underground nuclear test in 1969 left much of the natural gas radioactive.

The company has been there for more than four years but drilled its first well in 2003.

Being a small company and competing with giants such as EnCana Corp. and Williams Cos. Inc. is not easy, said Kim Bennetts, Presco's vice president of exploration and production.

"We had a hard time locating a rig because of activity by larger companies like EnCana and Williams, which have most of the rigs under contract," Bennetts said.

Bennetts said Presco discussed importing Chinese rigs with Sajjad Chaudhry, president of Houston- based GTS and a Pakistani immigrant who has been living in the U.S. for many years.

Bennetts and Chaudhry traveled to China's Sichuan province in January and met with executives of HongHua Ltd., manufacturers of rigs.

Satisfied with HongHua's professional manner and high quality of rigs, GTS signed a joint venture agreement with the Chinese company. And Presco signed a contract with GTS to operate a HongHua-built rig for two years, Bennetts said.

The rig was shipped from China and delivered to Rifle in late June. It was assembled in July and started drilling its first well last week. It is scheduled to drill up to four wells this year. Gohar Fayyaz, GTS' head engineer and also a Pakistani immigrant, is overseeing the site.

Four Chinese engineers from HongHua helped set up the rig. Those engineers will be stationed in Garfield County for another few months to ensure the rig operates smoothly, Bennetts said.

"If this rig operates efficiently, we have the option to contract for additional rigs," Bennetts said. "We will make a decision this fall."

Meanwhile, residents of Garfield County and activists remain concerned.

"What's happening now is very much like the boom and bust cycles that had happened in Colorado years ago," said Pete Kolbenschlag of the Colorado Environmental Coalition. "Our concerns are not that the rigs and crews come from China or Pakistan.

"Our concerns are that oil and gas development is happening in an unsustainable fashion. We don't have the workers and the equipment, yet we are rushing into it because it's all about making money for the industry."

Colorado's connections to China

• GTS Drilling Services: A Houston-based company signed a partnership with HongHua Ltd. of China to import drilling rigs. The first rig was shipped from China to Rifle in June and began drilling its first well last week. It will drill up to four wells this year. GTS has been hired by The Woodlands, Texas-based Presco Inc., which has leased 8,000 acres in Garfield County.

• Golden Bear Drilling & Services: A Denver-based company that will import rigs from subsidiaries of China National Petroleum Corp. Two rigs are scheduled to be shipped from China to Garfield and Moffat counties in September. Golden Bear has not revealed the names of the companies contracting the rigs. It plans to import 10 rigs and experienced Chinese crews to operate at least five of them to this region in the next couple of years.