A once-large ship repair and construction yard in Mobile, Ala., operated by BAE Systems Inc., will close in June after two years of downsizing.
“It’s closing because of the prolonged downturn in the ship repair business supporting offshore oil and gas in the Gulf of Mexico,” said Karl Johnson, spokesman at BAE Systems Ship Repair. The yard stopped making repairs in February.
“Workers are completing construction on a newbuild MSV (multi-service vessel) for Oceaneering that will wrap up this spring,” he said. The yard is also doing work, due to finish this spring, for Austal USA on ship launch services and steel preparation for the U.S. Navy’s littoral combat ships.
On Feb. 28, BAE told 70 Mobile workers in repairs that they would be laid off immediately. “Another 85 workers associated with building the Oceaneering vessel will leave by June,” Johnson said.
The U.S.-flagged subsea support and construction vessel that workers are finishing for Oceaneering International of Houston will measure 353 feet long, with a 72-foot beam. The boat, originally scheduled for 2016 completion, is to be delivered during this year’s second quarter.
Regarding the employees, “it’s difficult to let good, hard-working people go,” Johnson said. “Starting in June, we’ll have a caretaker staff at the Mobile shipyard. There are no other plans for the site at this time.” BAE’s U.S. headquarters are in Arlington, Va.
Between mid-2016 and February of this year, the Mobile work force was cut from 530 employees to 170 through layoffs and attrition during offshore oil weakness. Crude oil prices sank from over $100 a barrel in 2014 to below $30 the next year but have since stabilized above $60.
“The offshore oil service industry is languishing because of limited demand and oversupplied rigs and vessels,” Richard Sanchez, senior marine analyst at IHS Markit in Houston, told Professional Mariner in early April. “Oil prices are higher, but much of the oil companies’ exploration and production investment has been diverted to onshore projects.”
“Many OSV (offshore supply vessel) providers are still losing money, and the idea of building new vessels now for the offshore Gulf is preposterous,” Sanchez said. “OSV markets are severely oversupplied, and it will be a long time before new (vessels) are ordered.”
In mid-2010, BAE acquired the Mobile yard from JFL-AMH Partners LLC of Florida, along with operations at Jacksonville, Fla., Mayport, Fla., and Moss Point, Miss., with a total staff of about 1,000. “Moss Point closed as a facility for us shortly after that transaction,” Johnson said. The Mobile and Florida sites became BAE Systems Southeast Shipyards, doing vessel maintenance, repairs, conversions, marine fabrication and construction.
Because of a lack of Navy orders, a number of layoffs have occurred at the Jacksonville yard since 2015. BAE also has had to dismiss staff at yards in Virginia, California and Hawaii in recent years. But the company has openings, and its Mobile workers can apply for them.
“We’re hiring, specifically at Norfolk and San Diego, for work associated with Navy ship repair contracts,” Johnson said.
As for the future, “Gulf yards can expect to benefit from reactivation of the cold-stack fleet once a market recovery begins,” Sanchez said. “But that may not materialize until 2019 to 2021. We need even higher oil prices to get offshore demand going again.”
BAE Systems is a wholly owned U.S. subsidiary of London-based BAE Systems PLC. In October, BAE Systems PLC said it would cut over 1,900 jobs in the United Kingdom in military, maritime and intelligence services as it restructured.