Emerson Automation Solutions had just invested $110 million into renovations at its Minnesota facilities in 2013 and 2014 when the oil downturn hit and local expansion plans screeched to a halt.
Now, with the tide changing and new investments in the oil industry Emerson is back in growth mode. The company is putting about $25 million into facilities in the southwest suburbs of Minneapolis and has hired over 100 workers.
Emerson, which is based in St. Louis, makes temperature gauges, pressure and flow sensors and other automated equipment at plants in Shakopee, Chanhassen and Eden Prairie. Its equipment allows oil companies to remotely monitor oil wells, rigs and refineries and prevent explosions, equipment failures and production slowdowns.
The company will soon add 80 workers in Chanhassen and launch a $14 million renovation there that converts 30,000 square feet of offices into factory space.
In Shakopee — the headquarters for Emerson’s Rosemount Measurement and Analytical brand of instruments — the company hired 100 new workers and just finished $10 million of renovations.
The Shakopee changes include a state-of-the-art multimedia conference center with live satellite feeds and a new customer-training factory/laboratory that “looks exactly like what you would see inside a ship or an oil refinery,” said Mike Train, executive president of Emerson’s $9 billion Automation Solutions subsidiary.
“This is all about customer training and engagement and about broadening our product portfolio,” said Lal Karsanbhai, the Rosemount Group’s vice president, noting the factory-like training center’s three stories of tanks, fuel readers, pipes, valves, transmitters and flow meters plus a neighboring digital control room.
As construction workers tightened bolts and checked tank readings, Karsanbhai bounded up the center’s ladder with a smile. “Ah. This is starting to get that machine-oil smell of a real plant, which is great.”
Next week, 2,500 customers will come to the Twin Cities for Emerson’s Global Users Exchange conference. About 100 of those customers will head to the new training facility and learn how to safely monitor controls for some of the world’s most sensitive industries.
Next year visitors and trainees are expected from about 200 firms, including Dow Chemical, Shell and Chevron, Train said.
Emerson controls about 50 percent of the oil and gas industry’s process monitoring equipment market, so outreach and education are important. So is sales.
“In the last six months we’ve had North American growth and seen customers willing to invest again in [equipment] maintenance and new projects. And that’s good,” Train said. “The oil and gas downturn was deeper and longer than anything that the industry ever witnessed.”
Emerson saw eight straight quarters of down business. When added together, Train said, the company probably saw sales drop 10 to 15 percent since crude oil prices sank from $116 a barrel in 2013 to just $29 in early 2016.
Emerson’s Minnesota staff fell 8 percent but recently returned to about 2,400 as crude oil prices crawled back. Oil prices sit around $50 a barrel.
It’s not a full recovery, but it matters and is showing up in numbers nationwide.
Emerson started seeing improvements around the first of the year, Train said.
That’s a bit ahead of the industry as a whole, which reported year-over-year numbers seeing a “positive, accelerating trend” in March, according to an August report from the 600-member Association of Manufacturing Technology (AMT).
Train credited the uptick to renewed fracking activity in the Bakken oil fields in North Dakota, the Permian Basin in Texas and in Pennsylvania.
“And we are seeing a lot of work around terminals and pipelines that are moving things along again,” Train said. “Oil production is up again.”
Economists expect the impact of Hurricane Harvey will create a temporary three- or four-month slowdown as factories, refineries and petrochemical plants scramble to dry out, power up and get production and deliveries back online.
Emerson was forced to shut down eight of its facilities, check on 2,000 workers and find some of them shelter and temporary housing. It is also helping customers that lost power and found their entire electrical systems underwater.
But beyond temporary hurdles because of the disasters, the oil and chemical industries are expected to resume growth and continue to build the domestic resources, said Patrick McGibbon, strategic analytics vice president at AMT.
“We have always consumed more natural gas than we produced. But we are just now getting to the point where we’re importing a lot less oil. For the first time, we will start exporting natural gas,” McGibbon said, noting pipeline or port building projects scheduled for West Virginia, Pennsylvania and South Carolina. That “greater independence of oil has made Emerson a lot richer in the last year, with flows picking up and the building of new pipelines.”
Alex West, principal analyst of IHS Markit’s smart manufacturing division, said Emerson, Siemens and other makers of wireless, remote and other oil-equipment monitoring systems have all benefited from the rebound of oil and surge of natural gas.
“We have gone from those $80-a-barrel break-even points to oil prices now sitting at $50 a barrel. So, companies had to find a way of … reducing their costs,” he said. “Certainly instrumentation like Emerson’s has played a part in that.”
Its remote sensors and monitors and nonstop digital-data collection let oil “companies have better visibility of any potential energy wasting, and helped with collecting data and maximizing the efficiency of their processes,” West said. “Certainly the unconventionals [like the shale/fracking sector] have been one that we have seen adopting instrumentation quickly to help benefit its business and to reduce break-even costs.”
Emerson executives also point to a series of strategic acquisitions that have positioned the company well for when the oil and gas industry fully recovers.
In the past few years, Emerson made a series of small purchases, including a fledgling sensor company, a flame-and-gas detection equipment maker and an English firm that makes products that prevent pipe corrosion. In the spring, Emerson made a big acquisition, paying $3.1 billion for the energy valves and control division of Pentair.
The Pentair deal will fill a gap in Emerson’s energy valves business, Train said.
“We already had a large valves business,” he said. “But Pentair’s were a slightly different type.”
The division makes a safety valve that can automatically monitor pressure and shut off on its own, without the need for constant adjustments. The unit didn’t do much for Pentair, which is a well-respected maker of pumps.
But at Emerson, Train said, it will do well as the industry marches toward full recovery.
It’s taken two years, but “we are starting to get some positive underlying growth,” Train said.