Higher oil prices may spell headaches for people pulling up at the gas pump, but it has prompted oil companies to increase production and look for new ways to meet the rising demand.
Sauder Custom Fabrication, 220 Weaver St., is a local company that has seen an increase in the business of making vessels that hold equipment to manufacture and process oil. The company was founded in 1926 under the name Sauder Tank Company by the Sauder family in Madison. The original products included storage tanks and various oil equipment. Sauder was moved to its present location in Emporia in 1956 so it could use the rail line. In 1986, the company was purchased by employees and the name was changed to Sauder Custom Fabrication, Inc.
Sauder has no typical product, said Dale Davis, company president/CEO. According to the company’s Web site, “Sauder Custom Fabrication fabricates Steel Pressure Vessels for the Oil, Power and Chemical Processing Industries to all of the U.S. and all Foreign Continents, ranging from 50,000 pounds to 400,000 pounds; up to 14 feet diameter and lengths up to 250 feet.”
“We have no standard product,” Davis said. “The customer has specific equipment and they send us specifications. We build pressure vessels like Rolls Royce built cars at one time.”
Davis said what is driving business right now is the demand for refined oil products. Bottom line, the demand for more oil worldwide is the driving force behind the industry, including industries like Sauder. In Kansas alone, a few years ago, there were only a few oil units that drilled in Kansas. That figure has jumped to about 47 as more people are poking holes into the ground in search of oil.
“The demand for energy still hasn’t hit the wall,” Davis said.
According to a December 10 article in Fortune magazine, the demand for oil has caught up with supply. Davis said in the 1970s, the world had a surplus of oil products and about 40 percent of the refineries were shut down.
“Now worldwide the demand has grown to a proportion where the supply can’t meet the demand,” he said.
Davis said Sauder’s business has increased dramatically worldwide, with business in 14 countries including Canada, Russia, Korea, China, Trinidad, Romania, Nigeria, Venezuela, Taiwan, Mexico, India, Saudi Arabia, Brazil and Germany.
The “tar sands” in Canada are an example of an expanding oil industry. Davis said the oil is a different type of crude and requires a different way of refining. According to a 2005 article in Forbes Magazine, it wasn’t profitable to extract oil from this area because it comes from dense sand and shale. The Energy and Utilities Board estimated in 2005 that there were about 1.6 trillion barrels of crude oil trapped in the tar sands. In 2005, about 11 percent of this oil (175 billion barrels) was recoverable under oil prices.
“A lot of new crude is going to be coming out of Canada,” Davis said.
Sauder has shipped more than 30 vessels to refineries such as Flint Hills Refining in Pine Bend, Minn., Wyoming Refining in New Castle, Wyo., Suncor Refining in Denver, CHS Cooperative in Laurel, Mont., and Suncor and Shell Oil in Canada.
“The main advantage for refiners in utilizing this source of crude is that due to its characteristics, the purchase cost is less expensive than other crude sources and with some refinery modifications it can be refined with a lower net cost,” Said Mike Davis, product manager for Sauder.
The higher price of oil is a one-two punch, Davis said. The higher prices people pay at the pump have industries looking to expand. For businesses like Sauder, this spells more customers.
Expansions are being driven by several factors, a major one being demand.
“China’s demand alone is 30 percent higher and it is predicted to be that way for three to four years, and then it is (predicted) to exceed the United States,” Mike Davis said.
Another factor is developing countries. Many of these countries are seeing the comforts that the United States has and are upping their production of oil.
“You see a very fast ramping up (in) China and India,” Dale Davis said, adding that other countries are fast overtaking the United States in use.
All the extra demand is causing another shortage, Dale Davis said, a shortage of skilled workers to build the equipment in industries like Sauder.
“There is a tremendous need for skilled welders,” Davis said. “There truly is a huge shortage in all sectors. Engineering and manufacturing is the nerve center of the operation.”