HOUSTON(Reuters) - A shortage of skilled labor and nagging inflation from strong wage growth on the U.S. Gulf Coast are pressuring liquefied natural gas (LNG) developers and delaying some projects from reaching a financial go-ahead.

There are five LNG plants under development in Texas and Louisiana and 16 others on the drawing board in the U.S. looking to secure investment and customers. The five under construction would add a combined 86.6 million metric tons per annum (MTPA) of the superchilled gas, enough to keep the U.S. as the world's largest exporter for years to come.

With labor costs jumping as much as 20% since 2021, busting construction budgets and squeezing projected returns for those firms still trying to attract new investors, the fate of some of the early projects has become less certain.

Work at Golden Pass LNG, one of the largest U.S. projects, largely halted after its main contractor ran $2.4 billion over the original budget and filed for bankruptcy. Sempra LNG has revisited selecting Bechtel Corp to build its Cameron LNG expansion project to reduce costs, and it has reduced its stake in a Texas project, Port Arthur LNG, on higher construction costs.

NextDecade ( NEXT ), which is building the first phase of its $18 billion Rio Grande LNG export terminal, achieved a greenlight after recruiting new investors that reduced its original investors' stake after engineering, procurement and construction (EPC) costs rose, analysts said.

EXTRA PAY

Behind the struggles are costs that skyrocketed after the COVID-19 pandemic. Contractors have raised wages for skilled workers by as much as 20% in three years, and in some cases are having to pay a per diem rate to retain them, said Travis Woods, president of Gulf Coast Industrial Group, which represents over 1,500 contractors in Texas and Louisiana.

"Welders, pipefitters and electricians for sure are demanding more to keep them on the job. Per diem in some cases are paid to everyone on the project no matter where they live," Woods said.

The five plants had on site in excess of 20,000 employees up until Golden Pass LNG's prime contractor Zachry sent home 4,000 workers, according to regulatory filings by the companies and company statements over the last three months.

Venture Global LNG, which has Zachry helping build its Plaquemines plant in Louisiana, said the modular nature of the projects has "insulated us from the significant labor and inflationary challenges that have impacted other projects," said a spokesperson.

Data from the U.S. Bureau of Labor and Statistics show wages for construction workers in the oil and gas pipeline sectors increasing in Louisiana, where many of the new U.S. plants are being built, by 19% in 2023 compared to 2022.

"Welders and pipefitters are being offered up to $60 an hour and a sign-on bonus, if they agree to stay through completion," added Woods.

Data from LNG research and consulting firm Rapidan Energy Group show that between 2021 and 2023 EPC contracts for new LNG plants increased between 18% and 25%.

Bechtel Corp, which is the largest U.S. LNG plant contractor and a Zachry rival, declined comment on the situation.

The Reston, Virginia-based contractor has been the preferred builder for top U.S. LNG exporter Cheniere Energy, delivering projects using largely lump-sum, turnkey EPC contracts.

EPC contractors may look to reduce the scope of their contracts and make more elements cost reimbursable, to lessen the risks, according to Poten & Partners, a LNG shipping and consulting company.

"EPC contractors may now be factoring in a 30% to 40% increase into their lump-sum turnkey contracts," it said in a note last month.