March Newsreel: Boomerang Tube Funds Texas Plant; Oil & Gas Execs Predict More 2010 Employment and more

March 2010 Vol. 237 No. 3

Boomerang Tube Finalizes Funding For Line Pipe Plant In Texas
Free Pipeline Welding Productivity Seminar
Senior Oil & Gas Executives See Rising Employment This Year
Dresser Selected For Project In Athabasca Oil Sands

AGA Releases FERC Manual For Natural Gas Utilities
Texas Gas Plans Mississippi Pipeline Compressor Station Rejuvenation
Union Pacific’s Pipeline Express Sets Milestone
New Factors Impacting LNG Imports
Energy Companies Retire Leases In Montana
CenterPoint Unit Acquires East Texas Gathering Assets
Inaugural Tulsa Pipe Equipment Expo Deemed A Success
Greenhouse Gas Services Expands Into Renewable Energy
NGSA President Raps FY 2011 Budget Proposal

Boomerang Tube Finalizes Funding For Line Pipe Plant In Texas
Boomerang Tube, LLC has finalized funding to build a new manufacturing facility in Liberty, TX to produce welded OCTG (oil country tubular goods) and line pipe for oil and gas customers in the United States and Canada. Construction will be financed by Access Industries, a New York-based industrial group which has committed $200 million for the project. The facility will commence operations in August and employ up to 350 people once fully operational.

“We have great confidence in the future of this business and expect to quickly become a high-quality supplier to the oil and gas sector,” said President/CEO Gregg Eisenberg. “Our new, state-of-the-art equipment will allow us to offer a wide array of products to our distribution network. We are pleased that the playing field finally has been leveled for our business with the recent decision by the International Trade Commission to impose duties on imports from China.”

He said the 487,000-square-foot plant will use the most modern equipment available in providing the lowest conversion costs in the OCTG and line pipe industries. Modifications to the existing building are under way, and equipment deliveries are set for the second quarter.

Ross Lukatsevich, Director of Access, said, “Gregg Eisenberg and Chief Operating Officer Sudhakar Kanthamneni are an aggressive, results-oriented team with tremendous experience in establishing successful businesses and starting up new facilities. We expect Boomerang to be a platform for additional investments in the North American oil and gas industry.”

Free Pipeline Welding Productivity Seminar
Lincoln Electric will hold a free pipeline welding productivity seminar at is Cleveland, OH headquarters on March 16. Topics include: Pipeline Market Overview; Latest Construction Trends; Understanding PHMSA’s Latest Findings; Welding Consumables Selection; Solutions to Common  Welding Challenges; Understanding Hydrogen Cracking; Automating the Welding Process; and Various Welding Demonstrations and Facility Tours. For information, contact michelle_zayakosky@lincolnelecric.com or staci_hynd@lincolnelectric.com, Phone (216) 383-8355. 

Senior Oil & Gas Executives See Rising Employment This Year
Half of U.S. oil and gas senior executives expect to increase employment this year and two-thirds believe the recession will end this year, according to Grant Thornton LLP’s eighth annual Survey of Upstream U.S. Energy Companies.

Reed Wood, Grant Thornton LLP’s partner-in-charge of the firm’s energy practice, detected optimism from the respondents of the 2010 survey. “It was convincingly evident in their outlooks for prices, capital expenditures and employment.”

While only a third of the respondents expect an overall increase in employment for the industry as a whole in 2010, half indicate their company would increase employment levels. The numbers for 2011 are more promising, with nearly 74% expecting industry employment to increase and 56% expecting their own company’s employment to increase.

Two-thirds believe conditions will improve enough for the U.S. economy in 2010 for most business leaders to consider the recession to be over (34% said the first half of 2010 and 33% said the second half of 2010). In addition, 71% believe the recession will end in 2010 for the upstream sector and 65% for service companies. Only 11% believe the recession has already ended for the U.S. economy, 7% for the upstream sector and 1% for service companies.

Wood feels the survey responses confirm other dialogue with industry leaders that “the upstream industry experienced increased cash flow during the second half of 2009 and more favorable interest in their domestic capital intensive projects requiring highly trained and experienced personnel. Continued stabilization and improvement of the key drivers should result in 2010 as a strong beginning of hopefully another extended recovery for the industry and the U.S. pursuit of less dependence on foreign resources.”
 
Industry issues and opportunities from this year’s survey include:

  • Uncertain natural gas and crude oil prices repeat for a second year as the top concerns in the industry today.
  • Respondents still believe that incentives for increased U.S. drilling are the number one way for U.S. consumers to reduce energy prices.
  • While most respondents view alternative fuels as a long-term solution, respondents indicated that clean coal is the most likely to be effective in the short term.
  • Area of most opportunity: Successful exploitation of existing prospects, followed by mergers and acquisitions, and operating efficiencies.
  • While 35% believe the United States is a global leader in the industry, 80% believe it lags by its dependence on foreign sources of energy.

Dresser Selected For Project In Athabasca Oil Sands
Dresser Masoneilan® was named the steam-conditioning and turbine bypass system supplier for an unconventional oil mining and extraction project in the Athabasca Oil Sands in Alberta. The project is expected to begin producing 100,000 bopd in 2012. It has the potential to produce up to 345,000 bopd with future expansions. Dresser Masoneilan will provide steam pressure-reducing valves, desuperheaters and associated equipment required for the project’s steam conditioning and turbine bypass systems. The company will supply operational service and support for the life of the mines.

AGA Releases FERC Manual For Natural Gas Utilities
The American Gas Association (AGA), through its sponsoring members, has released The AGA FERC Manual—A Guide for Local Distribution Companies, written by lawyers at Dewey & LeBoeuf LLP.

Since the enactment of the Energy Policy Act of 2005, in which Congress gave FERC powerful enforcement authority, users of pipeline services in general, and local distribution companies in particular, have been the focus of substantial attention from FERC’s Office of Enforcement.

In response, the AGA and its sponsoring members have developed this complete guide to FERC’s regulation of natural gas in order to highlight the areas that most affect their interests and create their greatest jeopardy, while also offering suggestions about structuring compliance plans, conducting internal investigations and responding to a FERC investigation.

The manual is accompanied by a set of DVDs containing lectures on each of the major topics for viewing by company employees. On March 31 AGA and Dewey & LeBoeuf will co-host the AGA FERC Manual Users’ Forum at AGA’s headquarters in Washington, DC. The manual and DVDs will be available for
sale to the general public following the forum.

Texas Gas Plans Mississippi Pipeline Compressor Station Rejuvenation
GE Oil & Gas has replaced-in-kind a gas turbine at a Texas Gas Transmission, LLC pipeline compression station in Mississippi, using advanced technology designed to revitalize and recover performance with improved efficiency.

Commissioned in 1969, the original GE Frame 32H gas turbine had operated at the Lake Cormorant compression station for more than 200,000 hours due to a program of repair and maintenance. However, the next scheduled outage brought an unknown repair scope due to end of life issues for turbine discs, buckets and other hot gas path components.

When the company decided to make a long-term investment that would revitalize the original package, Texas Gas hired GE to upgrade the technology in a project valued at more than $4 million, designed to leverage technologies from GE’s advanced fleet of Frame 5, 6 and 7 gas turbines.

GE incorporated new design features into a newly manufactured replacement Frame 32J machine for the Lake Cormorant station, increasing efficiency by 2%. The new unit is in full-speed, full-load operation and Texas Gas has ordered a second unit, scheduled for October delivery.

Bill Nunn, manager compression support, Texas Gas said: “Knowing that several of the hot gas path components were reaching the end of their design life, we began evaluating our options to restore the existing unit to its original performance.”

Union Pacific’s Pipeline Express Sets Milestone
Union Pacific Railroad’s Pipeline Express service set a milestone in delivering its 25,000th rail car of customer product. Formed in 2005, Pipeline Express has grown from moving 1,700 rail cars in its first year to nearly 8,000 for its customers through year-end 2008.

Pipeline Express says it serves the steel pipeline industry for oil and gas producers with truck-competitive transit times and a rail network that aligns well geographically with new pipeline projects.

“By offering the best value proposition to the natural gas industry, Union Pacific has emerged as the clear transportation choice,” said Greg Shimonek, senior business director for the railroad’s Pipeline Express service. “Our carloads tell the story.”

Natural gas reserves are expected to grow 39% from 2007 levels by the end of 2009, according to the Energy Information Administration. Having invested nearly $17 billion in its rail network since 2005, Union Pacific said it is ready to serve that growth.

“We have the industry’s largest fleet of 89-foot flat cars capable of hauling 100 tons of pipe,” Shimonek said. “That’s greater than 40% more capacity in terms of weight than most of the cars our competitors offer.”

Union Pacific said it can carry 9-11 pipes on a single rail car compared with 7-8 for other rail carriers and just two per truck.

New Factors Impacting LNG Imports
Ziff Energy released a new report examining global LNG supply availability for North America to 2020. As global gas demand recovers and new liquefaction projects are delayed, Ziff Energy expects a potential shortfall in LNG supply commencing in 2014, which will put upward pressure on global gas prices.

Emerging LNG import markets put further pressure on global LNG supply when new regasification terminals begin operations by the 2013 timeframe. Potential LNG supply is expected exceed 50 Bcf/d by 2020, with over 10 Bcf/d of LNG supply added by 2014 from a dozen projects.

Energy Companies Retire Leases In Montana
Sen. Max Baucus (D-MT) announced that five energy companies will relinquish oil and gas leases on nearly 29,000 acres in Montana’s Rocky Mountain Front adjacent to Glacier National Park. Baucus said this “will help preclude oil and gas development and preserve fish and wildlife habitat in this unique area, which is important to citizens of Montana and the rest of the country.”

The oil and gas leases in the Badger-Two Medicine area of the Lewis and Clark National Forest were returned to the U.S. Bureau of Land Management and cannot be leased again because they are located in an area withdrawn from future leasing under a law that Baucus helped enact in 2006.

Collectively, Occidental Petroleum, Williams Cos., Rosewood Resources, XTO Energy Inc., and BP are voluntarily relinquishing leases on 28,730 acres. The companies did not receive any consideration for their actions.

CenterPoint Unit Acquires East Texas Gathering Assets
Martin Midstream Partners L.P. said its Waskom Gas Processing Company joint venture completed acquisition of the East Texas natural gas gathering and processing assets of the Crosstex Energy companies. WGPC’s general partners are CenterPoint Energy Gas Processing Company, an indirect, wholly owned subsidiary of CenterPoint Energy, Inc.

“We are pleased to add these gathering assets to our Waskom joint venture with CenterPoint Energy. Additional earnings will come primarily from fee-based contracts which are not directly affected by changes in commodity prices,” said Ruben Martin, president/CEO of Martin Midstream GP LLC, MMLP’s general partner.

“The East Texas system is located near the Waskom gas processing facility which will provide the opportunity to capture additional volumes by integrating the gathering system with the plant,” he said.

Inaugural Tulsa Pipe Equipment Expo Deemed A Success
Tulsa, OK has long been an important base for oil and gas pipeline manufacturers, contractors and energy companies. While much of the industry has consolidated in Houston, Tulsa remains a key manufacturing and service hub for the pipeline market. Last fall, several local companies decided to re-acquaint the market with the many products and services based in the area. The first-ever Tulsa Pipe Equipment Expo was held Nov. 19-20 and declared a success by attendees and sponsors.

The concept for the pipe expo began with an idea from Shawn Lowman, director of sales and marketing for Vacuworx International, when he was planning an open house for the company.

“I wondered how we were going to get anyone to come to our open house in Tulsa when the economy was in the gutter,” Lowman recalled. “When a contractor comes to Tulsa for business, they almost always set up meetings with other manufacturers. We had a good relationship with key manufacturers – and did not compete with each other. I approached Midwestern Manufacturing, Darby Equipment Company and McElroy Manufacturing.”

Helping organize the event were Chris Greggs and Dave Tanner from McElroy, Joe Beffer from Midwestern, and Bobby Darby from Darby Equipment. Other Tulsa companies supported the event as associate sponsors including Braden/Paccar Winch, Allen Edwards Inc. and Boyd Metals.
More than 100 visitors attended tours and equipment demonstrations by the four primary participants and a networking dinner. Attendance was limited to ensure that the event ran smoothly. Plans are to hold another Tulsa Pipe Equipment Expo this year. No date has been selected yet.

Greenhouse Gas Services Expands Into Renewable Energy
Greenhouse Gas Services, a GE AES venture that invests in and develops projects that reduce greenhouse gases, has expanded into renewable energy and Canada by acquiring StormFisher Ltd. The acquisition of Toronto-based StormFisher – which builds, owns, and operates projects in North America that turn food or agricultural byproducts into natural gas and electricity – enables Greenhouse Gas Services to grow in markets outside the U.S. and particularly where governments support renewable energy, such as Ontario.

“Adding the StormFisher team and its pipeline of shovel-ready biogas projects expands Greenhouse Gas Services’ business line and complements our carbon platform,” said Mauricio Vargas, CEO of Greenhouse Gas Services. “As carbon and renewable energy policies continue to evolve, we see tremendous opportunity and growth for us in North America.”

Greenhouse Gas Services will break ground this year on its first biogas project, a 2.8-MW facility in London, Ontario that will convert more than 100,000 tons of organic materials from agri-food producers into renewable energy through anaerobic digestion. Electricity produced at the plant will be sold to the Ontario Power Authority.

Greenhouse Gas Services is developing other biogas facilities in Ontario, Wisconsin and California, which are expected to start operation by the end of 2011.

NGSA President Raps FY 2011 Budget Proposal
R. Skip Horvath, president/CEO of the Natural Gas Supply Association (NGSA), was deeply critical over the Obama administration’s FY 2011 budget proposal, saying it is “is out of balance with the nation’s economic and clean energy goals.”

“If the administration is serious about creating jobs and reducing greenhouse gases, it should be looking for ways to encourage natural gas production rather than further burdening the industry with billions of dollars in tax increases.

“Payments from natural gas producers are already one of the largest sources of revenue for the U.S. Treasury. The effective income tax rate on natural gas production, including production taxes, import duties and excise taxes, totaled more than 4% in 2008, significantly higher than the statutory U.S. tax rate of 35%. Above and beyond taxes, natural gas producers contributed in 2008 more than $7 billion to the federal government and nearly $1.5 billion to state governments in royalties and other non-tax payments.”

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