July 2016, Vol. 243, No. 7

In The News

In the News

Shell Plans to Build Huge Petrochemical Complex in Western Pennsylvania

Royal Dutch Shell said last month it will build a multibillion-dollar petrochemical complex near Pittsburgh to make base chemicals and plastics from the natural gas produced in the Marcellus and Utica shale basins. Shell said the location benefits from “shorter and more dependable supply chains, compared to supply from the Gulf Coast.” Shell will retain its petrochemical and refining complex in Deer Park, near Houston. Shell is also planning to expand its chemical complex in Geismar, LA.

CEO Ben van Beurden said chemicals are a growth area for Shell which has been cutting thousands of jobs and billions in capital expenses after its acquisition of BG Group. Shell will start construction in Pennsylvania late next year on the ethylene cracker and a polyethylene derivatives unit. The plant will bring 600 permanent jobs, not counting about 6,000 jobs during construction

Wiese Leaves PHMSA for Executive Position with TRC

TRC Companies, Inc. announced May 31 that Jeff Wiese has joined as vice president and national practice leader for Pipeline Integrity Services. He will lead the management and delivery of geographic information systems (GIS) and integrity solutions.

“With over 25 years of industry experience, Jeff’s knowledge and relationships will be invaluable to our clients as they face increasing pipeline integrity management demands,” said Chris Vincze, TRC’s Chairman and CEO. “The perspective and insight Jeff brings will support the growth of our team and help our clients meet regulatory requirements and business goals.”

Prior to joining TRC, Wiese served as associate administrator for the U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety Administration (PHMSA), where he directed 350 employees and executed a budget of $200 million. He worked with executive branch agencies, congressional panels and oversight offices, pipeline companies, major pipeline trade organizations, state government representatives, public and private sector emergency responders, and public safety and environmental advocates. The programs he managed included strategic direction, personnel and budget development and oversight, data-driven and risk-based regulatory inspection and enforcement, research programs, and land-use management practices.

“As one of the only firms in the nation to offer full-lifecycle pipeline and integrity services to mid-sized clients, TRC’s reputation in the industry is unsurpassed,” said Wiese, who worked for PHMSA for 17 years.

“TRC’s integrated technology and market-leading solutions, combined with Jeff’s regulatory background, will provide our customers with unparalleled service offerings,” said Ed Wiegele, senior vice president of Oil and Gas.

Technip, FMC Merging as No. 2 Oilfield Service Company

Analysis by Rystad Energy shows the recently announced combination of Technip and FMC will create the second-largest company in the oilfield service industry, after the merger between Halliburton and Baker Hughes failed.

Technip and FMC said the two companies will merge after a successful alliance through Forsys. This is the second time an alliance has led to M&A after Schlumberger acquired Cameron. The merged company, TechnipFMC, will have anticipated revenue of $17 billion in 2016. Within the subsea space, it will control roughly 27% of the market and supply complete subsea production systems, SURF and subsea life-of-field services.

Goldman Sachs Now Bigger Gas Trader than ExxonMobil

Goldman Sachs is buying and selling enough natural gas to make it one of the key players on the market, even reportedly overtaking oil major ExxonMobil and Chevron and emboldened enough to call an end to the supply glut.

According to a recent regulatory filing, Goldman Sachs bought and sold 1.2 Tcf of physical gas in the United States during 2015, which equates to 25% of the country’s residential consumption and more than double its 2013 volumes.

These figures turn Goldman Sachs and its J Aron commodities division into the seventh-largest gas marketer in North America. Goldman Sachs entered the natural gas selling market in 2010 with acquisition of Canadian Nexen’s North American natural gas marketing operations.

“The fact J. Aron’s business is growing despite low volatility in physical natural gas markets is noteworthy. Many players have downsized,” said Tom Russo, an energy consultant and former official at FERC, told the Financial Times.

J Aron dealt 3.42 Bcf/d in 2011, but volumes in North America rose by 7% to 5.86 Bcf/d last year, according to Natural Gas Intelligence. With its status as a new natural gas trading giant, Goldman Sachs has also come out with a bold statement that the supply glut is now over. Sachs attributes the flip to a deficit in part due to Canadian wildfires and pipeline attacks in Nigeria saying, “The physical rebalancing of the oil market has finally started.” Goldman Sachs  has raised its U.S. crude forecast to $50 a barrel for the second half of 2016.

Canada’s Energy Industry Upbeat Despite Market Volatility

Though a changing political climate and the inability to access new markets is hampering its products Canada’s oil and energy sector remains positive about its global position as it adapts to new market realities that depend on collaboration between industry, government, special interest groups and the general public. Adaptability in a shifting landscape is the focus of PwC’s report Energy Visions: Customers, Carbon, and Costs, A New Business Model Now?

“The downward trend in commodity pricing we have seen over the past year – and the global market forces that have contributed to this trend – suggests added market volatility in the industry,” said Reynold Tetzlaff, Partner and PwC National Energy Leader. “The reality of today’s market has called into question the effectiveness of existing business models and their ability to weather significant shifts. Now is the time to examine how the industry accommodates these shifts in favor of sustainable growth and resilience in a volatile market.”

“What we need now, more than ever, is stability and certainty when it comes to carbon policies, procedures and price. Without stability, attracting foreign capital to our markets becomes increasingly difficult,” added Tetzlaff.

Demand for oil in Asian markets will increase by 2040 and Canada is positioned to meet their needs. Building the right infrastructure to reach those markets is a top priority for companies if they want to see growth. Optimism is tempered with some uncertainty around market access, recent tax hikes and growing political uncertainty in the region.

Despite lower operating costs, Canada is still struggling to find investors in light of market volatility and a changing policy landscape which creates uncertainty. In some cases this is leading to capital moving out of Alberta in favor of markets in the United States.

State Senate Considers Limits on Pipeline Construction

The Massachusetts state Senate has approved a ban on building pipelines within 1,000 feet of a residential neighborhood, a school or a senior center. The ban was adopted as part of the Senate’s version of the fiscal 2017 state budget. A group of House and Senate lawmakers will try to work out a compromise, which will be sent to Gov. Charlie Baker.

Sen. James Timilty, D-Walpole, proposed the pipeline ban, which was adopted by the Senate without a roll call May 25. Spectra Energy is attempting to build a natural gas pipeline, Access Northeast, which runs through Timilty’ district.

Michigan Lawmakers Scrutinize Enbridge’s Line 5

Michigan’s Democratic Sens. Gary Peters and Debbie Stabenow want federal Department of Transportation Director Anthony Foxx to reclassify underwater pipeline segments, such as the Enbridge Line 5, under the Mackinac Straits as separate “offshore” facilities.

Peters said Line 5, built in 1953, is regulated as an onshore facility, meaning that PHMSA holds it to less stringent regulatory standard and caps the insurance liability at $634 million.

Should an “offshore” pipeline spill, “there’s no limit to the liability,” said Peters. Enbridge’s own cleanup estimate for a spill from Line 5 reaches $1 billion if it were to happen in winter when the straits are iced over. Total cleanup of the 2010 Enbridge spill into the Kalamazoo River exceeded $1.2 billion.

Line 5 is being studied by experts to evaluate its operational risk and determine whether there are viable alternatives to having it traverse the Mackinac straits. In March, the Senate passed provisions added by Peters and Stabenow into the PHMSA reauthorization bill that would designate the Great Lakes as an “Unusually Sensitive Area“ and subject pipelines in or near the lakes to greater safety standards.

Enbridge spokesman Ryan Duffy said the company already tailors its various pipeline spill-response plans to each specific environment.

“We inspect Line 5 inside and out with high-tech tools and those inspection reports show us that Line 5, while not perfect, is in very good condition and meets or exceeds today’s standards for new pipelines,” he told a Michigan newspaper.

Canadian Utilities Propose Renewable Gas Content Target

Natural gas delivered to Canadian homes, transportation markets, businesses and industry will include more renewable energy, thanks to a national renewable natural gas (RNG) target announced by the Canadian Gas Association.

The utilities have set a target of 5% RNG-blended natural gas in the pipeline distribution system by 2025 and 10% by 2030. Nationally, the increased RNG content would result in 14 megatons (MT) of greenhouse gas emission reductions per year by 2030.

RNG, a 100% renewable energy source, is produced from organic waste from farms, forests, landfills and water treatment plants. The gas is captured, cleaned and blended into natural gas distribution pipelines and used similarly as traditionally delivered natural gas by homes, businesses, transportation fleets and industry. There are no special upgrades to furnaces, water heaters and other equipment needed to use RNG.

RNG can be produced, cleaned and injected into the natural gas distribution system at competitive costs compared to other renewable energy options. RNG costs between $10-25 per gigajoule (GJ) or 4-9 cents per kilowatt hour (kWh) while recent renewable electricity contracts for utility scale solar and wind projects have been signed for $19 and $44/GJ or 7-16 cents/kWh.

In British Columbia, Ontario and Quebec, utilities are blending RNG into gas pipeline systems. By the end of 2017, 11 RNG projects in Canada will be online producing enough renewable fuel to meet the energy needs of 51,000 homes or supplying 137 million liters of renewable fuel for transportation markets.

Linde Expands Plant Turnaround with Texas Site

Linde LLC has expanded its plant turnaround, maintenance, repair and overhaul (MRO) and pipeline services capabilities to include the Gulf Coast region from a new facility in Baytown, TX. With a secure supply of industrial gases from one of the country’s largest air separation units (ASU), which Linde recently completed in La Porte, TX, the Linde Plant and Pipeline Services team new turnkey facility complements its western Pennsylvania plant.

“These two locations allow Linde to provide services to customers in the two major areas of activity in the U.S. – natural gas production in the Northeast and petrochemical and refining in Texas and Louisiana,” said Brian Kubalik, program manager for Chemistry and Energy, Linde Americas.

Sheehan Pipe Line Files for Chapter 11 Bankruptcy

Tulsa-based Sheehan Pipe Line Construction Co. has filed for Chapter 11 bankruptcy in U.S. Bankruptcy Court for the Northern District of Oklahoma. The 113-year-old company is co-owned by

Robert Riess, who president and CEO since 2006, and David Sheehan, descendant of the founder John Sheehan. The bankruptcy filing lists both Sheehan’s estimated assets and liabilities in the $50-100 million range. Its estimated number of creditors are listed as between 200-999.

Expanded Panama Canal to Open Soon and Benefit LNG

Nine years of construction at a cost exceeding $5 billion has added a third set of locks and deeper navigation channels, doubling the Panama Canal’s capacity for moving cargo between the Atlantic and Pacific oceans. When the new locks open to traffic in late June, the reverberations will be felt worldwide, particularly by LNG terminals.

The opening coincides with a surge in U.S. natural gas supplies seeking export markets. The deeper channels can handle massive tankers that transport LNG, cutting one-third of the cost off the typical roundtrip to the Far East. Markets will become more accessible for oil producers across the Americas while millions of tons of container shipments originating from Asia could start bypassing western U.S. ports and opt to dock instead along the Gulf Coast or Eastern seaboard.

Almost 90% of the world fleet will be able to use the expanded canal, cutting from 31 to 20 days the trip from the U.S. Gulf to Asia via the Suez Canal or 34 days around Africa’s Cape of Good Hope.

DNV GL Wins Framework Deal from National Grid

DNV GL was been awarded a framework agreement for the provision of design and engineering technical services to the Grain LNG terminal. The scope of the three-year framework agreement covers feasibility studies, conceptual design studies, specialist engineering and risk management services up to and including front-end engineering and design (FEED).

Grain LNG is integral to the UK energy infrastructure and supply security. It is the largest terminal in Europe and eighth-largest in the world by tank capacity with a site that spans over 600 acres. As indigenous supplies from the UK Continental Shelf diminish, LNG could make up a significant percentage of the UK’s gas supply and demand requirement.

Nicola Duffin, Commercial Manager, National Grid  says “Grain recently celebrated ten exceptional years of progress and now we are looking to the future, increasing the services we offer to our customers and working to ensure that Grain remains the European port of choice for LNG shippers.”

Hari Vamadevan, DNV GL Regional Manager UK & West Africa, added, “This is a significant contract for DNV GL, the importance of LNG in the fuel mix is crucial to the UK, and the EU is supporting it as a clean fuel for road transportation. It is estimated that by 2020, 70% of the UK’s gas will need to be imported and more importantly stored.”