August 2016, Vol. 243, No. 8

In The News

In the News

Armstrong Retains Williams CEO Position Despite Upheaval

Just days after losing a bitter court fight to merge with Energy Transfer Partners, The Williams Companies announced July 1 that Frank T. MacInnis was immediately stepping down as chairman of the board of directors for personal reasons. Kathleen Cooper, a current director and Audit Committee member was named to replace him.

“Recognizing that it is in the best interests of the stockholders and the company to concentrate on the future, the board of directors has thoroughly evaluated the company’s leadership structure and determined that Alan Armstrong is the right chief executive officer as the company works to continue enhancing stockholder value,” Williams said in a written statement.

The company said in addition to MacInnis, Ralph Izzo, Eric W. Mandelblatt, Keith A. Meister, Steven W. Nance and Laura A. Sugg, who also disagreed with the strategic direction of the board, had stepped down. In their letters of resignation, New York hedge fund activists Mandelblatt and Meister blistered the leadership of Armstrong, who never fully endorsed the proposed merger.

Meister, who founded the Corvex Management hedge fund, wrote that he could “no longer in good conscience serve” on a board that keeps Armstrong in charge despite his “substantial business and operational failures.”

Mandelblatt, who founded the Soroban Capital Partners hedge fund, wrote that he resigned with “deep regret and sadness”

“It has unfortunately become evident that the CEO of the company, Alan Armstrong, is incapable of maximizing shareholder value and, instead, is primarily focused on maintaining his role as CEO,” Mandelblatt wrote. ” I cannot serve on a board that continues to empower a CEO with an abysmal operational and financial track record, and who in my opinion lacks the necessary judgment and character to lead the company forward.”

TransCanada Grows with Addition of Columbia Pipeline Group

Columbia Pipeline Group officially became part of TransCanada Corp. on July 1 after the closing of the deal worth $13 billion including debt. TransCanada is now North America’s largest natural gas storage company and one of the largest gas pipeline operators.  Columbia provides TransCanada with a major natural-gas base in the Marcellus and Utica shale regions in the Northeast.

“With this transaction, we have further diversified our suite of premium assets, added to our near-term growth portfolio and created one of North America’s largest regulated natural gas transmission and storage businesses, linking the continent’s most prolific natural gas supply basins to its most attractive markets,” TransCanada CEO Russ Girling said in making the announcement.

TransCanada adds over 14,000 miles of natural gas pipelines, 286 Bcf of storage capacity and a $7.3 billion backlog of new projects. Columbia Pipeline Group will operate as a TransCanada subsidiary. Columbia Pipeline Partners will continue to be publicly traded.

Fossil Fuel Usage to Dominate for Years, Says EIA

A new report by the Energy Information Administration says that fossil consumption fell in 2015 but will retain a large share of market for years to come.

Fossil fuels only made up about 81.5% of the total energy consumption in the United States in 2015, the lowest total in the past century. But despite the rapid deployment of renewable energy and electric vehicles expected in the years ahead, the EIA still sees fossil fuels dominating the energy landscape. By 2040, fossil fuels will only see its market share fall to 76.6%.

Solomon Forecasts Gas Demand for Oil Sands to 2025

Solomon Natural Gas Services released its Gas Demand for Alberta Oil Sands to 2025 report, the first major revision by Solomon in 10 years; driven primarily by the slide in oil and bitumen prices since late 2014.

The report analyzes over 150 producing, under construction, and proposed oil sands developments. It addresses pipeline and rail export transportation capacity as well as how Solomon’s production forecast fits within the proposed greenhouse gas emissions cap. The report concludes with a forecast of natural gas demand by major oil sands project for the next 10 years.

“Natural gas demand for the oil sands sector will account for 16% of total Canadian natural gas demand and just over 2% of the total North American demand in 2025,” said Glen Hensbergen, Lead Gas Analyst at Solomon and co-author of the report.

ENGIE Brand Launches in North America

Global energy and services provider ENGIE has launched the ENGIE brand for its operations in the United States and Canada, reflecting a new strategic direction and regional organization. ENGIE is the succeeding brand for the company’s businesses operating under the GDF SUEZ name.

In North America, ENGIE has unified its renewable and natural-gas-fired generation, LNG, retail energy supply, and energy services businesses under one umbrella to enhance collaboration among the service and supply activities it has to offer customers.

Frank Demaille was named CEO of ENGIE North America Inc. He was executive vice president of ENGIE’s international division of the Energy Services Branch, in charge of its business development in the Pacific, Asia, and the Americas. Joining the North American corporate management team are Suthiwong Kongsiri as CFO, André Canguçu as head of Business Development, and Scott Flippen as head of Acquisitions, Investments, and Financial Advisory, and Analysis.

Par Pacific Buys Wyoming Refinery, Pipeline

Houston-based Par Pacific Holdings bought the Newcastle refinery in Wyoming for $271.4 million from Black Elk Refining and its Houston parent, EOR Energy Services. The deal includes the 18,000-bpd refinery and the 140-mile Thunder Creek pipeline system in northeast Wyoming that sources crude oil from the Powder River Basin.

Par Pacific, which also has a strong presence in Hawaii, changed its name in October from Par Petroleum Corp. Par moved to Houston in 2012, having emerged from Denver-based Delta Petroleum Corp.’s bankruptcy. In 2013, Par bought the Hawaiian refining assets of Tesoro Corp.

 Oil Sands Lost 30 Million Barrels Worth $1.4 Billion to Wildfire

 The wildfires that tore across the oil-producing region of Canada this year will cost insurers about C$3.58 billion (US$2.8 billion) in claims, the most costly insured natural disaster in the country’s history, an industry group said. The fires led to 27,000 personal-property claims averaging C$81,000 each, and 12,000 auto claims averaging C$15,000, the Insurance Bureau of Canada said July 7 in a statement. More than 5,000 commercial claims averaged over C$250,000 and included costs from work stoppages. The estimates come from insurer surveys collected by Catastrophe Indices and Quantification Inc.

“This wildfire, and the damage it caused, is more alarming evidence that extreme weather events have increased in both frequency and severity in Canada,” Don Forgeron, IBC’s president, said in the statement. The previous costliest natural disaster on record was a 2013 Southern Alberta flood, which cost C$1.7 billion in insurance claims, IBC said.

Some of the largest oil sands producers in the Province of Alberta were forced to shut down or curtail operations in May as 80,000 residents of Fort McMurray evacuated the city to escape the fierce blaze. Damage to oil sands projects was minimal but Calgary-based analysts say restarting operations is taking longer than expected.

Analyst Martin King of FirstEnergy Capital estimates the industry’s production loss at $1.4 billion, while Nick Lupick, an analyst for AltaCorp Capital, puts the value of the losses at almost $1.6-billion. Both expect their numbers to grow.

“It sounds like there have been some pipeline clogging issues on some of these projects,” said King. “I guess when the bitumen cooled it hardened so they’re having trouble getting stuff down these pipes right now.”

King said his wildfire cost estimate is based on a production loss of about 37 million barrels, about half in the form of raw bitumen, which must be mixed with light oil to flow in a pipeline. The other half is more valuable synthetic crude. Lupick based his calculation on lost production of about 28 million barrels but with a higher proportion in the form of synthetic crude, which commands prices.

Midstream SemGroup Expands Tulsa Office to 175 Employees

SemGroup Corp. has expanded its Tulsa headquarters at Two Warren Place to 175 employees including the transfer of 51 positions from Oklahoma City. SemGroup specializes in transportation, storage, distribution, marketing and other midstream services in the United States, Canada, Mexico and the UK.

“Over the last year it became clear to the SemGroup senior management team that the current limited geographical separation between two separate headquarters, the Tulsa and OKC offices, impeded our ability to fully capitalize on our business opportunities, leverage synergies and deliver more efficient growth,” said CEO Carlin Conner.

Distributed Natural Gas Generation Could Top $35.9 Billion by 2025

A Navigant Research report examines the market for distributed natural gas-fueled generation (DNGG) for residential, commercial, industrial, and utility applications, including forecasts for capacity and revenue, through 2025. Despite slowdowns in oil and gas, DNGG is positioned for growth, with key drivers such as demand for reliable power, stricter environmental standards, and lower costs of onsite generation relative to alternatives like grid power.

DNGG’s related technologies are placed at the intersection of two of today’s biggest energy trends: the proliferation of distributed energy resources and the growing abundance of cheap oil and gas. According to @NavigantRSRCH, the global market for new DNGG installations is expected to grow from $12.6 billion in 2016 to $35.9 billion by 2025.

“DNGG is cleaner than diesel or coal generation and, unlike renewables, doesn’t rely on the sun or wind in the production of critical power,” said Adam Forni, senior research analyst with Navigant Research. “With fuel prices low and environmental policies favoring natural gas, global demand is growing from a wide range of segments – from residential, to industrial, to utilities.”

DNGG is expected to serve both the developed world and developing nations. In the developed world, emissions regulations will help DNGG continue to displace higher-emitting incumbents like diesel generator sets. Developing nations will incorporate more DNGG to meet reliability requirements and satisfy growing electricity demand.

Enterprise Expands Delaware Basin Network with New Processing Plant

Enterprise Products Partners L.P. plans to build a cryogenic natural gas processing facility and associated natural gas and natural gas liquids pipeline infrastructure to enable continued growth of NGL-rich natural gas production in the Delaware Basin of West Texas and southeastern New Mexico.

The site for the processing plant, which will have a capacity of 300 MMcf/d, and the capability to extract over 40,000 bpd of NGL, is not yet determined. The project is anchored by long-term commitments from a major producer. The facility is expected to begin service in mid-2018.

“This project, which complements our ongoing growth in the region, is the third cryogenic gas processing plant Enterprise has announced in less than 24 months,” said A.J. “Jim” Teague, CEO of Enterprise’s general partner. “The South Eddy facility began operations earlier this year while our joint venture processing plant at Waha is expected to begin service in the third quarter.

These are expected to increase our processing capacity in the Delaware Basin to 800 MMcf/d compared to 40 MMcf/d in 2012.” In addition to processing capabilities, the project will include rich gas gathering lines, a residue pipeline to Waha and an NGL pipeline to Enterprise’s Mid-America Pipeline system. These assets will integrate with the rest of the company’s Delaware Basin infrastructure.

Mustang Engineering Co-founder Publishes Book on Company History

Mustang: The Story – from Zero to $1 Billion, authored by Mustang Engineering co-founder Bill Higgs, has been published and is available for purchase. The book is based on the events that Higgs and the other two Mustang originators faced while starting an energy engineering firm in the struggling Houston economy of mid-1987.

Mustang Engineering, now Wood Group Mustang, is a global company with over 8,500 employees and revenue exceeding $1 billion annually. Higgs writes how the culture was created and driven by the mottos of “Making Heroes”, “People Oriented Project Driven”, and a “Just Do It” mentality.

“It’s about motivating others and leading a team to victory,” Higgs says. “Energy and enthusiasm are force multipliers.” After undertaking what he says were at least seven downturns, Higgs serves as a reminder that the industry has been through this before and survived. In the book, he discusses how to manage projects, cash flow, influence team members and cultivate leaders of tomorrow. For more information visit www.mustangthestory.com.

U.S. Producers of Carbon Steel Flanges File Trade Petitions Against India, Spain and Italy

Two leading producers of carbon steel flanges, Weldbend Corporation and Boltex Mfg. Co. have filed petitions with the U.S. Department of Commerce and U.S. International Trade Commision charging that unfairly priced and subsidized imports of carbon steel flanges from India, Spain and Italy are causing material injury to the domestic industry.

The antidumping and countervailing petitions seek the enforcement and compliance of Indian, Spanish and Italian manufacturers with U.S. and international trade laws. Boltex and Weldbend charge that unfairly traded imports of carbon steel flanges from those countries are causing material injury to the American industry of carbon steel flanges, as they are selling their products in the American market at prices less than their fair value and are thereby significantly undercutting American market prices.

The countervailing duty petition alleges that the Indian government has given significant subsidies to the Indian carbon steel flanges industry – to the severe detriment of American jobs and manufacturing.

“Together with Boltex, we are filing these petitions on behalf of American producers to offset the unfair advantage that Indian, Italian and Spanish producers have gained through actions that are in contravention of the law,” said James J. Coulas, Jr, owner and president of Weldbend.

“The prices at which these foreign-made flanges are coming into the U.S. market are unbelievably low, and they are consistently undercutting us.  We can compete with anyone, as long as that competition takes place on a level playing field. However, it’s impossible for these flanges to be considered fairly priced,” said Frank Bernobich, president and chairman of Boltex

The products covered by the petitions, carbon steel flanges, are forged rings of steel designed to join two sections of a piping system or to start a piping system from a pressure vessel, valve, or any other integrally flanged assembly.