December 2017, Vol. 244, No. 12



Onshore Pipeline Market Recovery Foreseen 

The global onshore pipelines market is forecast to see a continued growth in overall spend in the period 2017-22 at a compound rate of 1.4%. Over the next five years, this represents a 15% growth in total spending vs. the previous five-year period, as forecast in the latest edition of the World Onshore Pipelines Market Forecast by Westwood Global Energy.

The report includes regional capital and operational expenditure forecasts, including examples of key countries and projects driving installation activity and expenditure within each region. Westwood expects the market to see a near-term increase in installation activity, with the total number of miles installed forecast to rise by 13% in 2018, supported predominantly by projects sanctioned prior to the downturn.

The nature of the market, with long-lead times for many projects, does mean that the lack of new project-sanctioning activity in recent years will result in a slight decline in miles installed and spending following the 2018 peak. However, overall forecast capex for the 2018-22 period will still represent a 13% increase compared with the preceding five-year period.

An increasing population of aging pipelines, in addition to stringent regulations governing essential repairs and maintenance works, particularly in North America and Western Europe, will continue to act as stable long-term drivers for operational expenditure, with spending over the 2018-22 period expected to increase by 17%, relative to the 2013-17 period.

In other forecast items of note:

  • North America has historically dominated installation activity and will continue to do so over the forecast period, albeit with a reduced share of 34%, compared with 44% over the 2013-17 period.
  • While installation activity for both medium (24-41 inch) and large (greater than 41-inch) pipelines is expected to decline over the next five years, capex allocated to small (less than 24-inch) pipelines is forecast to rise by 21% over 2018-22.
  • Africa is expected to see the strongest growth in total forecast capital expenditure for the next five years, when compared to the 2013-17 period. Total expenditure in the region for 2018-22 is forecast to rise by 84%, relative to the preceding five years.
  • Global pipelines opex is forecast to rise steadily at a 3.5% CAGR over the next five years driven by an increase in the installed base of infrastructure and the need to maintain aging networks, particularly in Western Europe and North America.

Major projects underway include the 5,202-mile Xin-Zhe-Yue synthetic gas pipeline in China and the 1,544-mile Power of Siberia I pipeline from Russia to China. North America will remain the largest contributor to the market, with projects such as the 870-mile Line 3 Replacement are expected to support capital expenditure within the region over the forecast.

Moreover, large projects such as the 870-mile Hoima-to-Tanga crude oil pipeline will contribute to relatively high installation activity in the African market, compared to the preceding five years.

New Life Breathed Into Keystone XL Pipeline

TransCanada Corp said Nov. 9 that it has received adequate support from crude oil shippers on its long-delayed Keystone XL pipeline, but the parties still need to work out specific terms. A period for gaging interest from shippers ended in late October. While Canadian Natural Resources Ltd, one of Canada’s largest producers, said it has increased its commitment, there is concern among industry participants that other producers may no longer be as keen as oil sands growth slows. TransCanada’s liquids pipelines President Paul Miller said the company has obtained the desired volume commitment of about 500,000 bpd.

“We do have various conditions attached,” he said, without disclosing the terms from shippers. “We believe the conditions are manageable.” The company said it expects an introduction of new shippers and reductions in volume commitments by others. “We anticipate commercial support for the project to be substantially similar to that which existed when we first applied for a Keystone XL pipeline in 2008.”

The Keystone XL pipeline passed a major hurdle after Nebraska regulators approved the route for the project. The Nebraska Public Service Commission voted 3 to 2 to approve TransCanada’s route for Nebraska’s portion of the pipeline. The Keystone Pipeline system transfers crude oil via a 2,600-mile route from Alberta, Canada, east into Manitoba, Canada, and then south across the US border to Texas, according to parent company TransCanada. The proposed Keystone XL Pipeline, would stretch from Hardisty, Alberta, southeast to Steele City, Nebraska, would augment other pipelines and complete the entire system.

White House Issues Permits to Valley Crossing Pipeline

Officials with the Trump administration have issued a presidential permit for Enbridge’s recently acquired Valley Crossing Pipeline. The 168-mile pipeline will be able to move 2.6 Bcf/d of natural gas from the Agua Dulce hub near Corpus Christi, TX to the Port of Brownsville, TX and then into the Gulf of Mexico. It will connect beneath the sea floor with another natural gas pipeline from Mexico.

The Federal Energy Regulatory Commission (FERC) granted the permit Oct. 23 for the cross-border natural gas pipeline project nearly a year after Houston-based Valley Crossing Pipeline submitted its application for the project.

Williams Agrees to Expand Gathering Services in Northeast

Williams Partners agreed to expand its services to Southwestern Energy Company in the Appalachian Basin of West Virginia where Williams Partners has already established a strong operational footprint.

Williams Partners is to deliver gas processing, fractionation and liquids handling services in Southwestern’s wet gas acreage in the Marcellus and Upper Devonian Shale, along with gas gathering services for Southwestern in its South Utica dry gas acreage.

Southwestern with be provided with 660 MMcf/d of processing capacity to serve a 135,000-acre dedication in its wet gas acreage in the Marcellus and Upper Devonian Shale in Marshall and Wetzel counties in West Virginia. Williams Partners expects to build out its Oak Grove processing facility for Southwestern’s expanding production of wet gas. The Oak Grove processing facility can expand an additional 1.8 Bcf/d of gas processing capacity.

Oryx to Build New Mexico-Midland Pipeline

Midland-based Oryx Midstream Services plans to build a 220-mile crude oil pipeline system in the Permian Basin that will run from New Mexico to Midland. The company said the 400,000-bpd network will run through Carlsbad crude oil delivery points in Crane and Midland, TX.

The project would tie into Oryx’s existing Permian pipeline system. Oryx said it has oil transportation deals with WPX Energy and others to fund the pipeline. Oryx said it closed on a long-term regional transportation deal with WPX Energy and other producers for 300,000 acres of land dedicated to the project.The system will be constructed in phases, consisting of 6-, 20- and 24-inch pipeline, and is expected to go in-service by the end of 2018.

Alberta-to-B.C. Pipeline Faces Permit Delays

Kinder Morgan Canada said it faces months of delay on its Trans Mountain pipeline expansion project due to the timing of permits and regulatory approvals.

“If you just took the delays experienced to date, and just flowed that through the schedule, we believe that results in a nine-month delay,” said CEO Steve Kean during a conference call following the company’s third-quarter earnings release.

Kean said because of the delays about $340 million of project spending scheduled for 2017 has been pushed back. The project has obtained “hundreds of permits” from British Columbia, but will require over a thousand from the province, the company said.

In a related development, a non-profit group has abandoned a legal challenge of the Trans Mountain project, saying losing the case could bankrupt the organization. Officials of Democracy Watch said it withdrew its legal action after the B.C. Supreme Court judge assigned to the case suggested the premier was not responsible for the decision to grant environmental approval to Kinder Morgan’s pipeline expansion.

The original court action alleges that the decision to sanction the $6.8 billion project was “tainted” by political donations made by its proponents to former premier Christy Clark and the B.C. Liberal party. Democracy Watch and PIPE UP Network filed the documents early this year.

Colonial Plans Gasoline, Diesel Capacity Expansion

Colonial Pipeline will add 50,000 bpd of capacity to its southern gasoline and diesel main lines by March 2019, the company said. Additions to the 1.4 MMbpd Line 1 and 1.1 MM bpd Line 2 running from the Houston area to Greensboro, NC, would represent the first increases since 2013 on the largest products system connecting the U.S. Gulf Coast to the New York Harbor market.

West Texas Drillers Discussing Pipeline Option

Mexico is in talks with shale drillers in West Texas concerning a possible pipeline project to ship their gas to Mexico’s West Coast for liquefaction and shipment overseas.

The pipeline would eliminate the need for LNG tankers to navigate the Panama Canal and open up another U.S. outlet for its burgeoning gas supply. While Mexico doesn’t have a detailed plan, there has been “a lot of interest,” Deputy Energy Secretary Aldo Flores said. “It makes total sense for West Texas gas producers.”

Mexico’s West Coast is already lined with LNG import facilities that could be converted to exportation with likely destinations in China, Japan and South Korea.

BP Signs on to New Permian Basin Gas Liquids Pipeline

BP will be the first customer for a new natural gas liquids pipeline from New Mexico and West Texas. The 650-mile EPIC natural gas liquids pipeline is being built by a subsidiary EPIC Midstream Holdings and will transport 220,000 bpd of natural gas liquids when completed.

The pipeline will extend from the Delaware and Midland basins in southeast New Mexico and West Texas to Corpus Christi where a fractionation complex will be built to separate the various liquids. The pipeline’s initial phase is set for completion in February 2018, with full completion in 2019.

Producers Midstream Adding Gathering System in Delaware Basin

Producers Midstream is planning a new natural gas gathering system that will have up to 260 MMcf/d of cryogenic processing capacity in the Western Delaware Basin through the formation of Culberson Midstream. The system, located in Culberson County, TX, will be anchored by more than 40,000 net dedicated acres and a 1,000-square-mile area of mutual interest from Charger Shale Oil Co.

The system will consist of more than 70 miles of pipeline, up to 40,000 hp of compression, and a new cryogenic natural gas-processing complex with up to 260 MMcf/d of capacity to serve producers in the Wolfcamp, Bone Springs and Avalon formations. It should be operational early next year.

Alaska, China Sign Joint Development Agreement

Alaska Gasline Development Corporation (AGDC), the State of Alaska, China Petrochemical Corporation (Sinopec), CIC Capital Corporation (CIC Capital) and Bank of China (BOC), announced a joint development agreement in Beijing to advance Alaska LNG, Alaska’s strategic gas infrastructure project.

Alaska LNG is designed as a 20 mtpa, integrated LNG system comprised of a three train liquefaction plant in Southcentral Alaska at Nikiski. The 42-inch pipe will extend 800 miles to connect the Prudhoe Bay gas complex to a gas treatment plant. Under the agreement, the parties will work cooperatively on LNG marketing, financing and an investment model.

The agreement was signed in the presence of President Trump and Chinese President Xi Jinping.

Pipeline Expansions to Move Western Canadian Gas to Markets

Expansion of North American gas pipelines will keep Western Canada’s growing production from wreaking havoc on regional markets, suggests a pricing specialist with S&P Global Platts. Higher rig counts in British Columbia and Alberta should boost Western Canada’s gas output 19% by 2020 from 16 Bcf/d.

Ryan Ouwerkerk said pipeline projects will keep Canada’s products moving to market. “These expansions are what is going to keep Canada in the mix within the production provinces, but also into the U.S. market,” he told an energy information session in Calgary on Sept. 7. This year, gas producers in B.C. have already felt the effect of limited sales options. “Prices have actually been crushed this year.”

Ouwerkerk said expansions of Enbridge’s High Pine and TransCanada’s Tower Birch pipelines will add more than 1 Bcf/d farther into the Alberta market. Into the United States, Ouwerkerk said the Sundre Crossover NGTL system expansion will add 360 MMcf/d of gas to the Pacific Northwest in 2018. Additionally, the Alliance Pipeline should increase capacity into the U.S. market by 500 MMcf/d by 2020.

New Era Certainty Revising Canadian Oil Producers’ Strategies

A shift in global oil markets sentiment will replace decades of scarcity fears with confidence in surpluses, capping oil prices and forcing changes in the way the industry works, observers say. “We’re moving from a mindset where oil was considered a scarce resource to one now where it’s more of a plentiful resource,” said Steve Reynish, executive vice president of strategy and corporate development at Suncor Energy Inc. told a conference in Calgary.

“What we’re seeing is a huge reorganization worldwide and it’s all about how can we compete in a more plentiful world and that really takes us to competitiveness, cost-cutting, capital discipline,” he said.

Reynish said Canada has fallen behind the U.S. in pipeline and major resource project construction and needs to rework regulatory, political and environmental priorities. He reiterated a call by Suncor CEO Steve Williams to update Alberta conservation rules to allow oil sands producers to leave the most costly and carbon-intensive portions of a resource untapped.


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