May 2017, Vol. 244, No. 5

In The News

In the News

Enbridge, NDT Global Advance R&D of Next-Generation Inspection Technology

Enbridge Inc. and NDT Global will partner in a multi-year project to advance innovation in pipeline inspection technology. The agreement focuses on development of a new generation of inspection tool designed to further improve pipe crack assessment. Enbridge and NDT Global have been working together for 15 years on pipeline inspections and said this latest investment will bring further innovation and a new technology capability to the existing integrity management programs.

The scope of the project is aimed at evolving existing inline inspection performance. An important step in this research and development program will be to prove the equipment capability by conducting test runs within the Enbridge pipelines in the U.S. and Canada. Enbridge said that in the past five years it has spent nearly $5 billion on programs to maintain the fitness of its systems.

Cenovus to Double Size with $17.7 Billion Buy of ConocoPhillips Assets

Calgary-based Cenovus Energy Inc. is doubling its reserves and production by acquiring Canadian holdings from ConocoPhillips for C$17.7 billion (US$13.3 billion). The deal includes Conoco’s 50% interest in a joint venture with Cenovus in Canada’s oil sands, as well as ConocoPhillips’ Deep Basin conventional assets in Alberta and British Columbia. The holdings can produce 298,000 barrels of oil equivalent a day. With about 440,000 bpd of capacity after the acquisitions, Cenovus will be the third-largest oil sands producer by the end of the decade, behind Suncor Energy Inc. and Canadian Natural.

Hess Corp. Taking Houston Spinoff Public

Hess Corp. is taking its Houston pipeline spinoff public through an initial public offering. Hess hopes to raise $250 million in the IPO for Houston-based Hess Midstream Partners through the sale of 12.5 million units of stock at about $20 per unit. Hess Midstream primarily owns pipeline and storage assets in North Dakota’s Bakken Shale. Hess Midstream will trade on the New York Stock Exchange under the “HESM” ticker symbol. Nearly 25% of the ownership stake is being sold in the IPO. The remainder of the pipeline and storage business will be controlled by Hess Infrastructure Partners, a joint venture between Hess and New York’s Global Infrastructure Partners investment fund.

Schlumberger, Weatherford Form North American JV

Oilfield service companies Schlumberger and Weatherford are forming a joint venture aimed at helping North American drillers pump oil and gas. The companies said the joint venture, OneStim, will specialize in providing technologies and services that stimulate shale oil and gas wells including hydraulic fracturing. They will combine Schlumberger’s fracking fleet of high-horsepower pumps with Weatherford technologies that are used to stimulate multiple separate horizontal zones within shale wells. Schlumberger will own 70% of the joint venture with the rest owned by Weatherford. As part of the deal Schlumberger will pay $535 million in cash.

Halliburton Adding 2,000 U.S. Jobs as Oilfield Activity Rises

Halliburton said it added 2,000 U.S. jobs in the first quarter and is ramping up activity faster than anticipated to match the surging oilfield activity, especially in West Texas. Halliburton Chairman and CEO Dave Lesar said the company is spending more money now to protect market share and ensure stronger profits in the future. The plan to “frontload as much of the costs as we can” will mean weaker profits short term to better position Halliburton in the future.

“We are coming off of a historic trough, so what we have to add back is almost unprecedented,” Lesar said, warning that its first-quarter earnings won’t be as strong as previously projected. At the end of the year, Halliburton had 50,000 employees after cutting 35,000 positions over a two-year oil bust. Jobs are starting to return and idled equipment reactivated. Profits will follow later, Lesar said.

British Columbia Reports 64 Pipeline Benefit Deals with 29 Northern First Nations

The Canadian province’s Ministry of Aboriginal Relations said new agreements with Northern First Nations tribes will lead to long-term working relationships that include shared benefits and respect for aboriginal rights. The four proposed pipelines linking the gas fields to the northern coast are the Prince Rupert Gas Transmission pipeline, the Coastal GasLink Pipeline Project, the Westcoast Connector Gas Transmission Project and the Pacific Trail Pipeline Project. The provincial government reported 64 natural gas pipeline benefits contracts have been signed with 29 First Nations (90%) with most initial payments worth over $1 million. Most of the agreements have separate milestone payments, covering when construction begins or gas starts to flow.

Cascade Natural Gas Fined $1M for Safety Violations

The Associated Press reported that Cascade Natural Gas will pay $1 million to settle allegations it broke state and federal pipeline safety rules. The Washington state Utilities and Transportation Commission approved the settlement, in which Cascade could be fined another $1.5 million unless it completes a compliance plan, including validating the maximum pressure on its highest-risk pipelines in Washington, by the end of the year.

An investigation by commission staff last year found that Cascade could not provide required documentation for nearly 40% of its high-pressure pipelines. Cascade is based in Kennewick, WA, and serves about 200,000 customers around the state. Its pipeline safety program will undergo a third-party audit as part of the settlement.

Alliance Pipeline Seeks to Add Service into Chicago Market Hub

Alliance Pipeline announced a non-binding request for expressions of interest for additional natural gas transportation service on its system with an anticipated commencement date of Nov. 1, 2020. In response to high demand for its transportation service to the Chicago market hub, Alliance is assessing the feasibility of adding more compression facilities along its pipeline system to increase throughput capacity. Approximately 500 MMscf/d of new capacity could be made available. Alliance already transports 1.6 Bscf/d on average.

Alliance was built with the potential to add more compressor stations on its existing system footprint. The new facilities would be built between existing stations along the 3,848-km (2,391-mile) pipeline to safely expand capacity to the Chicago market by 30%, without requiring a system outage. Dan Sutherland, vice president of Commercial Operations., said Alliance may start a binding open season this fall.

M2 Infrastructure, TransCanada Plan New Crude Oil Storage at Cushing

M2 Infrastructure LLC has entered into a Memorandum of Understanding with TransCanada to construct 6.2 million barrels of new crude oil storage at TransCanada’s terminal in Cushing, OK. The new storage will be owned by M2 Infrastructure and operated by TransCanada. M2 Infrastructure has an option to build up to 20 million barrels of storage, which would be built in subsequent phases. Construction could begin in late 2017.

Shell Pulls out of Prince Rupert LNG Project

BG International Limited, a member of the Shell Group, will discontinue development of the proposed Prince Rupert Liquefied National Gas project on Ridley Island at the Port of Prince Rupert in British Columbia. Acquired as part of the Shell and BG Group combination in 2016, the project was part of a global portfolio review of combined assets, which resulted in the decision to discontinue further development.

Wood Group’s Acquisition of AMECFW Creates Dominant Player

On March 13 Wood Group announced the acquisition of Amec Foster Wheeler. The merger will create a new market leader within the engineering and MMO-market with a market share twice as large as its competitors. With a combined workforce of 64,000, it will rank as one of the top 15 oilfield service companies in the world, according to an analysis from Rystad Energy, an international consulting firm.

“The engineering and MMO markets have been very fragmented for a long time, so a market consolidation was not surprising” said Audun Martinsen, vice president of Oilfield Service Research for Rystad. “Wood Group has previously been active with mergers and acquisitions by acquiring Mustang and Alliance Engineering, Baker Energy and PSN, so it was expected that they would not squander this unique opportunity during a downturn in the market.”

Wood Group has had a larger footprint into the upstream oil and gas business than AMECFW, which traditionally was more exposed to non-upstream markets such as civil work and mining business. Combined, they reached $14.2 billion of revenues in 2015, of which about 40% is related to upstream services and the majority of that is associated with engineering and MMO.

“When Amec and Foster Wheeler merged November 2014, Wood Group saw them as a clear competitor to their upstream business. However, the timing of this acquisition was better positioned than when AMECFW merged at the brink of the downturn,” Martinsen said.

The projected market growth for this new entity is expected to further contract in 2017 before recovery in 2018. “The market outlook will still be challenging for Wood Group and AMECFW, but they should be able to leverage on their size going forward through realized synergies and dominating some markets. Now, it is only time before we expect their competitors to consolidate,” he said.

Distributed Natural Gas-Fueled Generation Undergoing Transformation

A white paper from Navigant Research, “Distributed Natural Gas: Five Trends for 2017 and Beyond,” analyzes five global trends for distributed natural gas (DNG) in 2017 and beyond, including the key determinants driving global investment and related opportunities.

Thanks to key developments in technology, new business models and the changing regulatory environment, established DNG technologies are now being used in new applications. Access to cheap natural gas, demand for resilient onsite power and improved controls offerings are improving the value proposition for customers, and regulators are recognizing the benefits of cleaner, dispatchable distributed generation as grids experience growing supply variability from intermittent renewables.

“As natural gas becomes more globally available, opportunities are growing for DNG generation,” said Adam Forni, senior research analyst with Navigant Research. “Mature technologies like generators are developing personality and becoming more interactive thanks to smarter controls, demand for resiliency, and a need to balance increasingly variable grids.”

According to the report, as macroeconomic, regulatory and technological forces push the DNG industry into a new era, the following five trends are expected to be the most impactful in the next few years:

• Five years later, the Gold Age of Gas goes global.

• To support renewables, gas will compete with storage—and often win.

• Distributed energy resource (DER) software surge will unlock DNG revenue stacking in the energy cloud.

• Stationary fuel cell vendors mending from a tough 2016 will look abroad.

• Regulators will recognize the locational and fast-start benefits of DNG.

Scientists Tweak Seat Cushion Material to Clean Oil Spills

Federal researchers have created a new tool to clean up oil spills by tinkering with the kind of foam found in seat cushions. The modified foam can soak up oil floating on water and lurking below the surface, and then can be repeatedly wrung out and reused, the researchers say.

“It just bounces back like a kitchen sponge,” said co-inventor Seth Darling, a scientist at the Argonne National Laboratory near Chicago. Other oil spill sponges are already on the market, and modifying polyurethane foam for this purpose is not a new idea. But the researchers used a new procedure to coat the foam with a material that attracts oil but not water.

Darling and colleagues recently published a preliminary description of the foam’s performance in a laboratory. Experts who examined that paper said it’s hard to tell how well it would work in real-world settings, but that it appears suitable for production in large quantities. Argonne is looking for a commercial partner.

Texas PUC Says NextERA/Oncor Deal Won’t Help Ratepayers

The Texas Public Utility Commission (PUC) intends to block Florida-based NextEra Energy’s move to acquire Oncor, Texas’ largest utility owned by Dallas-based Energy Future Holdings. The PUC agreed that the $18.4 billion deal is not in the public interest, said Terry Hadley, a spokesman for the agency. The Federal Energy Regulatory Commission approved the deal in January. If the PUC votes to reject the deal, it will be the second failed attempt to buy Oncor from bankrupt Energy Future Holdings. In May, a $18 billion deal led by Dallas billionaire Ray Hunt fell apart over regulatory concerns. NextEra lost in the original bidding process to Hunt.

Omission

An article on page 92 of March’s Pipeline & Gas Journal entitled “How SAFETY Act can Manage Liability Risks Arising From Pipeline Threats” inadvertently omitted the authors’ credits. The article was written by Paul M. Tiao and Brian M. Zimmet of the Hunton & Williams law firm.

Hunton partner Paul M. Tiao co-chairs the firm’s multi-disciplinary Cyber and Physical Security Task Force and its Energy Sector Security Team. He advises companies on risk-management, preparedness, cyber incident response, compliance, litigation, policy and legislation. Hunton senior attorney Brian M. Zimmet focuses on federal and state energy regulation, particularly FERC regulation, and cybersecurity regulation, as it relates to critical infrastructure.