Volume 17 Number 6 - June 2017 · And, it is growing. The Canadian Association of Petroleum...
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® Volume 17 Number 6 - June 2017
Transcript of Volume 17 Number 6 - June 2017 · And, it is growing. The Canadian Association of Petroleum...
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Volume 17 Number 6 - June 2017
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Contents
ON THIS MONTH'S COVER
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ISSN
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390
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Copyright© Palladian Publications Ltd 2017. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the copyright owner. All views expressed in this journal are those of the respective contributors and are not necessarily the opinions of the publisher, neither do the publishers endorse any of the claims made in the articles or the advertisements. Printed in the UK.
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Volume 17 Number 6 - June 2017
WORLD PIPELINES | VOLUME 17 | NUMBER 06 | JUNE 2017
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03. CommentTime for change?
05. Pipeline newsConstruction milestones reached on Turkish Stream, Power of Siberia and the Trans Adriatic pipeline; projects continue their review processes; and several new contracts have been awarded.
REGIONAL REPORT
12. A roller coaster of twists and turnsCanada is making headway in creating new pipelines to move increasing production to market, but it is going to be a bumpy ride. Gordon Cope explains why.
NATURAL GAS PIPELINES
18. Managing landslides and mountainous terrainJohn Haynes, Trans Adriatic Pipeline AG, Albania.
23. Powering gas pipeline actuatorsMatthew Shepherd, Paladon Systems, UK.
PIPELINE INTEGRITY MANAGEMENT
29. Protecting pipelines with fibre optic technologiesHenry Stephenson and Stewart Dewar, Senstar Corporation, Canada.
34. Finances: what they say about asset managementDale Ramsawak, Lloyd’s Register, USA.
39. Overcoming inspection hurdlesAaron Huber, Diakont, USA.
PIGGING
43. Pigging: a dangerous game?Peter Ward, Pipeline Innovations Ltd, UK.
49. The reality of pig trackingAndy Marwood, Online Electronics, UK.
PAGE
12
OF TWISTS AND TURNS
A roller coaster
12
Canada is making headway in
creating new pipelines to move
increasing production to market,
but it is going to be a bumpy ride.
Gordon Cope explains why.
Canada holds a wealth of oil and gas. The oilsands alone contain over 170 billion bbls of heavy crude in the form of bitumen. It possesses shale resources that are almost as large as those encountered in the US, and it
produces over 4 million bpd of crude and 13 billion ft3/d of gas, making it the fifth largest oil producer and fourth largest gas producer in the world.
And, it is growing. The Canadian Association of Petroleum Producers (CAPP) predicts oilsands production, which averaged approximately 2.5 million bpd in 2016, will grow to 3.7 million bpd by 2030.
While shallow conventional fields have been the mainstay of Canada’s natural gas production, unconventionals are now making major inroads. First Energy Capital Corp., using government and industry data, estimates that the Montney shale formation in northwest Alberta and northeast British Columbia (BC) holds 282 trillion ft3 of gas and 12.8 billion bbls of crude and natural gas liquids (NGLs). Production has
13
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INLINE INSPECTION
53. The art of inspectionPaul Cooper, Halfwave AS, Norway.
COVER STORY
57. Making a debut in MexicoJason LaValley (LaValley Industries, USA) and Kevin Allen (CRC-Evans, USA).
WELDING
61. A race against timeAndrew Scherfenberg, Dyna Torque Technologies Inc., USA.
66. Adding a spark in AlbertaTennille Barber, Metegrity Inc., Canada.
71. Putting a spin on weldingAaron Harker, Weld Revolution, USA.
UNDERWATER INSPECTION
77. Taking on the battle against corrosionMartin Beale, Bilfinger Industrial Services, UK.
81. Pinpointing pipeline threatsAudun Brandtzæg, MMT Sweden AB.
POWER GENERATION
87. Mastering the Mexican marketGiuseppe Ratti and Luigi Di Vincenzo, Bonatti, Mexico.
TRENCHLESS TECHNOLOGY
91. A virtual realityCheryl Kohn-Marks, Mears, USA.
97. A simultaneous solutionAlan Goodman, HammerHead Trenchless Equipment, USA.
PIPELINE CONSTRUCTION EQUIPMENT
101. 15 tips for undercarriage careJohn Bauer, CASE Construction Equipment, USA.
105. Working together in Saudi ArabiaGerman Flores, Worldwide Machinery, USA.
PIPELINE MACHINERY REVIEW
109. World Pipelines' quarterly pipeline machinery focus, featuring Barbco and Tesmec.
101
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Comment
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TIME FOR CHANGE?
A s I write, the fate of Canada’s energy and safety regulator, the National Energy Board (NEB), is uncertain.
In December 2016, a five member expert panel was appointed by Prime Minister Justin Trudeau’s government to review a “focused set of issues related to the Board’s structure, role and mandate, [which] will aim to position the NEB as a modern, efficient and effective energy regulator and regain public trust.”1
The panel presented its findings and recommendations in a report on 15 May to Canada’s Natural Resources Minister, Jim Carr, where it summarised methods of modernising the NEB.
The report looks at replacing the NEB with a new energy commission: the Canadian Energy Transmission Commission (CETC).
The CETC would be governed by a board of directors and, while it would still carry out many of the NEB’s current regulations, it would not be able to generate or examine energy data. Instead, the panel suggests introducing a new Canadian Energy Information Agency (CEIA), which would be responsible for providing organisations and the public with energy information and evaluations. Both CETC and CEIA would then partner to assess the technical and environmental elements of proposed energy projects. This will essentially separate project regulation and reviews from the analysis and production of energy-related information.
However, prior to any licensing or reviews, major projects must be assessed by the Federal Cabinet. The Cabinet must determine whether or not each energy project is in the national interest. This is expected to take approximately one year, and would then be followed by a thorough project review. The report noted that, “at this stage, ‘yes’ means ‘yes, subject to further regulatory approval after a detailed project review’, and ‘no’ means ‘no’.”1
The expert panel also advocates moving the regulator from its current location in Calgary to Ottawa, the base of Canada’s parliament. This move would supposedly incorporate Ottawa’s energy policy and outlook on the environment and economy. The report stated: “We heard intense and near-unanimous criticism of the current requirement that board members reside in the Calgary area. […] We do agree entirely that Canada’s energy transmission infrastructure regulator
needs a stronger connection to the seat of the federal government.”
This proposed change of regulatory body aims to serve as a hub for energy information, similar to the US Energy Information Administration.
Nevertheless, the panel’s
recommendations have been met with opposition. Lesley Matthews, Owner of Polaris Solutions Inc., believes that the government’s interference is affecting the NEB’s regulatory performance, and that changes should be made to ensure that the government is not able to overturn the Board’s decision, unless through the federal court. Matthews reportedly stated: “What’s the point of going through this process of having people present evidence and having the decision made on evidence if it can just be made on non-evidence.”2
This change in regulator is not a decision that should be made lightly. It will affect not only proposed energy projects, but the entire nation. Currently, the Canadian government is accepting online comments regarding the panel’s recommendations, which will conclude on 14 June. So, is it time for change? Only time will tell.
1. https://www.nrcan.gc.ca/sites/www.nrcan.gc.ca/files/pdf/NEB-Modernization-Report-EN-WebReady.pdf
2. http://business.financialpost.com/news/energy/dismantle-national-energy-board-and-replace-it-with-two-new-agencies-for-regulation-growth-panel-recommends
THIS CHANGE IN THIS CHANGE IN REGULATOR IS NOT REGULATOR IS NOT A DECISION THAT A DECISION THAT SHOULD BE MADE SHOULD BE MADE LIGHTLY. IT WILL LIGHTLY. IT WILL
AFFECT NOT ONLY AFFECT NOT ONLY PROPOSED ENERGY PROPOSED ENERGY PROJECTS, BUT THE PROJECTS, BUT THE
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Public comment period for Line 3 pipeline begins after DEIS is released
After releasing its draft environmental impact statement (DEIS) of Enbridge Energy’s Line 3 pipeline, the Minnesota Department of Commerce has commenced a comment period for the oil pipeline replacement project. According to news sources, the comment period will consist of 22 public meetings, which will be held from 6 - 22 June.
With regulatory approval already obtained in Canada, North Dakota (USA) and Wisconsin (USA), Enbridge Energy is seeking to replace its ageing 36 in. dia. Line 3 pipeline as part of a US$7.5 billion project. The original 1960s pipeline is currently restricted to 390 000 bpd, operating at just over half of its original capacity of approximately 760 000 bpd.
Enbridge Energy would prefer the replacement line to follow the existing pipeline route, which runs from Alberta (Canada) to Wisconsin, crossing through North Dakota and Minnesota on route. The company plans to spend US$2.6 billion on the 337 mile section of the more than 1000 mile route.
News sources have reported that the DEIS offers comparisons between alternative Line 3 pipeline routes but does not make a recommendation regarding the route that the replacement should take. It provides key data for regulators to use when deciding whether to approve a certificate and the route that Line 3 should take.
This DEIS is just one of several steps of the process. The DEIS suggests that a final EIS is expected in August, with public hearings following in the autumn, before the Public Utilities Commission decides on the project.
The project will also need additional approvals from various federal and local agencies, and potentially tribal governments, depending on the route.
World NewsContinued progress made on TAP
Trans Adriatic Pipeline AG – the company behind the Trans Adriatic pipeline (TAP) – has successfully completed its first hydrotest. Also known as hydrostatic testing, this is a method for verifying a pipeline’s safety after it has been built. The pipeline is filled with water and pressurised more than its intended operating pressure to test its integrity and ensure its safe performance during operation.
The hydrotest was applied to the first 1.4 km of the Greek section of TAP. It is a very significant step in the construction process, since it technically affirms the pipeline’s safety, which is identified as the project’s number one priority. Following this successful start, additional parts of the pipeline will be gradually tested until the end of the year.
In addition, 17 May marked one year since construction of the Trans Adriatic pipeline commenced. TAP is one of Europe’s largest and most strategic natural gas infrastructure projects. Much has been achieved on the project over the past twelve months, with activity in each of the three host countries that TAP crosses being on time, on track and on budget.
TAP’s Managing Director, Ian Bradshaw, noted: “In terms of overall project progress, we are approximately 41% complete, including all engineering, procurement and construction scope. We are on track to deliver first gas from Shah Deniz II in 2020.”
“I am particularly pleased that today, approximately 173 km of welded steel pipes – around 21 times our project length in Italy – have been put in the ground in Greece and Albania. TAP remains fully committed to reinstate land to its original condition or better. A project of this scale and magnitude will face daily challenges, however, we are well positioned to address and manage them by working closely with our teams, our supply network and alongside communities,” Bradshaw added.
By this time next year, TAP AG plans to have completed the clearing and grading of the route across Greece and Albania, and have approximately 67% of welded pipes placed in the ground (backfilled).
“The Permian region is now better equipped to handle new production than it was in 2014,” says the EIA
The Permian Basin has seen an increase in crude oil production. This rise has been accompanied by a concurrent rise in pipeline infrastructure so that the crude oil can be delivered to locations with high demand.
At points in both late 2012 and mid 2014, West Texas Intermediate (WTI) crude oil at Midland (Texas, USA) was priced at least US$15/bbl lower than WTI at Cushing (Oklahoma, USA).
Crude oil production in the Permian grew from 886 430 bpd in January 2010 to nearly 1.5 million bpd in January 2014. This production level was more than could be accommodated by in-region refining and pipeline capacity, which led to large price discounts in Midland, compared with Cushing. Thus, pipeline capacity was becoming constrained and crude oil was likely moving out of the region by more expensive methods, such as rail or truck.
In 2014, WTI-Midland averaged a US$6.94/bbl discount to WTI-Cushing, compared with a US$1.68/bbl average discount during 2013. However, as new and expanded pipeline capacity was added, WTI-Midland’s discount to WTI-Cushing narrowed, falling to an average of US$0.18/bbl in 2015 and US$0.07/bbl in 2016.
Due to 2016’s rise in oil prices, the US Energy Information
Administration (EIA) expects crude oil production in the Permian to accelerate. The EIA’s April Drilling Productivity Report (DPR) indicates a total of 310 oil directed rigs active in the Permian, 158 more than at the same time last year. The DPR also estimates crude oil production in the Permian at 2.3 million bpd as of April 2017, which is almost 300 000 bpd higher than April 2016.
With several pipelines coming online to accommodate rising Permian production, including Magellan’s BridgeTex pipeline, Sunoco Logistics’ Permian Express pipeline, and Plains All American’s Cactus pipeline, pipeline infrastructure in the Permian region is now better equipped to handle new production than it was in 2014. These pipelines are also undergoing expansions, which are expected to add approximately 340 000 bpd of capacity.
Alongside these pipeline expansion projects, Enterprise Product Partners is building a Midland to Houston pipeline with a capacity of 450 000 bpd, which is expected to come online later this year. After 2017, several other new pipelines and expansions are planned, or are in the planning stages, to accommodate additional Permian oil production increases.
6 World Pipelines / JUNE 2017
IN BRIEF
IndiaGAIL India Ltd has awarded additional pipelaying contracts for the Kochi-Koottanad-Mangaluru natural gas pipeline, for another 131 km section from Areacode (Malappuram) to Kurumathoor (Kannur). The additional pipelaying work will cost approximately Rs 200 crore. The project has a targeted completion date of December 2018.
USAAccording to ESAI Energy’s North America Watch, the 470 000 bpd Dakota Access pipeline (DAPL) will start operating this month, but the ramping up of throughput will take time as Bakken production rises. ESAI Energy projects that DAPL will reach 75% of its capacity by the end of 2017.
MexicoAn explosion on the Minatitlan-Mexico pipeline has forced Pemex to temporarily halt operations along the line. The reason for the blaze is supposedly an illegal tap by suspected thieves.
MoroccoAgreements regarding the Nigeria-Morocco gas pipeline project were signed at a ceremony chaired by King Mohammed VI in Rabat. When presenting on the pipeline project, Nasser Bourita, the Moroccan Foreign Minister, claimed that the pipeline will have a positive impact on over 300 million inhabitants.
CanadaPembina Pipeline Corp. and Veresen Inc. have entered into an arrangement agreement to create one of the largest energy infrastructure companies in Canada with a pro-forma enterprise value of approximately CAN$33 billion. The company’s portfolio will include crude oil, liquids and natural gas pipelines, terminal, storage and midstream operations.
World NewsNEB seeks public input for joint Energy East and Eastern Mainline hearing
After issuing two draft Lists of Issues (one for the Energy East pipeline and one for the Eastern Mainline), the National Energy Board (NEB) is seeking public input regarding the topics that should be considered in the review of the Energy East and Eastern Mainline pipeline projects.
It was previously decided that the Energy East and Eastern Mainline projects would be ruled on concurrently. The draft Lists of Issues identify topics that the hearing panel will consider during the joint hearing. Any evidence and questions raised during the hearing should relate to at least one of the
topics identified on the final Lists of Issues.The NEB is also responsible for carrying
out an environmental assessment under the Canadian Environmental Assessment Act. In this context, the hearing panel is looking for comments on its proposed scopes of factors for the environmental assessment, which has been expanded to include additional potential environmental impacts.
The panel will review all of the comments received during the comment period to see if any changes to the Lists of Issues are warranted. The panel expects to release the final Lists of Issues by early summer.
Construction of the offshore section of Turkish Stream begins
Gazprom has announced that construction of the offshore section of the Turkish Stream gas pipeline has commenced.
Allseas is the construction contractor for both strings of the gas pipeline’s offshore section. The pipelaying work is being carried out by the company’s Audacia vessel, which can be used for laying small and medium diameter pipelines of any length at any depth. The vessel will be also used for pipe pulling through microtunnels. Construction of the deepwater area of the Turkish Stream pipeline will be performed by the Pioneering Spirit pipelaying vessel.
“Today, we started the practical implementation of the Turkish Stream gas
pipeline project: pipelaying within the offshore section. By late 2019, our Turkish and European consumers will have a new, reliable source of Russian gas imports,” said Alexey Miller, Chairman of the Gazprom Management Committee.
The Turkish Stream pipeline will stretch across the Black Sea, from Russia to Turkey and further to Turkey’s border with its neighbouring countries.
The first string of the gas pipeline is intended for Turkish consumers, while the second string will deliver gas to southern and southeastern Europe. Each string will have the throughput capacity of 15.75 billion m3/y of gas.
White House FERC nominees to restore the agency’s quorum?
Selected by US President Trump, Neil Chatterjee, a senior energy adviser to Mitch McConnell, and Robert Powelson, a member of the Pennsylvania Public Utility Commission since 2008, are expected to be nominated to serve on the Federal Energy Regulatory Commission (FERC). An announcement of Trump’s nomination plans was made by the White House on 8 May.
News sources reported that if these two nominees take positions in FERC, this would bring the agency one step closer to being able to rule on key natural gas pipelines. While, at present, just two slots are filled on the five member panel, FERC requires a minimum of three members to issue substantive orders, regulations and policy initiatives on projects.
FERC was left with just two members when the agency’s then-chairman, Norman Bay, stepped down, which left the commission short of a quorum. The current lack of quorum
prevents FERC from taking action on major gas pipeline requests, including over US$50 billion of pending project applications.
FERC has been without a quorum since early February, which has concerned lawmakers and industry groups. Moreover, Colette Honorable, one of the two remaining FERC commissioners, is stepping down from her role later this year, which will drop the number of commissioners to one. This will present another opening for Trump.
Trump plans to nominate Chatterjee and Powelson for terms expiring in 2021 and 2020, respectively, news sources have claimed.
Trump’s nominations require Senate vetting and approval by the Senate Energy and Natural Resources Committee. Senator Lisa Murkowski is cited as stating that said she plans to clear the nominees quickly to restore the quorum and allow processes to continue.
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8 World Pipelines / JUNE 2017
Events DIARY
9 - 13 July 2017
22nd World Petroleum
Congress
Istanbul, Turkeyhttps://www.worldpipelines.com/events/22nd-world-petroleum-congress/
10 - 11 August 2017
The 2nd IndoAIM 2017
Jakarta, Indonesia
http://indoaim.com/
5 - 8 September 2017
SPE Offshore Europe
Aberdeen, Scotlandhttp://www.offshore-europe.co.uk/
17 - 19 September 2017
Pipeline-Pipe-Sewer
Technology Conference and
Exhibition (PPST)
Cairo, Egypthttps://www.pipelinepipesewer.com/
25 - 29 September 2017
IPLOCA 2017 Convention
Mexico City, Mexicohttp://www.iploca.com
24 - 26 October 2017
LAGCOE 2017
Lafayette, USAhttp://www.lagcoe.com/home-expo
13 - 16 November 2017
ADIPEC
Abu Dhabi, UAEhttps://www.adipec.com/
25 - 29 June 2018
World Gas Conference 2018
Washington, USAhttp://wgc2018.com/
World News
To read more about the articles go towww.worldpipelines.com
News Highlights
➤ Kinder Morgan secures fi nal investment decision
➤ JFSE completes Kandla Gujarat project
➤ Ashtead Technology secures UKAS accreditation
➤ SkyX receives investment
Testing undertaken on the Trans Forcados pipeline
Royal Dutch Shell has reportedly been testing its Trans Forcados crude export pipeline in Nigeria.
The Trans Forcados pipeline, which has a daily capacity of 240 000 bpd, has been a target for militant groups. It was attacked in February last year and the pipeline has spent the majority of time shutdown since. While the pipeline was repaired, and its exports briefly resumed, in October, the pipeline was attacked again in November.
A full resumption of the Trans Forcados pipeline could complicate matters for the Organization of the Petroleum Exporting Countries, which has seen its member nations cut output due to a fall in benchmark oil prices. While Nigeria was exempt from the original cuts, the country’s Oil Minister, Emmanuel Ibe Kachikwu, said his country would voluntarily join the cuts if its production reached 1.8 million bpd.
Milestone celebrated on the Power of Siberia pipeline
The Power of Siberia pipeline project has reached a milestone, with a cross-border section being opened on the Russian-Chinese border. To celebrate, an inauguration ceremony for a temporary two-way checkpoint on the border has taken place, attended by Vitaly Markelov (Deputy Chairman of the Gazprom Management Committee), Wang Dongjin (Vice President of CNPC) and Alexander Kozlov (Governor of the Amur region).
The Verkhneblagoveshchensky temporary checkpoint was built by Gazprom for the crossing under the Amur River as part of the Power of Siberia pipeline project’s cross-border section. The checkpoint is meant to provide unfettered access to the restricted area for operating personnel and construction equipment.
The two-string underwater crossing will connect Power of Siberia pipeline to China’s gas transmission system. The project entails the construction of two 1139 m tunnels with an inside diameter of 2.44 m each, to provide gas deliveries of 38 billion m3/y.
“Construction of the Power of Siberia pipeline is proceeding at a rapid pace,” said Markelov. “719 km of the gas pipeline’s linear section has been built. The opening of this checkpoint is vital to synchronising efforts aimed at establishing gas transmission capacities across Russia and China.”
Gas pipeline targeted in Nigeria
News sources have reported that a gas pipeline – operated by the Nigeria Gas Company, a subsidiary of Nigerian National Petroleum Corp. – has been attacked close to the oil hub of Warri by suspected rebels. The attack comes after months of truce in Nigeria and while the country’s government and Niger Delta leaders are in negotiations.
Spokesperson for Nigeria Gas Company, Violin Antaih, commented: “It has been confirmed, even by the community people, that it was a third-party sabotage.”
“If you have a picture of the blast, you will know too well that was exactly what happened because the pipeline was cut into two. A ruptured pipeline will not have such effect,” Antaih added.
The Nigerian military is aware of, and is now investigating, this pipeline attack.
Nigeria has been in recession since August last year due to reduced global oil prices and increased pipeline attacks in the Niger Delta region. The country recently increased its budget for an amnesty programme for militants, to US$175 million.
However, according to one news source, a reduced number of attacks this year has allowed the country’s oil production to recover to 1.7 - 1.8 million bpd of oil.
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Contract NewsTrans Mountain makes pipe supply agreement with EVRAZ North America
Trans Mountain and EVRAZ North America (EVRAZ) have come to an agreement for the supply of approximately 250 000 t of pipe, equal to approximately 800 km of pipeline construction.
While the deal is contingent upon Kinder Morgan’s final investment decision, if approved, it would see over 75% of the pipe that is needed for the Trans Mountain project coming from EVRAZ’s Regina (Saskatchewan, Canada) plant.
The CAN$7.4 billion Trans Mountain expansion project is expected to result in direct and lasting economic benefits to Canada and communities along the pipeline corridor, including the equivalent of 15 000 jobs per year during construction. Overall, the Conference Board of Canada estimates that the project will generate CAN$46.7 billion in government revenues and 802 000 person years of employment, the equivalent of 37 000 jobs per year, during operations.
The next steps for the project include arranging acceptable financing and a final investment decision by Kinder Morgan. Construction is set to begin in autumn 2017, with an expected in-service date of late 2019. The remainder of the pipe that is needed for the project, as well as other procurement contracts, will be announced as project planning proceeds.
“It has been our commitment from day one to deliver benefits from this project to Canadians, and we are pleased to announce the single largest potential procurement contract to a Canadian plant and Canadian workers,” said Ian Anderson, President of Kinder Morgan Canada.
“We look forward to working with Kinder Morgan on this project. Our collective expertise will make this one of the most technically advanced and environmentally safe pipelines in the world,” said Conrad Winkler, EVRAZ’s President and CEO.
Competence management system contract awarded for TANAP
Training and competency development organisation, International Human Resources Development Corp. (IHRDC), will provide its training solutions to operations, maintenance and integrity personnel of the Trans Anatolian natural gas pipeline project (TANAP).
IHRDC’s aim is to develop an effective competence management system for TANAP to assure the competency of its workforce and that personnel have the essential skills and knowledge for their role. IHRDC will establish pathways to high performance, in line with TANAP’s operational requirements. To achieve this, IHRDC will provide a combined package of competency-based development training plans and learning solutions for the pipeline operator, including IHRDC’s CMS Online software and custom learning modules created specifically for the TANAP project.
IHRDC will create curricula for each discipline, broken down into blocks of blended learning events, based on the competency requirements for each position. Each block will contain one or more courses that will include instructor led classes, e-learning courses and/or on-the-job training.
Nord Stream 2 survey contract awarded to M2 Subsea
M2 Subsea has secured a contract that is valued in excess of £1 million. The contract will see the firm supplying the multipurpose support vessel (MSV) Go Electra vessel, remotely operated vehicles (ROVs) and personnel to support survey work on the Nord Stream 2 subsea pipeline system.
M2 Subsea has been sub-contracted to deliver the campaign after Next Geosolutions was appointed to carry out unexploded ordnance identification (UXO) surveys on the two new Nord Stream 2 pipelines.
The 90 day project will be undertaken in an area that is noted for munitions discoveries following the end of World War II. M2 Subsea has signed its first charter agreement for the Go Electra, which has recently completed its first five year class inspection successfully.
The work will be project managed from Aberdeen and will see the MSV deployed from Hanko (Finland), which will be supported by 15 of M2 Subsea personnel.
M² Subsea’s CEO, Mike Arnold, said: “Safety is a key factor on every project and, in particular, where it involves surveying the seabed to identify undiscovered explosive devices for removal. We are very pleased to have chartered the Go Electra, which is a highly specialised vessel for subsea inspection, repair and maintenance work and ideal for supporting the conditions the team and ROVs face in the Baltic.”
Spencer Coatings Group acquired by Axalta Coating Systems
Axalta Coating Systems (Axalta) has entered an agreement to acquire the Spencer Coatings Group, an industrial coatings manufacturer that offers polyurethanes for internal and external pipeline coatings.
The company is pleased to welcome the Spencer Coatings Group. Michael Cash, Axalta’s Senior Vice President and President, Industrial Coatings, commented: “Spencer Coatings Group’s industry-leading product technologies fit very well within Axalta’s current industrial portfolio. With the acquisition of Spencer Coatings Group, we will have the opportunity to take some incredibly innovative products and expand into new geographies, as well as provide our combined industrial customers with additional product technologies. We both share a strong commitment to our customers and to the industrial coatings markets in which we participate.”
Financial terms of the transaction have not been disclosed.
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OIL & GAS ASIA 2017 11-13 July | Kuala Lumpur, Malaysia
OF TWISTS AND TURNS
A roller coasterA roller coaster
12
Canada is making headway in
creating new pipelines to move
increasing production to market,
but it is going to be a bumpy ride.
Gordon Cope explains why.
Canada holds a wealth of oil and gas. The oilsands alone contain over 170 billion bbls of heavy crude in the form of bitumen. It possesses shale resources that are almost as large as those encountered in the US, and it
produces over 4 million bpd of crude and 13 billion ft3/d of gas, making it the fifth largest oil producer and fourth largest gas producer in the world.
And it is growing. The Canadian Association of Petroleum Producers (CAPP) predicts oilsands production, which averaged approximately 2.5 million bpd in 2016, will grow to 3.7 million bpd by 2030.
While shallow conventional fields have been the mainstay of Canada’s natural gas production, unconventionals are now making major inroads. First Energy Capital Corp., using government and industry data, estimates that the Montney shale formation in northwest Alberta and northeast British Columbia (BC) holds 282 trillion ft3 of gas and 12.8 billion bbls of crude and natural gas liquids (NGLs). Production has
13
risen dramatically over the last several years and now stands at 5 billion ft3/d, more than one third of Canada’s total production.
The vast majority of hydrocarbons move through pipelines. Canada has 840 000 km of gathering, transportation and distribution lines, and this amount grows by several thousands of kilometres each year.
RegionalIn 2016, Pembina Pipelines (Pembina) – which is largely invested in moving and processing hydrocarbons in Alberta and BC – spent CAN$1.9 billion on various capital projects, including the Phase III expansion of its Peace and Northern pipeline systems. In addition, it will spend a further CAN$1.9 billion in 2017 in order to finish the 16 in. and 24 in. pipelines in the Fox Creek to Namao (Alberta) corridor, boosting the overall system capacity to 1.2 million bpd (with a further 300 000 bpd capacity available through pump station additions).
Pembina also received regulatory approval to expand the northeast BC system. The company will spend CAN$275 million to add 75 000 bpd capacity by building a 145 km, 12 in. pipeline that will parallel the existing Blueberry pipeline system. The twinned line will be dedicated to transporting NGL and condensate, produced in the liquids-rich Montney shale.
TransCanada will be spending CAN$1.3 billion to expand its NGTL system. The project includes five pipeline sections totalling 230 km, and the addition of two compression units. When the work is completed in mid 2018, the NGTL system, which gathers and transports 75% of the natural gas produced in the Western Canadian Sedimentary Basin, will have a capacity exceeding 11.3 billion ft3/d.
NationalIn late 2016, the federal government led by Prime Minister, Justin Trudeau, gave the green light to the Trans Mountain pipeline expansion; a 60 year old line running from Alberta to tidewater in BC. The project will increase capacity from 300 000 - 890 000 bpd.
The project would also include the expansion of capacity at the Westridge dock from 79 000 - 630 000 bpd, allowing for the simultaneous loading of three Aframax-sized tankers. “It’s still very much a project that is needed in Canada and, despite the recent talk about Keystone [XL], this is the project that is in the lead; this is the project that gets the product to a world market, not just a US market, and the customers want it and want to get it built,” said Steve Kean, Kinder Morgan’s President and CEO. In all, Kinder Morgan expects the Trans Mountain expansion costs, which were formerly estimated at CAN$6.8 billion, to escalate to CAN$7.4 billion.
Other major lines are also being proposed; TransCanada would like to repurpose part of its mainline natural gas system to crude transmission (the section running from Alberta to Ontario), then extend it to tidewater. The 4500 km, CAN$15 billion Energy East proposal would deliver up to 1.1 million bpd from Alberta to the deepwater port of St. John (New Brunswick). The proposal is currently under review by the National Energy Board (NEB).
Keystone XLOver 3 million bpd of Canada’s production is exported south to the US, and the country’s export network is constantly in need of enlargement. In late 2015, the White House under former
President Obama, announced that the Keystone XL project – a 590 000 bpd pipeline designed to deliver heavy crude directly from Alberta to US Gulf Coast refineries – was rejected.
When President Trump took office in January, however, he signed an executive order to accelerate the project’s approval. TransCanada subsequently submitted a new presidential permit application to the US Department of State. Although the project still faces many hurdles, the addition of a reliable source of heavy crude would be most welcome in the US Gulf Coast.
“Keystone XL will strengthen the US’ energy security and remains in the national interest,” said Russ Girling, TransCanada’s President and CEO. “The project is an important new piece of modern US infrastructure that secures access to an abundant energy resource produced by a neighbor that shares a commitment to a clean and healthy environment. Numerous studies have shown that pipelines are a safer and more environmentally sound way to transport oil to market than trains and Keystone XL raises the bar on both fronts.”
Mergers and acquisitionsThe midstream sector – gathering, processing, transporting and storing – has been one of the few profitable sections of the oil and gas industry in the last several years. Institutional investors, such as pension funds, place high value in their ability to deliver stable dividends year after year. Devon Energy recently sold its 50% ownership of the Access pipeline to a subsidiary of the Canada Pension Plan Investment Board for CAN$1.4 billion. The Access pipeline network services Devon’s Jackfish thermal oilfields in the northeast Alberta.
Other deals involved the purchase of complementary assets. In August 2016, Inter Pipeline bought the Canadian assets of Williams Pipeline. The Calgary-based company paid CAN$1.35 billion to purchase a 420 km gas pipeline network and two NGL plants. “This positions Inter Pipeline to significantly benefit as energy prices strengthen,” said Inter Pipeline President and CEO, Christian Bayle. The purchase prices represent a 45% discount from the initial cost.
Both deals were dwarfed by TransCanada’s purchase of the Columbia Pipeline Group for US$10.2 billion. The acquisition gave TransCanada an extensive network of gas pipelines throughout the rapidly growing Marcellus and Utica gas shale plays.
In an even larger deal, pipeline majors Enbridge and Spectra Energy united in a friendly merger to create a US$126 billion midstream company. The merger reinforces the potential for organic growth. The combined company will have US$20 billion in secured projects and an additional US$37 billion of projects under development. The risks for delays (and cancellations) are spread out over a much larger portfolio, and the added weight and breadth of the new corporation allows for a stronger hand when competing for new projects and opportunities.
As the investment and growth landscape in the midstream sector continues to evolve, the economics of scale evident in the Enbridge/Spectra Energy deal will become more compelling. Analysts expect to see further mergers in the future as competitors, such as Kinder Morgan and Enterprise Products Partners, weigh up the competitive advantages of size.
ChallengesWhile the improved prospects of both Keystone XL and Trans Mountain are cause for optimism, opposition to other
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projects remains strong. The federal government refused to endorse the Northern Gateway pipeline, saying it was not in the best interests of the locally affected communities. “The Great Bear rainforest is no place for a pipeline and the Douglas Channel is no place for oil tanker traffic,” said Trudeau. In a written statement, Enbridge expressed disappointment with the decision, saying that it is an important project to ensure Canada gets its resources to international markets, and that local communities would profit, citing a one third ownership structure with 31 indigenous communities that would result in CAN$2 billion in benefits.
In late 2016, opposition to pipelines escalated dramatically when activists broke into network facilities and disrupted operations. Five crude pipelines carrying several million barrels to the US were halted when trespassers shut key valves. Climate Direct Action, a protest group responsible for the attacks, released a statement, saying that its actions were in support of the Standing Rock Sioux Tribe, which is protesting construction of the US$3.7 billion Dakota Access pipeline carrying oil from North Dakota to the US Gulf Coast.
Kinder Morgan, owners of one of the affected pipelines, said it is in “deep conversations” with the RCMP regarding both the interruptions and the Trans Mountain expansion. “We are planning from both a safety and security standpoint,” said Ian Anderson, President of the firm’s Canadian operations. “I would be naive if I didn’t expect [protests] ... It’s when it goes beyond that we will have to be prepared.”
With total Canadian production surpassing 4 million bpd, existing pipelines are at nearing nameplate capacity; another 850 000 bpd of production is expected to come online in the next four years as oilsands projects currently under construction are completed. According to Genscape, Canadian production of heavy crude will reach pipeline takeaway capacity limits by the end of 2017, and leave a shortfall of up to 500 000 bpd until at least 2019, when it is projected that Keystone XL and Enbridge’s Line 3 expansion will be in operation. During that time, Canadian crude by rail deliveries are expected to jump from current levels of 90 000 bpd to over 500 000 bpd.
LNG prospectsWhile the numerous LNG projects being touted in Canada have suffered from the combination of too much world supply and lowered demand growth in China, there are still some positive developments. Over 50 million tpy of LNG exports have been approved by the NEB for almost two dozen projects situated on BC’s Pacific Coast, but none have reached final investment decision. Petrobras, which is advancing the CAN$36 billion, 12.5 million tpy Pacific NorthWest LNG plant, is closest to a final investment decision; it was recently heartened by the federal cabinet’s decision to green light the project.
Each of the LNG projects has been aligned with over half a dozen proposed gas pipelines. The 463 km Pacific Trails pipeline, owned by Chevron and Apache, would deliver up to 1 billion ft3/d to Kitimat (BC). Petronas’ Pacific NorthWest plant would be serviced by the Prince Rupert gas transmission project; a 900 km, 3.6 billion ft3/d line. Recently, the BC government issued an environmental assessment certificate to FortisBC Energy for its Eagle Mountain-Woodfibre gas pipeline project. The 47 km line would deliver over 200 million ft3/d to the proposed Woodfibre LNG facility, located in Squamish (BC).
FutureAs usual, there is a plethora of wild cards that could affect Canada’s oil patch. The Trump Administration has proposed a border adjustment tax to reduce trade imbalances with certain nations, such as China and Mexico. Although details remain sketchy, a 20% border tax on imports – including roughly 10 million bpd of crude – has been floated. Canada, which supplies approximately one third of those imports, would be significantly affected. If the proposal was implemented, it might result in a reduction in the strength of the Canadian dollar, deflecting some of the impact.
On the plus side, recent actions by provincial and federal governments have strengthened the oil and gas sector’s ability to gain social licence. The Alberta government’s climate change management plan recently came into effect. The initiative calls for an economy-wide carbon tax of CAN$20/t, which started in January 2017, and CAN$30/t in 2018 (adding approximately 6 ¢/l at the pumps). New oilsands production would not be curtailed, but an overall emissions limit of 100 million t (it is currently around 70 million t), will be set. Methane emissions will be reduced by 45% by 2025, and coal electricity production will be phased out by 2030; most will be replaced by renewables.
There are also signs of life beginning to emerge in the oilsands. In previous years, investments in the oilsands plunged dramatically, from CAN$81 billion in 2014 to CAN$31 billion in 2015. Cenovus, a major oilsands player, recently announced that it would increase its 2017 budget by 24%, to CAN$1.4 billion, and will target expansion in its flagship Christina Lake in situ project. The company hopes to boost production up to 300 000 boe/d.
In March, Canadian Natural Resources Limited (CNRL) spent CAN$12.74 billion to acquire 70% of the Athabasca Oil Sands Project (AOSP), as well as other properties from Shell Canada and Marathon Oil. AOSP includes the Jackpine and Muskeg River mines, as well as extensive mineable leases. “There is significant opportunity for growth in the mining operations with the Jackpine mine expansion, which has regulatory approval for 100 000 bpd of production capability,” CNRL stated.
It did not hurt that the company bought the assets a bargain, either. “This deal is highly accretive on all per share metrics and we’ll be able to acquire a world class mine that is up and running for a 40% discount to what it would cost to build,” said CNRL’s CEO, Steve Laut.
In unconventional plays, operators are working diligently to lower costs, increase production and estimated ultimate recoveries. Encana is a major player in the Montney formation, holding 600 000 acres in BC and Alberta. Between 2015 and 2016, it lowered its average well cost by 33%, to CAN$4 million per well. In addition, average initial well output climbed from 900 bpd of condensate and 1400 boe/d, to 1200 bpd of condensate and 2400 boe/d.
Oil prices have also stabilised in the US$50 - US$60 range, allowing some predictability in the market place. Although stakeholders in Canada’s upstream sector are cautiously optimistic for the future, much remains outside their control. However, one thing is certain; the world demand for oil is growing, and Canada remains one of the few non-OPEC sources with increasing output. The pressure is on for tidewater outlets to supply Asia and other markets; Canadian midstream operators will have a wealth of opportunities for the foreseeable future.
16 World Pipelines / JUNE 2017
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