December 2009 Vol. 236 No. 12

In The News

December Newsreel: Keane Resigns, AGIA Releases AK Status Report and more

Tony Keane Resigns as NACE Executive Director
AGIA Coordinator Releases Alaska Pipeline Project Status Report
MasTec to Acquire Precision Pipeline
Enterprise Announces Commercial Organization After Completing TEPPCO Merger

Barrett Receives Gold Medal For Contributions To DOT
BENTEK Claims Rig Count Not Effective Picture of Natural Gas Activity
United Spiral Pipe Dedicates New Facility
GE Oil & Gas Awarded $400 Million Contract for Gorgon Project
Former Crosstex Executives Launch TEAK Midstream LLC
Strong Attendance Expected at 6th Interpipe Conference
Bayou Companies Completes Acquisition of Pipe Coating and Insulation Facility
Soaring Dakota Oil Production Gets Another Boost
North American Energy Resources Acquires Interest In Gathering System
DOE-Sponsored Expedition Studies Methane’s Role In Global Climate Cycle
TPG Capital Buys Majority Stake In Valerus Compression

Tony Keane Resigns as NACE Executive Director
NACE International, the Corrosion Society, announced that Executive Director Tony Keane will resign effective Jan. 8. He is leaving to become president/CEO of the International Facilities Management Association in Houston. Del Doyle, P.E., NACE Senior Director for Strategic Initiatives, will be the Interim Executive Director during the search for a permanent replacement.

AGIA Coordinator Releases Alaska Pipeline Project Status Report
TransCanada Alaska (TC Alaska) is on target to complete an initial open season by the end of July 2010, with a significant boost in pre-open season investment, according to a Alaska Pipeline Project Report submitted to the state Legislature on Oct. 31 by Alaska Gas Line Inducement Act (AGIA) coordinator Mark Myers.

Efforts to advance Alaska’s natural gas pipeline received a significant boost over the summer with the announcement that TransCanada and ExxonMobil reached an agreement to work together on the project.

“This is exactly the type of commercial alignment which AGIA was developed to encourage,” said Myers. “ExxonMobil brings upstream development expertise, the wherewithal to design a gas treatment facility and invaluable technical data of the gas line route as an owner of TAPS.”

ExxonMobil’s participation immediately started to pay out though its financial investment into the project.

“In my perception, ExxonMobil commits itself financially to the front end of any activity it pursues to maximize success,” said Alaska Department of Natural Resources Commissioner Tom Irwin. “We are seeing a joint effort by these companies that will result in increased pre-open season spending from $83 million to $150 million. This is a encouraging.”

TC Alaska has continued to make progress heading into the upcoming open season with substantial progress on several fronts, including:

• Expanding the project management team to include 100 full-time employees (50 percent from TC Alaska and 50 percent from ExxonMobil)
• Establishing and staffing a new project office in Anchorage
• Acquiring both LiDAR and immersive video along the majority of the route for both the mainline and LNG alternatives
• Preparing to complete an instate demand study, and
• Working with 24 Alaska-based service providers as part of the project participants’ commitment to the Alaska business and local hiring provisions of AGIA.

“Alaskans should be encouraged by the progress which TransCanada and ExxonMobil have demonstrated in moving the APP forward,” Myers concluded.

For additional online information, including copies of the Oct. 31 Progress Report and Coordinator’s letter, visit www.gov.state.ak.us/agia/.

MasTec to Acquire Precision Pipeline
Coral Gables, FL-based MasTec Inc. has signed a definitive agreement to acquire Precision Pipeline LLC for a purchase consideration of $150 milliont. The transaction is contingent on financing availability on terms and conditions acceptable to MasTec, in its sole discretion, and there is no break-up fee if such financing is not available.

Based in Eau Claire, WI, Precision is a leading energy infrastructure services provider, specializing in the construction and maintenance of large-diameter pipelines.

Enterprise Announces Commercial Organization After Completing TEPPCO Merger
Enterprise Products Partners L.P. recently introduced its commercial management team following completion of its merger with TEPPCO Partners, L.P. The senior officers of the general partner of Enterprise listed below will report to A.J. “Jim” Teague, an Executive Vice President and Chief Commercial Officer of Enterprise.

Lynn L. Bourdon, a Senior Vice President of Enterprise, will be responsible for petrochemical and refinery services businesses in addition to its natural gas liquid (“NGL”) marketing activities. He joined Enterprise in 2003.

J. Michael Cockrell, a newly elected Senior Vice President of Enterprise, will be responsible for managing onshore crude oil transportation, pipeline, storage and marketing business. He joined TEPPCO in 1999.

James M. Collingsworth, a Senior Vice President of Enterprise, will be responsible for the regulated NGL, refined product and natural gas pipelines and storage businesses. He joined Enterprise in 2001 from Texaco.

Thomas M. Zulim, a Senior Vice President of Enterprise, will continue to be responsible for unregulated NGL assets. He joined the partnership in 1999 as part of the acquisition of midstream energy businesses from Shell.

Christopher R. Skoog, a Senior Vice President of Enterprise, will be responsible for the unregulated natural gas pipeline, storage and marketing businesses. He joined Enterprise in 2007 from ONEOK Energy Partners where he was president of the Interstate pipeline group.

James F. Guion, a Vice President of Enterprise, will continue to be responsible for the unregulated offshore pipeline and services business. He joined Enterprise in 2007.

Rudy A. Nix, a Senior Vice President of Enterprise, will continue to be responsible for distribution services and asset optimization group. He joined Enterprise in 1982.

Barrett Receives Gold Medal for Contributions to DOT
Deputy Federal Coordinator Tom Barrett received the Secretary of Transportation’s Gold Medal for his exemplary contributions and leadership to the Department of Transportation (DOT) in his tenure as DOT Deputy Secretary.

During the Oct. 29 presentation at DOT’s 42nd annual awards ceremony, DOT Secretary Ray LaHood cited Barrett’s contributions to the department during a year of political and economic transition.

LaHood said, “His wisdom and guidance during the transition were a tremendous help to me personally, and to many of the new members of our team. No one who has worked at the Department over the last several years should be surprised that Admiral Barrett is the recipient of this year’s Gold Medal for outstanding service to DOT and to the U.S. government.”

The medal’s presentation took place before the resignation of Federal Coordinator Drue Pearce Nov. 16. From January 3, 2010, when the resignation goes into effect, until a new coordinator is named Barrett will serve as interim federal coordinator.

BENTEK Claims Rig Count Not Effective Picture of Natural Gas Activity
A new Market Alert from BENTEK Energy examines a major development in natural gas markets resulting from the disconnection between future natural gas production and the number of active drilling rigs in the field. For decades, the active drilling rig count has served as the benchmark to forecast future natural gas supply.

“The historic correlation between rig count and gas production rates began to fail midway through 2008 and completely broke down in 2009,” noted BENTEK Managing Director Rusty Braziel. “We saw the rig count fall more than half in less than six months – from a peak of 2,569 rigs in October 2008 to a low of 1,146 rigs in May 2009, as measured by RigData. Yet natural gas production has been up nearly 4%, or 2.1 Bcf/d in 2009.”

This divergence has perplexed natural gas industry observers because many of the underlying causes have been difficult to track. The BENTEK Market Alert highlights the impact from significant improvements in horizontal drilling and well-completion technologies over the past few years. The time it takes to spud, drill and complete a well is much shorter compared to two years ago. The industry has also achieved initial high rates of production in developing unconventional shale gas resources, resulting in huge productivity improvements.

“These efficiency gains have enabled the industry to do much more with far less, rendering the historic rig count correlation virtually meaningless in today’s environment,” noted Tom Sherman, senior energy analyst at BENTEK.

United Spiral Pipe Dedicates New Facility
United Spiral Pipe LLC (USP), a joint venture of United States Steel Corporation, POSCO and SeAH Steel Corporation, formally dedicated its new state-of-the-art spiral welded pipe manufacturing facility in Pittsburg, CA on Nov. 3.

The plant is expected to provide 120 new full-time manufacturing jobs to Northern California. It took 320,000 hours of labor to build the facility.

John P. Surma, chairman and CEO of U.S. Steel, said, “The capacity and location of this facility will favorably position United Spiral Pipe to be an active, competitive participant in the expanding market for large-diameter line pipe in North America.”

The USP facility has world-class pipe making and coating capabilities that will produce, at its peak, 300,000 net tons of line pipe per year to meet the anticipated demand in North America for spiral welded pipe due to natural gas and oil transmission projects. The facility will produce pipe with outside diameters ranging from 24-64 inches and will implement an advanced and automated two-step welding process.

U.S. Steel and POSCO each own 35% of the joint venture. They have been partners in USS-POSCO Industries (UPI), a steel finishing joint venture in Pittsburg, for more than 20 years. The new spiral welded pipe facility is located on land owned by UPI. SeAH Steel Corporation (SeAH), a manufacturer of tubular products in Korea, owns the remaining 30% of the joint venture.

GE Oil & Gas Awarded $400 Million Contract for Gorgon Project
Chevron has awarded GE Oil & Gas a competitive bid worth over $400 million to deploy advanced liquefied natural gas (LNG) technology for the development of Gorgon, one of the world’s largest untapped natural gas fields, which also features the world’s largest ever carbon dioxide (CO-2) sequestration technology project.

GE will supply Chevron with equipment to fulfill Gorgon’s LNG production and CO-2 sequestration with three main refrigerant compression trains required for Gorgon’s production of 15 million tons per annum (MTPA) LNG, equating to three shipments a week leaving Gorgon’s LNG-loading jetty; and, six compression trains required to drive Gorgon’s pioneering carbon dioxide sequestration (C0-2) project, the world’s largest – injecting up to four times more carbon dioxide than any other project worldwide.

Former Crosstex Executives Launch TEAK Midstream LLC
Dallas-based TEAK Midstream, LLC has secured a $100 million private equity investment from Natural Gas Partners (NGP), a leading energy private equity firm based in Irving, TX. TEAK, a Dallas-based midstream start-up, will use the private equity investment to acquire and develop midstream assets in key gas producing areas of the United States.
 
TEAK Midstream is led by A. Chris Aulds and James R. Wales who have more than 55 years of oil and gas industry experience. Prior to starting TEAK, they were two of the original three founders of Crosstex Energy, Inc. where they were instrumental in growing the company from a $4 million start-up in 1996 to a $3 billion publicly traded company at the time of their departure in 2007.

Through strategic acquisitions and greenfield projects, TEAK will provide midstream services including gathering, transmission, treating, processing, compression, marketing and price risk management. The company will first focus on gas production areas in Texas, Louisiana, Oklahoma and Mississippi with anticipated geographic expansion based on customer needs.

Strong Attendance Expected at 6th Interpipe Conference
With more than 100,000 km of transport and distribution pipelines planned in China alone, the 6th Interpipe conference in Langfang, China, March 31-April 1, is expected to be well attended.
 
The forum is being organized by the Euro Institute for Information and Technology Transfer in Environmental Protection (EITEP). Key topics will focus on planning and construction and operation and maintenance of gas, oil and water pipelines for transport and distribution. Other issues that will receive attention include pipeline integrity, life-cycle extension strategies and technical safety management.

For information, contact Alissa Ritter, Tel. +49 (0) 511 90992-20, e-mail: a.ritter@eitep.de or visit www.eitep.de/interpipe.

Bayou Companies Completes Acquisition of Pipe Coating and Insulation Facility
The Bayou Companies, Inc., a subsidiary of Insituform Technologies Inc. completed its $CN12.25 million acquisition of Garneau Inc.’s pipe coating and insulation facility and associated assets located in Camrose, Alberta, Canada. The acquisition was effected through Bayou Perma-Pipe Canada, Ltd. (BPPC), a joint venture between Bayou and Perma-Pipe, Inc. and will serve as the operating company for Bayou’s Canadian operations.

Bayou announced its agreement to acquire the Camrose facility on Sept. 30. Bayou expects this additional pipe coating and insulation facility in Western Canada will increase its addressable market by $200 million. Eldridge Indest was appointed president of Bayou Perma-Pipe Canada. He has 32 years of experience with Bayou, most recently director of Technical Planning in New Iberia.

Soaring Dakota Oil Production Gets Another Boost
North Dakota’s fast-growing oil production could soar another 50% next year as the state’s capacity to export crude catches up with its ability to pump it, state regulators and industry officials said.

According to a news report, if oil prices stay above $60 a barrel and expected oil transportation projects develop, the state could producing 400,000 barrels of oil daily within five years, said Lynn Helms, director of the state Department of Mineral Resources.

North Dakota production now exceeds 230,000 bpd, which ranks the state behind only Texas, Alaska and California and supplies about 2% of the nation’s domestic crude oil output. It is expected to approach 350,000 barrels next year because of a major pipeline expansion and the anticipated startup of a shipping terminal near Stanley that will be able to haul 60,000 bpd by rail to refineries near Cushing, OK. More expansion being planned by Enbridge Inc. and Kinder Morgan Energy Partners LP would allow another increase that could put production at 400,000 bpd, Helms said.

Regulators say 59 drilling rigs are working in western North Dakota’s oil patch, many in the Bakken oil shale. That number could jump to 100 as more oil shipping capacity opens up this spring and summer, Helms said.

North American Energy Resources Acquires Interest In Gathering System
Austin, TX-based North American Energy Resources, Inc. has acquired a 20% interest in the Washington Gathering System in northern Oklahoma. The gathering system serves all of the production in NAEY’s primary area of interest in Washington County, OK. The gathering system with the pipeline already owned by the company will have the ability to expand and carry over 10,000 Mcf/d.

“Depressed natural gas prices provide infrastructure opportunities for integrated companies,” said Ross Silvey, president of North American Energy Resources, Inc. “We will continue to add to our natural gas distribution system as opportunities present themselves.”

DOE-Sponsored Expedition Studies Methane’s Role In Global Climate Cycle
Increased understanding of methane’s role in the global climate cycle and the potential of methane hydrate as a future energy resource could result from a recent joint research expedition off the coast of northeastern Alaska involving the U.S. Department of Energy’s National Energy Technology Laboratory.

The Beaufort Sea expedition, which included research partners from the U.S. Naval Research Laboratory and Royal Netherlands Institute for Sea Research, gathered a wealth of data to help understand “fluxes,” or changes in the concentration of methane within and across the Beaufort shelf. The expedition, completed Sept. 26, also provided information for helping to evaluate methane hydrate as an energy resource in this region.

TPG Capital Buys Majority Stake In Valerus Compression
Valerus Compression Services and TPG Capital jointly announced that investment funds managed by TPG will purchase a majority stake in Houston-based Valerus. Valerus is a privately held provider of natural gas handling services, including natural gas compression, processing, and treating. TPG will invest $500 million in the company’s debt and equity. Proceeds from the transaction will be used to provide capital for the company’s growth plans and to refinance existing debt. Management, employees, and other current investors will retain the remaining ownership.

Chet Erwin will continue as CEO. Dan Smith will become chairman at the time of the TPG investment. He served as Chairman, President/CEO of Lyondell Chemical Co. until its acquisition by Basell in 2007.