February 2013, Vol. 240 No. 2

Editor's Notebook

Editor's Notebook: The State Of The Industry

Texas Medical Center, Jan. 8—-I’m laying here in the middle of the night high up in St. Luke’s Episcopal Hospital hooked to an IV and other gadgets monitoring my vitals. It is raining as I stare into the shrouded mist that blankets this vast complex.

All I can think about is who had the worst night – Notre Dame, crushed by Alabama in the BCS Championship Game, or yours truly who faded away just minutes prior to a scheduled presentation at an SRO meeting of the Pipeliners Association of Houston.

Sleep is impossible, thanks to my abused esophagus. I reach into my jacket pocket that still holds my prepared comments. So, for those who missed out and others who may be interested, here is a condensed version of what I planned to say about the State Of The Industry.

No matter what you may hear tonight, tomorrow or the next day, the story is going to change. This is the state of our industry and if industry, lawmakers and regulators handle development properly, this will recharge our economic engine for years to come.
Last month I visited western Pennsylvania and met with companies and universities involved in the Marcellus Shale. A Chevron executive told me they expect to be there for 50-60 years. Williams plans to spend $20 billion in the Marcellus in the next five years.

Outside of Pittsburgh is a business park housing over 60 companies working in the Marcellus with more coming in every week. You can’t find office space in downtown Pittsburgh. And they’re just barely scratching the surface.
There is talk of building at least five steel plants in the U.S. When was the last time you remember one steel plant being built here? I visited a new pipe coating plant located in a former steel mill and a compression company revived by the shale.

Industry and government work together to mitigate problems. The University of Pittsburgh and Carnegie Mellon are trying to solve issues involving possible environmental and health hazards related to fracking. Then I toured a company claiming it can handle wastewater problem by sending portable units to the well site within an hour of a call.

Something to consider is the railroad industry. In some cases the railroads already are supplanting pipelines as a means of oil delivery.

ONEOK dropped plans for a $2 billion pipeline from the Bakken to Cushing, OK because producers found it was cheaper and more convenient using rail cars to ship oil to Philadelphia. If you’re a producer, do you invest in a pipeline that only goes to one place and has yet to be built or spend it developing your product?
Spectra Energy is buying the 1,717-mile Express-Platte Pipeline System for $1.5 billion. E-P carries crude from Western Canada to Rocky Mountain and Midwest markets. It’s Spectra’s first move into the crude oil business and indicative of the growing opportunities in North America’s crude market. Whether we see new construction or acquisitions followed by expansions or conversions from gas to oil pipelines is anyone’s guess.

Some fast facts & figures:
– Expenditures for new gas infrastructure are forecast at $205 billion through 2035. This would expand the mainline transmission system by 35,600 miles. It’s estimated the U.S. and Canada will need 30,000-60,000 miles of new pipelines by 2035. 
– The shale gas revolution has the potential to increase U.S. GDP 1.2-1.7% per year by 2017.
– Natural gas use for power generation rising from 29 Bcf/d in 2012 to 45 Bcf/d in 2035.
– A 37% increase in demand in North America natural gas from 76 Bcf/d in 2012 to 104 Bcf/d in 2035.
– Onshore natural gas resources with North America shale production rising from 27 Bcf/d in 2012 to 75 Bcf/d in 2035.
– A modest revival of the industrial sector – including petrochemical – from 25 Bcf/d in 2012 to 34 Bcf/d in 2035.

So, I am waiting for the next series of tests. All I know is that neither I nor the Fighting Irish should have gone out last night. But at least they could go home.