January 2015, Vol. 242, No. 1

In The News

Pipe Coaters Meeting Examines Mixed Messages

Although the total tonnage of transport pipe needed in North America was down as of late summer, that has not been due to decreased construction activity ahead. Rather, it reflects NGL and oil pipes crowding out demand for large-diameter gas transmission pipe, and the prevalence of reversals and conversions of existing pipe, according to a report by Amanda Eglinton, senior research analyst for IHS Global Insight.

In addition to significant construction in Canada, over 2,000 miles of large-diameter pipes are planned in Mexico. Latin American demand growth also appears promising.

The pipe slated for these projects will be manufactured in a wide array of countries. Sufficient pipe manufactured in the United States will be available, but proximity will not outweigh other factors to shut out imported pipe.

“Before all this new [domestic] production capacity was built, buyers had a lot of relationships with mills overseas,” Eglinton said. “Just because the production capacity has been added doesn’t mean those relationships have gone away.”

Eglinton spoke to the National Association of Pipe Coating Applicators, which held its August workshop in Houston on Aug. 21 with 55 attendees. The workshop also heard about a glut in the pipe market from Dolty Cheramie, president of Pipe Exchange, Inc.

Cheramie raised concerns that the large number of foreign-owned pipe mills that have opened in the United States within recent years will flood the market, undermine prices and lead the pipe manufacturing sector into a season of bankruptcies.

“Wherever we are right now, if you don’t like the numbers, it is going to get worse. The capacity production from these mills has not really hit the market yet,” he said.

He warned those hoping for large LNG exports that the North American production boom does not represent a unique opportunity and will not provide the United States with a permanent production advantage.

“There are shale formations everywhere on the planet,” he said. “The biggest shale play on earth is in China. As soon as they start using our technology and drilling and producing our natural gas and shipping it out with steel – we’re going to be able to compete with those guys in the open market?”

Jason French, director for government and public affairs for Cheniere Energy, explained the perspective of the prospective LNG exporter. He highlighted the importance of speed to market to capture demand that will almost certainly fall short of eventual supply.

“We’re not Coke-Pepsi type competition. The competition in the LNG industry is with other countries,” he said. “Will their markets allow them to get to the marketplace first?”

LNG customers sign long-term contracts and French said Cheniere’s contracts were already in place. “Every drop of gas that we’re permitted to build [facilities to condense] thus far has been sold for the next 12 years. And some of the gas that we’re not permitted to [build for] yet has been sold.”