January 2017, Vol. 244, No. 1

Features

Technology to Future-Proof Your Natural Gas Pipeline for Growth

The unprecedented rate of production of natural gas in the last few years has been matched by a record level of consumer deliveries including residential, commercial, industrial and vehicle fuel deliveries. Today, natural gas accounts for 30%t of America’s energy generation, heats 76 million homes, is a key component of fertilizers and is critical for manufacturing and production.

What’s interesting is five states – Texas, Pennsylvania, Oklahoma, Louisiana and Wyoming – account for 67% of all gas produced in the United States. This means that a large number of states depend on safe and reliable transportation of natural gas to meet their energy needs. The more than 300,000 miles of interstate and intrastate transmission pipelines spread across the U.S. form a highly integrated transmission and distribution network that can transport natural gas to and from nearly any location in the Lower 48 states.

However, as environment and safety concerns over pipelines mount, pipeline asset owners are under tremendous pressure to better maintain infrastructure. Moreover, increased use of natural gas for electricity generation means pipeline operators need to improve integration, coordination and reliability throughout their purchase, management and delivery processes.

In addition, asset owners must keep up with growing demand for natural gas and manage the rapidly evolving regulatory environment, while improving efficiencies to lower operating costs. This needs to be accomplished while grappling with the challenge of an aging workforce.

In order to maintain profitable operations and revenue growth targets in this volatile market, it is imperative for pipeline asset owners to have the most up-to-date, real-time information on supply, current inventory, projections on future prices and expected demand. They need modern transaction management systems that are web-based, fully integrated, scalable and highly flexible to keep up with today’s market demands.

Some of the key factors driving the need for better software solutions among natural gas pipeline operators include:

1. Widening skills gap – Almost every industry is feeling the effect of the “Great Crew Change” as a large number of baby boomers retire, leaving in their wake a vacuum of talent and skills. In the knowledge and skills-intensive oil and gas field, companies are feeling the pressure to fill tens of thousands of jobs, especially as the natural gas industry continues to grow, driven by increased demand and lower prices. Industry data show that in 2015, 50% of the workers in the oil and gas industry were up for retirement.

According to the American Petroleum Institute (API), the natural gas and petrochemical industries will need to hire close to 30,000 workers annually over the next two decades to replace departing and retiring employees. However, the challenge is not just hiring people. Companies are struggling with the huge skills gap between departing baby boomers and incoming millennials.

To continue on expected growth trajectories, companies will need to come up with innovative ways to pass on the knowledge and expertise gathered over the years by the retirees to the incoming employees. Additionally, to attract and retain tech-savvy millennial workers, natural gas companies need to offer modern technologies similar to the kind they’re familiar with in their personal lives.

As most business and operational processes supporting the oil and gas industry have remained highly manual so far, companies need to invest in technologies that can automate processes to make it easier to train new employees while safeguarding against future risks.

Also, when adopting new automation solutions, companies should invest in software based on human-centric design principles. This software design approach focuses on the employee’s needs first and then builds technologies around those needs to optimize employee effectiveness.

2. Increasing cost per mile – As the expense of maintaining and operating a pipeline continues rising, asset owners need to increase efficiencies and resolve issues faster. Technologies that help detect and assess anomalies faster, as well as help reduce the number of incidents, will be critical.

The traditional methods of pipeline maintenance, such as manual inspections, are giving way to more modern means. Internet-connected sensors and networked smart devices bring asset intelligence previously only available through human inspection to a centralized operations center in real-time. Operators are able to detect potential issues before they lead to actual production downtime, enabling companies to more smartly deploy resources and equipment to ensure a higher degree of operational continuity at an overall lower cost.

To get insights from the vast amounts of data gathered from the sensors and better manage internet-connected industrial assets, natural gas pipeline owners should consider investing in modern analytics solutions, which are able to stream large volumes of sensor data from industrial assets and provide real-time situational awareness.

3. Volatile gas prices and demand – Seasonal fluctuation in demand and shifts in supply greatly affect the price of natural gas. In the absence of real-time supply and demand data such as production, natural gas wellhead productive capacity, or natural gas consumption volumes, this volatility can be further exacerbated.

To maximize throughput, thereby increasing revenues, pipeline owners need technology solutions giving them access to real-time data on dynamic pricing, market conditions and contracts.

Additionally, as the industry sees a paradigm shift toward “just-in-time” inventory models, storage providers will need to become agile in providing services to support the abundant supply with just-in-time offerings. Providers may need to offer wheeling, parking, loaning and pooling services to create fluidity for the commodity. A software solution that can provide the platform on which these services can be offered and automated will be critical.

4. Dynamic regulatory environment – The North American Energy Standards Board (NAESB) recently released Wholesale Gas Quadrant Standards, version 3.0. Accordingly, natural gas pipelines need to add an intraday nomination cycle to help synchronize all interstate gas pipelines. This means pipelines will have to confirm and schedule five times a day instead of the previously required four times.

This change can mean significant cost and time investments for pipeline asset owners that have to upgrade legacy systems. Yet at the same time, it is costly not to update them – the Federal Energy Regulatory Commission (FERC) can fine pipelines millions of dollars for failing audits and not meeting compliance requirements. By using a flexible, cloud-based technology platform, companies can benefit from fast, easy updates and upgrades.

5. Pressure to improve reliability – Natural gas-fired electricity generation surpassed coal-generated electricity in July 2015 and has been steadily increasing since. By the end of 2016, natural gas-fired electricity is expected to account for 34% of electricity generated in the U.S., according to Energy Information Administration (EIA) data. By comparison, coal-generated electricity is projected to account for 30%, while nuclear-generated will stand at 19% and renewables at 15%.

There are several reasons for the rise in popularity of natural gas as a source of electricity. One is that it is a cleaner, more efficient source than harsher burning primary energy sources such as coal. Overall, natural gas produces less carbon and other harmful emissions compared to coal and is more environmentally friendly.

Furthermore, when compared with more sophisticated primary energy sources such as nuclear, natural gas-fueled electric generation plants can more readily adjust generation to meet fluctuating market demands; these plants are also much safer for the environment and communities. All this means that the volume of natural gas flowing through pipelines, which form the primary mode of transportation, is generally expected to increase.

With pressure mounting to supply more natural gas with improved reliability, pipeline asset owners need a transaction management software platform to help identify and understand points of constraint within natural gas systems, and then optimize natural gas flow accordingly.

Conclusion

Investing in technologies that are agile, cloud-based and secure will be critical for pipeline asset owners and operators in order to sustain growth by taking advantage of abundant supply and increasing demand for natural gas. The time is opportune for these owners and operators to make strategic investments in forward-looking technologies that offer them scalability, flexibility and mobility.

Author: Rakesh Agrawal has served the energy industry since the beginning of his career and is considered a thought leader and innovator. Since the early 1990s, he has guided companies through market deregulation and the highly dynamic marketplace evolution. He has been a NAESB member and Executive Committee Member for the Wholesale Gas Quadrant for the past five years. He holds an MBA in Finance and Operations Research Decision Science from the University of Kentucky, and a Bachelor in Material Science Engineering from the Regional Engineering College, India. Trellis is headquartered in in San Francisco with offices in Houston, Denver and Washington, D.C.