October 2020, Vol. 247, No. 10
Global News
Global News
Pipeline CEOs Expect More Consolidation in ‘Maturing’ Industry
The pipeline industry is shifting out of its growth phase, signaling that more consolidation is likely on the horizon, executives at two major operators said during separate events recently.
“As we go forward and times are continuing to be more challenging, I think you’re going to see more of that (consolidation),” CEO Willie Chiang said at the Barclays CEO Energy-Power conference.
His comments echoed those of Richard Kinder, executive chairman of Kinder Morgan, in an earlier conference call with investors.
“Looking beyond 2020, we believe we’re operating in a maturing business segment and there are opportunities for viable expansion projects will likely be significantly less than we have experienced for the last several years,” Kinder, said in a conference call with investors.
“If that expectation proves accurate,” Kinder continued, “ It will probably reduce our growth potential but allow us to husband significant cash flow that we can use to increase our dividend, pay down debt and or buy back shares under the right conditions.”
Midstream companies raced to add pipelines as shale production boomed, but takeaway capacity out of some production areas – notably, the Permian Basin – is more than enough to handle reduced demand. Several major projects that were planned in the region have been scuttled amid a price and demand collapse during the COVID-19 crisis.
“(Permian) takeaway capacity is more than needed currently, not just for crude, but also NGLs as well as natural gas,” Chiang said. The constraints have been significantly been removed with the reset of production, which positions it well for when production comes back.”
While Kinder didn’t specify that his company is looking for acquisitions, he signaled that his company would be the alpha of any potential deals.
“Most investors we talk with … believe that given our size, attractive assets and relatively strong balance sheet, we will be a long-term survivor. With that in view, they see us as a potential consolidator in the midstream arena,” he said.
EU Looks to Hydrogen, but ‘Green’ Faces High Hurdles
The European Union has set a goal to expand production and use of “green hydrogen,” but experts say its success will depend on billions in investments by member states that are struggling to recover from a global pandemic.
“This was never going to be easy,” said Noe van Hulst, hydrogen envoy for the Dutch government. “You need everything: scaling up on the production side and the demand side at the same time. You need to have the infrastructure in place. A lot of things have to come together.”
Europe’s heavy industry already consumes millions of tons of hydrogen each year, but it is mostly produced from coal or natural gas.
“Green hydrogen” describes the production of a zero-carbon fuel using renewable energy to split water into hydrogen and oxygen using an electrolysis process. So-called “grey hydrogen” is produced from fossil fuels, and “blue hydrogen” relies on hydrocarbon energy with a carbon-capture process.
Despite the high hurdles facing the EU’s ambitious 2050 targets, there is no doubt that hydrogen will play a growing role in the continent’s energy mix. Germany, for instance, is taking concrete steps toward development of a hydrogen grid, according to Malte Grunwald, Hydrogen Team, Gasunie Deutschland Transport Services GmbH.
“We think that future gas demand might be on the same magnitude we see right now. But we will have almost an equal split between hydrogen and methane in the future,” Grunwald said at P&GJ’s Pipeline Opportunities Conference-EMEA on Sept. 17.
“We are planning to have a parallel (pipeline) infrastructure for methane and hydrogen in the future,” Grunwald said during the Pipeline & Gas Journal-sponsored event, noting that up to 90% of needed hydrogen pipelines may be converted from natural gas lines.
The EU’s announced goal is to scale up green hydrogen projects across polluting sectors – from chemicals to steel – to reach net-zero emissions by 2050. Analysts say it will be expensive and difficult to achieve, largely due to simple economics.
The cheapest grey hydrogen costs 1.5 euros per kilogram to produce, European Commission figures show. Blue hydrogen costs 2 euros/kg and green up to 5.5 euros/kg.
“Potentially, that infrastructure challenge is much greater than with any of the other technologies that have emerged for decarbonization over the last 10-15 years,” consultancy Wood Mackenzie’s Ben Gallagher said.
Snam: Italy Can be Hub for Piped Hydrogen from Africa
Italy could become a clean energy hub for Europe by piping green hydrogen produced in North Africa at 10-15% less than it costs to produce locally, a study by Italian gas group Snam and consultancy The European House-Ambrosetti said.
Presented at a conference in Cernobbio, the study said Italy is well-placed to benefit from hydrogen developments thanks to its location and extensive gas network.
Snam, Europe’s biggest gas pipeline operator, has been experimenting with a 10% mix of hydrogen in its 21,000-mile (33,000-km) natural gas network. It has said that 70% of its natural gas grid is already made up of “hydrogen ready” pipes.
“Italy can become the infrastructural bridge between Europe and the African continent, thus enabling greater hydrogen penetration in other European countries,” the study concluded.
Hydrogen could account for 23% of Italian energy demand by 2050, the study said.
Colombia’s Ecopetrol Says Siphoning of Oil Pipelines Rising
An increase of illegal siphoning on pipelines in Colombia resulted in an average daily loss of 2,500 bpd of oil and refined fuels during the first eight months of 2020, according to Ecopetrol, up from an average 1,453 bpd during the same period of 2019.
Nearly 900 illegal valves were found on pipelines during the first eight months of the year, Ecopetrol said in a statement, up from 747 in the same period in 2019. At least 20 of Colombia’s municipalities have experienced this type of crime, it said.
Crude makes up 2,439 of the average stolen barrels daily, the company said, most of which comes from the 480-mile (773-km) Cano Limon-Covenas pipeline, where 27 illegal valves – mostly in two municipalities in Colombia’s Norte Santander province – have been found.
The 190-mile (306-km) Trans-Andino pipeline has also been heavily tapped, with 706 illegal valves found mostly in the provinces of Tumaco and Narino through August, Ecopetrol said.
Theft of oil and fuels puts communities and the environment at risk, the company said, as the methods used to tap the pipelines can result in spills affecting soil, bodies of water, animals and plants.
Court Schedule Keeps Dakota Access Flows Safe Through 2020
A new schedule released by the court managing the case concerning the Dakota Access pipeline (DAPL) shutdown order means the line will be able to operate at least through the end of 2020.
The federal court in Washington that is handling the case released a schedule that would allow the pipeline to continue flowing until late December at the earliest, Bloomberg reported.
The timeline gave Native American tribes opposing the line until Oct. 16 to file a request to close the line. DAPL operator Energy Transfer and the Army Corps of Engineers will have until Nov. 20 to respond to the request.
All final briefs from the tribes must be submitted to the court by Dec. 18 meaning a final decision is unlikely to come until close to the end of the year, or possibly early 2021.
The 1,172-mile, 570,000 bpd oil pipeline was ordered shut down and emptied in late July after a judge invalidated an environmental permit for the line issued by the Corps of Engineers. It continues to operate on appeal.
Industry Executives Predict Global LNG Demand Recovery
Demand for LNG is set to increase steadily for several decades helped by economic growth in Asia, with the COVID-19 pandemic seen as only a short-term setback, according to industry executives at the Gastech summit.
“While the world continues to grapple with the severe impacts of market demand and the impact of COVID-19, long-term fundamentals remain strong supported by growing population and energy demand,” said Irtiza Sayyed, president, ExxonMobil LNG Market Development.
Global gas demand is forecast to decline by around 3% in 2020 and make a robust recovery after that, according to International Energy Forum.
“LNG is and will remain a high-growth industry based on a growing economy worldwide, particularly in Asia, with a desire for secure, affordable and cleaner-burning fuels,” Douglas Wharton, vice president, Cheniere Marketing Pte. Ltd., told Gastech.
The global gas and LNG conference, launched in London in 1972, was held virtually this year due to the COVID-19 pandemic. It will be held in Singapore next year.
Gas Pipeline Blast Injures Dozens Praying at Bangladesh Mosque
An underground gas pipeline near a mosque exploded during evening prayers outside the capital of Bangladesh, killing 24 people and leaving other Muslim worshipers with critical burns, officials said.
At least a dozen people who were admitted to a burn unit in a state-run hospital in the capital of Dhaka had survived the blast. Samanta Lal Sen, a coordinator of the unit, said most of them were in critical condition, Sen said.
The blast occurred as people were finishing their prayers at Baitus Salat Jame Mosque at Narayanganj, local police chief Zayedul Alam said.
Firefighters were investigating the cause of the explosion.
Black Bear, Pin Oak Complete Acquisitions
In what may be sign of ongoing industry consolidation, Pin Oak Midstream has acquired Laurel Mountain Midstream’s Jackson Center natural gas pipeline assets, and Black Bear Transmission completed its bolt-on acquisition of Natural Gas Transmission assets from a subsidiary of Third Coast Midstream.
Pin Oak’s Jackson Center deal includes more than 1,050 miles of natural gas gathering pipelines and five gathering compressor stations, with a gathering capacity of over 50 MMcf/d and multiple interstate pipeline interconnects to both National Fuel Gas and Tennessee Gas Pipeline.
Pin Oak Midstream’s Appalachian Basin position consists of nearly 1,200 miles of pipeline assets including 13 interstate pipeline interconnections, gathering, processing and transportation dedications on more than 150,000 dedicated net deep acres (Marcellus and Utica) and current flowing volumes more than 15 MMcf/d.
Black Bear’s newly acquired NGT Assets include six intrastate natural gas pipelines spanning 1,400 miles in Alabama, Louisiana and Mississippi. The system has total capacity of more than 800 MMcf/d and benefits from significant interconnectivity to major long-haul pipelines, providing gas supply to utilities and other key end-users, the company said.
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