Recently I attended the 2nd annual Pipeline Leadership Conference in Denver Colorado sponsored by Continuum Capital and Benjamin Media.
The goal of the event is to recognize and promote innovation and leadership through people, process, and practice in the oil and gas pipeline industry. This includes representatives from the transmission, midstream and local distribution companies across North America.
Here is a brief summary of what I heard and learned.
Market projection– Being 1 week after the shocking election results the group has mixed reviews;
INGAA conference predicted that the wave of Transmission work that was supposed to happen in 2016, will actually happen in 2017. The number of Spreads needed in 2017 will be 123 vs the 85 needed in 2016. Many disagreed with this and see more growth in 2018 and 2019, due to approvals still delaying construction.
Distribution work will continue to grow mainly because of upgrades to pipelines. Qualified labor is a key concern, shortages will continue. When pipeline comes back it will be hard to get employees back in the industry,
Station work is countercyclical and Integrity work accelerated, but will be cyclical due to having 5 or 7 years to do work, can wait until they have money.
- Mergers- CPG acquisition was driven by the Appalachian Region having low cost production will keep gas flowing, and having $7.3B shovel ready, fixed contracts. The Merger happened quickly. 6 months from conception
- Permitting constraints driven by 3 events in 2010
- BP Horizon
- Enbridge Kalamazoo oil pipeline spill
- PGE San Bruno gas pipeline
- Special interest groups- well funded, want to stop hydrocarbon industry
- A lot of opportunity in gas plants etc., many expansion of existing RW and lines
- Less money spent up front, wait to spend $ until approved, longer duration
- Work more up front with stake holders
- QA/QC more important- documentation
- Staffing critical issue, retirements etc.
- Don’t see that much change, slowing regulations would be good, difficult to reverse things, difficult to make change with people
- Transmission-Economic driven- will move along where permitting can happen
- Distribution- drive by money available for replacement
- Utilities driven to do solar and wind, invest into security of assets
- Need to improve education of public- currently 10% of take home $ for energy, what if doubled- can’t over communicate,
- Contractors sooner, Spend more money on quality and safety- contractors with the right systems and processes.
- Owners buy from professionally managed firms- good systems and processes, Going to work with the best people, becomes competitive advantage, has systems in place to keep life cycle cost lower even if initial price higher.
- Companies that are good aggregators, bring local suppliers and bring them along with systems and professionalism.
- Now have to have business processes support in addition to doing the work, including stake holder relations
PHMSA Rule changes going to final language next summer, likely will change significantly , looks like 2018 planning year, huge dollar ammounts, operators will wait until they have certainty, will be testing people and processes over the next few years. Maybe better to replace pre 70’s pipelines. Big difference between Capital vs Maintenance (operating costs can’t be depreciated) money allocated.
Increasing capacity of the workforce needed
- Local Distribution utility companies are 5 years into a 20 year system upgrade program.
- “stealing” construction resources, chasing military and tech schools
- Regulators rate cases- do create a lot of work- audit of cost effectiveness, decisions analyzed, few contractors, inspectors (Mark recommends more inspectors for contractors)
- Contractors- more communication, longer term, strategic partners- how to improve,
- cost have increased 20-40% to handle new requirement
- Contractor margin have gone down- less experienced crews
- Skill supervision is the key- where come from, how to train- Critical
- Integrity management- transmission requirements will be required of distribution- un-piggable, how handle
- Rate payer fatigue- falling commodity price has hidden it
- Have not yet seen improvement in # of leaks yet, after 4-6 years, what is causing this? More aggressive in documentation. Hoping tipping point, need to be specific in what is goal- leak reduction vs. risk reduction, what type of leak is it.
- Utilities are better in planning work and considering contractor needs- Dave- Infrasource doing their steel pipe work.
Regulatory compliance training
o Lessons learned
- Everyone needs to know why and how- strategic idea and training going to implement
- You will not get it right the first time- need commitment and
- Key people need to be involved early
- Leadership is critical- need to be willing to explore
- Train- why- how- change management- reduce resistance and add satisfaction