November 2007 Update

In the news...

• National Fuel Proposes $700 Million Gas Pipeline (11/12/07) National Fuel Gas Co. proposes to build a 324-mile pipeline extending from southeastern Ohio to Corning, NY at a cost between $630 million and $725 million. National Fuel, currently constructing a 77-mile extension to its Empire State pipeline between Victor, NY and Corning, calls the proposed pipeline the "West to East" project. The pipeline would link the Rockies Express pipeline with the Millennium Pipeline in Corning and could carry 550 to 750 million cubic feet of gas each day. Construction of the proposed project is contingent on getting firm commitments from customers for the bulk of the pipeline's capacity. [More here]

• Work On N.B. Pipeline Likely To Start Soon (11/9/2007) Emra Brunswick Pipeline Co. will not have to wait another 60 days to begin pre-construction work on its $400 million gas pipeline project. The National Energy Board (NEB) of Canada initially turned down an application to start work because Emra failed to provide all the required information. A company spokesman stated the necessary information has now been submitted to the board. NEB spokeswoman Carole Leger-Kubeczek said work on the 145-kilometer pipeline near Saint John, New Brunswick can begin after the board reviewed the new information and found it to be satisfactory. [More here]

• Tammany Pipeline Repairs Continue (11/9/2007) ....... Repair work continues on the Tammany Oil & Gas pipeline that ruptured about four miles offshore from McFaddin Beach, Texas on November 5. Two leaks released about 2,000 gallons of crude oil into the Gulf of Mexico. Divers have removed a three-inch thick concrete covering surrounding the southern leak and will install a pipe clamp. Once finished, divers will do a similar repair on the northern leak. In the meantime, the Texas General Land Office and MSU Port Arthur are conducting helicopter over-flights to monitor discharged oil movement and direct skimming operations. [More here]

• Man Gets 30 Years In Pipeline Plot (11/6/2007) ........... Michael C. Reynolds, who claimed to be trying to root out terrorists on the Internet, was sentenced to 30 years in Federal prison for plotting to help a supposed al-Qaida operative blow up U.S. oil pipelines and refineries. He was arrested after he tried to meet a purported al-Qaida contact (actually a Conrad, MT judge working for the FBI) 25 miles from Pocatello, Idaho. Prosecutors said Reynolds wanted to work with al-Qaida to target the Williams natural gas refinery, Transcontinental Pipeline and a Standard Oil refinery that no longer exists. At the meeting in Idaho, Reynolds expected to get $40,000 to finance the plot. [More here]

• Battle Brewing Over Proposed Oil Pipeline (11/6/2007) ..... A group of First Nations leaders in Manitoba is seeking to force gas and oil distributor, Enbridge Inc., to pay them for building a pipeline through traditional territory. Enbridge's pipeline project - the Alberta Clipper - on its way from Alberta to Wisconsin would pass through a southern part of Manitoba. Roseau River Chief Terry Nelson, a First Nations leader told CBC News, "Every municipality gets a benefit from the pipeline coming through the municipality — they get it without a fight because they are recognized as beneficiaries to the pipeline — except the indigenous people". He has sought unsuccessfully to convince the Canadian federal government to refuse approving the pipeline unless First Nations are compensated. Industry Canada officials said the National Energy Board will examine all issues related to the Alberta Clipper. An Enbridge spokesperson would not comment while hearings are underway. [More here]

• TransCanada: Cost Of Keystone Pipeline Almost Double Original Estimates (11/5/2007) According to TransCanada, its proposed Keystone pipeline will now cost $5.2 billion or almost twice its original estimate of $2.8 billion. The pipeline extending 2,148 miles from Hardisty, Alberta to Cushing, OK as well as Wood River and Patoka, IL, is expected to transport 590,000 barrels of oil per day by 2010. TransCanada said design changes and inflation related to higher prices in steel and labor are the reason for the cost escalation, according to the Globe and Mail. The Canadian Energy and Paperworkers Union oppose the pipeline project claiming 18,000 Canadian jobs will be lost to the U.S. if it is completed. Operations are expected to begin in 2009, transporting 435,000 barrels per day to Illinois. [More here]

• Enbridge Energy Partners Closes Sale Of Kansas Pipeline System (11/1/2007) Enbridge Energy Partners, L.P. has sold its interstate natural gas transmission system, also known as the Kansas Pipeline System, to Quest Midstream Partners, L.P. a subsidiary of Quest Resource Corporation for $133 million. [More here]

• Explosion In Mexico Gas Pipeline (10/31/2007) .................. In the city of Huimanguillo, located in the Gulf coast state of Tabasco, Mexico, a Pemex natural gas pipeline exploded causing at least one town to be evacuated. No injuries or deaths were reported. Workers immediately shut down the 16-inch pipeline and burned off excess gas trapped in ducts. Pemex is also trying to contain oil leaking from a land pipeline that cracked on October 24. An estimated 10,000 barrels of oil have spilled into the Jaltepec and Coatzacoalcos rivers in the Gulf state of Veracruz. Despite containment efforts, oil has reached coastal areas. [More here]

• TransCanada May Take Larger Role In Mackenzie Project (10/31/2007) TransCanada Corp. is considering building and operating by itself the $7 billion main-line portion of the $16.2 billion Mackenzie Gas Project. Although the project faces many hurdles including escalating costs, long regulatory delays and aboriginal community opposition, TransCanada's CEO Hal Kvisle said the project is still viable. “I think we look forward a little more optimistically because I don’t think anyone would be more aware than us of the challenges of sustaining gas production in Alberta,” he said. Other potential stakeholders including Imperial Oil, Conoco Phillips, Exxon Mobile Corp. and Royal Dutch Shell PLC will not make any final investment decisions on the project until receiving regulatory approval from the National Energy Board of Canada expected late next year. [More here]

• Enbridge Energy Partners Proceeds With Second North Dakota Pipeline System Expansion (10/29/2007) Enbridge Energy Partners, L.P. announced it will expand the Enbridge North Dakota Pipeline System adding up to 51,000 barrels per day (bpd) for a total system capacity of 161,00 bpd, if approved by the U.S. Federal Energy Regulatory Commission. Costing an estimated $150 million, the expansion will add 40,000 bpd of capacity from the western end of the system to Minot, ND and 51,000 bpd of capacity from Minot to Clearbrook, MN. This new expansion project is expected to be in service late 2009 and is in addition to the existing 30,000 bpd expansion project under construction with a targeted completion date at the end of 2007. [More here]

• Willbros Wins Five Contracts (10/26/2007) ................ Willbros Group Inc. said it has been awarded approximately $170 million in domestic and Canadian construction contracts. The five contracts include building two sections of the natural gas pipeline looping sections for TransCanada Corp., a Pipeline Alley tie-in connection for Kinder Morgan, projects for Cheniere Energy Inc., and new pump station and modification work for Marathon Oil Company. [More here]

• Alaska Gets Tough On Big Oil (10/17/2007) .................. Governor Sarah Palin was elected by Alaskans on a simple platform - get a natural gas pipeline built on Alaska's terms. Previous governor, Frank Murkowski, negotiated a deal with North Slope producers - Exxon Mobile, BP and Conoco Phillips - to construct a pipeline from Prudhoe Bay to the continental U.S. in exchange for 5% reduction in their taxes. The new governor does not think these producers need inducements since they each stand to gross up to $1 billion a year at current prices. Furthermore, Governor Palin thinks that the threat of having to pay fees to an organization outside the group may prod one of the three to bid. However, her plan may not work. So far, none of the big oil companies have submitted a bid that is due at the end of November. Several pipeline builders could bid on the project including Enbridge, MidAmerica and TransCanada. But these companies are reluctant to build it without commitments by the oil companies to use their pipeline. If there are no bids, Governor Palin may sue the producers or have the state finance the pipeline, further adding to at least a seven-year build time. With rising natural gas prices and disruptions in the Gulf by hurricanes such as Katrina, the rest of the U.S. need the pipeline and can't afford to wait. [More here]

Is the Natural Gas Market Ready for Hourly Nominations?

Marketers, traders, and power generators would like the natural gas market to be as fluid as the electric market. Pipeline companies trying to efficiently manage their assets want to assure that if markets pull all their gas in a few hours per day, that they keep the integrity of their pipelines safe, as well as collect money from those using their pipelines in such a manner.

The problem in moving the natural gas market towards the electric market lies in the fact that electricity literally moves at the flick of a switch, while natural gas takes a bit of time to move from the producing fields to the end use markets.

Frankly, power generators don’t necessarily care what it takes to get the gas there; they just want it available when they need it. Pipelines are often more interested in selling capacity and maintaining steady throughput and linepack.

To manage this hourly, transactions will need to be scheduled on an hourly or series of hourly basis. This would result in up to twenty-four scheduling cycles in which the pipeline would need to assign capacity and make cuts each hour. Great in theory, but not realistic from a scheduling and accounting view.

The logical step is to continue scheduling under the current cycles and utilize hourly nominations for flow profile calculations so that pipelines can manage their assets – and maybe even come up with a simple billing mechanism that does not call for massive manual spreadsheets, or re-writes of existing business systems.

Until all the camps come together and put themselves in each others shoes, a solution determined by the regulatory agencies trying to mediate the selfish concerns of the different camps will result. That could lead to disastrous results – or at least leaving no one happy.

Robert Young
Product Manager – Commercial Applications

Dashboard Web Applications

Pipeline applications are becoming more and more advanced offering more and more information to different groups of people within the pipeline companies. Todays software applications provide a wealth of information ranging from design to commercial information, with lots of operational information in between.

All this information can be overwhelming, so efficient data management and presentation is very important. Different groups of personnel needs different data and the timing requirements are quite different as well. For example, you need to know immediately if there is an integrity issue on the pipeline. Often you want to know ahead of time of any upcoming contract violations etc.

All this information can be tied together in a Dashboard application that allows each specific user to select exactly what data to show. This application can be accessed via the web and will show information from a wide range of applications. Basically only your imagination limits what information you can include here.

This dashboard is currently under development and you will soon be able to see a live demonstration of this. If you have any comments as to what type of data that should be included within the dashboard or how this should be presented, please feel free to post your comments.

Thanks,

Morten Kristiansen
Product Manager - online operational applications

October 2007 Update

In the news...

• Pipe Dream (10/11/07) Almost 600,000 miles of high-pressure steel pipelines are monitored in the U.S. by oil and natural gas pipeline operators for corrosion-induced failures that can lead to leaks or explosions. Corrosion results from a pipeline generating a naturally occurring electrical charge. Cathodic protection can protect the pipelines through the placement of an anode near the pipeline through the soil and directly on the pipeline. A current with the opposite polarity to the natural charge halts corrosion as long as it is applied. A Congressional study estimated corrosion on large-diameter high-pressure pipelines costs U.S. operators $7 billion annually. Strict U.S. governmental regulations require all newly laid oil and natural gas pipelines to have cathodic protection. Although many existing pipelines had cathodic protection installed more than 50 years ago, the technology was primitive and requires corrosion monitoring on a regular basis. Preserving new pipeline with a protective outer coating requires an anode installation every 20 miles at a cost of approximately $1,000 per mile. Older pipeline needs a continuous anode that runs parallel to the pipeline and can cost as much as $75,000 per mile. Although retrofitting older pipeline to install anodic protection can be extremely expensive, the alternative - shutting down and replacing it - is even more expensive. [More here]

• Midcontinent Express Pipeline Files for FERC Certificate (10/10/2007) Midcontinent Express Pipeline LLC (a joint 50/50 venture between Kinder Morgan Partners and Energy Transfer Partners, L.P.) filed an application requesting a certificate of public convenience and necessity with the Federal Energy Regulatory Commission (FERC). If approved Midcontinent Express Pipeline will be authorized to construct and operate about 500 miles of natural gas pipeline starting August 2008 and scheduled to be in service the first quarter of 2009. Costing approximately $1.27 billion the pipeline project will go from southeastern Oklahoma across northeastern Texas, northern Louisiana and Central Mississippi to interconnect with the Transco Pipeline near Butler, Alabama. Once completed it will consist of around 265 miles of 42-inch, 196 miles of 36-inch and 41 miles of 30-inch pipe with up to 13 receipt and/or delivery interconnections providing an initial capacity of up to 1.4 billion cubic feet per day of natural gas. [More here]

• Irving Protests Proposed LNG Pipeline Route (10/9/2007) Irving Oil has filed a formal opposition with the Canadian National Energy Board over the proposed route of the Brunswick Pipeline Project. Irving claims the pipeline route, proposed by Emera Pipeline Co., could interfere with its plans to develop a second oil refinery in the area as well as impact commercial and/or residential buildings significantly impairing economic viability and marketability of the proposed development. Irving also said a minor change in the route would minimize the impact on the area affected. The proposed pipeline will serve and start at the Canaport LNG terminal (Irving Oil is a stakeholder) before traversing 90 miles through existing industrial and utility pipeline corridors to Saint John, New Brunswick. [More here]

• Small Oil Company Makes Big Arctic Gamble (10/5/2007) Pioneer Natural Resources Co. will become the first independent operator to produce oil on the North Slope. In order to compete in a market dominated by major producers including BP PLC, Exxon Mobil Corp. and ConocoPhillips, the company had to overcome major obstacles including drilling in the open waters of the Arctic Ocean three miles off the Alaskan coastline. The company had to build a six-acre gravel island named Oooguruk, install a drilling rig and eight miles of pipeline to a processing center onshore about 150 miles southeast of Point Barrow, AK. Oooguruk, only the second man-made island in the Arctic Ocean (the first was five-acre, Northstar, built by BP in 2001), took four years to build at a cost of more than $500 million. Construction could take place only during winter months using manmade ice roads crossing the frozen ocean and required 20,000 truckloads or around 450,000 cubic yards of gravel to complete. Production on the island is expected to yield 20,000 barrels a day. [More here]

• BP Announces Start of Binding Open Season for Proposed Viridian Pipeline Project (10/4/2007) BP Pipelines will conduct Phase Two of its open season for the proposed Viridian Pipeline project. It is soliciting binding bids on long-term contracts to transport light crude from the Chicago area to Cushing, Oklahoma. BP Pipelines owns and operates the BP No. 1 Pipeline that is a 600-mile long and 20 to 22 inch diameter crude oil pipeline. The reversed pipeline targeted to be in southbound service by May 2010 has a capacity of 100,000 barrels per day with possible expansion up to 200,000 barrels per day. [More here]

• Canadian Natural Gas Facility May Brighten Bay State Energy Picture (9/24/2007) The Canadian province of New Brunswick is adding a third liquefied natural gas storage tank to the plans of an LNG facility (Canaport) now under construction in Saint John located approximately 70 miles from Calais, Maine. The province is also expanding its primary natural gas pipeline into New England. Once completed by the end of 2008, the LNG terminal will have three tanks each holding 5.65 million cubic feet of natural gas. According to Energy Minister for New Brunswick, Jack Keir, "We're ideally located to supply natural gas all over Atlantic Canada and the northeastern United States," adding "The concept is that we become an energy hub." ..... [More here]

• TransCanada Gets Pipeline Approval (9/21/2007) TransCanada Corp. received government approval from Canada's National Energy Board for their TransCanada Keystone Pipeline GP Ltd unit to convert a part of a natural gas pipeline to crude oil service. Additionally, TransCanada Corp. received approval to operate the Canadian section of the pipeline as well as build new pipeline. When finished, the 2,148 mile pipeline will connect Hardisty, Alberta to a point near Haskett, Manitobe before crossing into the U.S. onto Patoka, Illinois and then Cushing, Oklahoma. TransCanada will construct 231 miles of new pipeline as well as acquire and convert of 537 miles of existing natural gas pipeline into oil transporting pipeline. The project is estimated to cost $664 million and be operating by the fourth quarter of 2009. [More here]

• National Energy Board OKs Offshore Pipeline (9/13/2007) An application by EnCana Corporation to construct a 176-kilometer long underwater pipeline was approved by Canada's National Energy Board. The C$234 million Deep Panuke Pipeline will connect the Deep Panuke Offshore Gas Development Project near Sable Island to Goldboro, Nova Scotia. When production begins in 2010, Encana expects to ship up to 300 million cubic feet of natural gas per day and extract approximately 630 billion cubic feet of natural gas over an estimated 13-year lifespan for the project. [More here]

How Dynamic will the LNG Market Become?

LNG imports to the U.S. are set to surge over the next ten years (50+ onshore terminals being built or going through the approval process), resulting in a new set of trading points being generated.

Owners of facilities who buy LNG from the source, move it to their facility, and then sell it off - either at the tailgate or likely utilizing firm transport to sell downstream - will simply serve as additional supply to the market.

However, some facility owners may stay away from the buy/sell process and simply provide services to its customers who do the trading – acting much like pipelines or NGL plant processors who make their money as service providers – in this case LNG services. Depending on the terminal size and number of pipeline connections, these facilities could become fairly flexible and liquid market points. While it would be prudent for LNG supply owners to have set markets for their gas, if demand continues and LNG becomes a necessary and integral supply source, then the call for this gas could be very dynamic.

Will a company take the calculated risk of bringing in supply on the chance that the market will bid up for it? Envision a tanker on its way in with the marketing sharks and end use facilities starved for supply lying in wait. Assuming that pipelines will have capacity, a facility with a number of pipeline outlets could be a very active trading point. And the demand competition wouldn’t just be in the traditional U.S. markets – the rest of the world is already ingrained in the LNG process – and tankers can change directions.

This competition on a global scale could certainly become very interesting. Of course, the facilities still need to be built, rather than just approved.


Robert Young
Product Manager - Commercial Applications

September 2007 Update

In the news...

• 2007 International Pipeline Security Forum (9/2007) ..... The 2007 International Pipeline Security Forum will be held October 23 - 25, 2007 at the Fairmont Chateau Laurier Hotel in Ottawa, Ontario, Canada. The agenda is currently being developed but will cover topics ranging from NATO initiatives on pipeline security to threats to critical energy infrastructure. [More here]

• 6 Explosions Believed To Be Sabotage Rip Through Pemex Pipelines In Mexico (9/10/2007) On Monday, September 10 at 2:00 a.m. in the Gulf coast state of Veracrus, six explosions destroyed at least four natural gas pipelines belonging to Mexico's state oil monopoly - Petroleos Mexicanos (Pemex). Shortly after, the People's Revolutionary Army (PRA) claimed responsibility for the attack. The PRA claimed responsibility for similar explosions three months ago. Although no injuries or deaths were reported directly from the blasts - which were heard and felt more than 20 kilometers away, -- civil defense agencies said two women in their 70s living nearby died from heart attacks shortly after the explosions. Thousands of people were forced to evacuate local communities including Ciudad Cardel and Antigua. Pemex immediately shut done the affected lines. [More here]

• Rainbow Lake Oil Pipeline Put On Sale By Imperial Oil And Partners (9/6/2007) Key proponents of the $16-billion Mackenzie natural gas pipeline - Imperial Oil, ExxonMobil and Royal Dutch Shell -- are selling the Rainbow oil pipeline in northern Alberta. The 40-year old pipeline, which transports up to 200,000 barrels a day of crude oil from Zama, Alberta to Edmonton, Alberta, is considered by analysts to be strategically important, especially if the proposed Mackenzie pipeline is constructed. It is possible the pipeline could be converted for natural gas transport. The Rainbow pipeline can also connect Enbridge Inc.'s pipeline system to U.S. Midwest and the Trans Mountain pipeline to the Pacific Coast. No price for the pipeline has been set. [More here]

• Mackenzie Gas Project; Tapping Arctic Gas Could Save $338B, Argues Minister (9/6/2007) A study done by the Government of the Northwest Territories, Canada says North Americans could spend an additional $338 billion for natural gas starting 2014 through 2025 if fuel costs soar and reserves in the Arctic remain untapped. In addition to the increased fuel costs, Brendan Bell, Minister of Industry, Tourism and Investment, told members of an influential think tank another 280 million tons of carbon emission will be released into the atmosphere if coal is used instead of natural gas for electricity generation. Mr. Bell also said the territorial government is working with Imperial Oil and its partners to create a list of infrastructure projects, such as ports, roads and power generation facilities, that may warrant federal financial support. [More here]

• Gateway Energy Corporation Acquires All Of Gulfshore Midstream's Offshore Systems (9/6/2007) Gateway Energy Corporation acquired offshore pipeline assets from Gulfshore Midstream Pipelines, Ltd. for $3.1 million in cash, 1,550,000 shares of Gateway common stock and assumption of an estimated $300,000 in liabilities. The acquisition nearly doubles Gateway's offshore pipeline network extending it from Galveston, Texas to New Orleans, Louisiana. The pipeline assets range from 6" to 16" diameter pipelines in water depths ranging from 50 to 650 feet connected to 56 wells producing approximately 60,000 MCF per day of natural gas. [More here]

• Pipeline Operator Works On Expansion (9/5/2007) Dallas-based Crosstex Energy L.P. said it has completed the first phase of an $80 million, 29-mile natural gas pipeline expansion. Once completed approximately a year from now, it will have a capacity of 400 million cubic feet per day of natural gas. The pipeline system will include three compressor stations, tie into an existing pipeline operated by Energy Transfer Partners and provide access to long-haul transportation pipelines. [More here]

• Questar Pipeline And Enterprise Announce Plans To Construct New Rockies Natural Gas Pipeline Hub (8/27/2007) Questar Pipeline Company, a subsidiary of Questar Corp., and an affiliate of Enterprise Products Partners L.P. have entered into a Memorandum of Understanding to jointly develop a new natural gas pipeline hub in the Rockies and equally split ownership. The White River Hub would be a header system that connects Enterprise’s natural gas processing complex near Meeker, Colorado to as many as six interstate pipelines in the Piceance Basin area, including the Questar Pipeline. The initial design details a 30-inch pipeline with the capacity to transport more than 2.5 billion cubic feet per day and provide hub-related services for natural gas producers. Construction is expected to begin in the summer of 2008 and be in service by the fall of 2008. [More here]

• Company Eyes Pipeline Expansion (8/22/2007) ....... .... Kern River Gas Transmission Co. may expand its Wyoming-to-California pipeline connection. The company sees potential growth among its existing California natural gas customers and future development of natural gas-derived electrical power generation. The Kern River system carries more than 1.76 billion cubic feet of gas per day but could be expanded to carry an additional 28 percent by November 2010. Initially there were doubts about the ability of Wyoming and other Rocky Mountain states to extract natural gas, trapped in unconventional tight-sands gas but the Rockies region is now the fastest growing natural gas supply in the nation. [More here]

• New Pipeline To Raise Gas Cost (8/16/2007) ......... According to energy market expert Porter Bennett of Bentek, the Rockies Express pipeline currently under construction "just radically changes the way the market is structured.". Currently there aren't enough pipelines to transport Colorado's booming natural gas production to other parts of the country, therefore depressing local gas prices. The Express pipeline starts near Meeker, CO and goes through Wyoming and eventually to Ohio. Once completed, Bennett thinks the Rockies Express will be good for the gas industry and in the future it's possible gas from the Rockies Express pipeline will be more expensive than the national price. However, in the interim period, he expects large fluctuations in gas prices throughout the country for the next few years. [More here]

• Houston Pipeline Company Fined$2.8 Million For Dumping Oil, Gas Into Texas, Arkansas, Oklahoma Waterways (8/15/2007) Houston-based oil and gas distributors TE Products Pipeline Co. LLC and TEPPCO Crude Pipeline, LLC will pay a civil penalty close to $2.8 million for discharging approximately 6,470 barrels of jet fuel, gasoline and crude oil into multiple waterways in Texas, Arkansas, and Oklahoma between November 2001 and May 2005, the Justice Department and Environmental Protection Agency announced today. Under terms of the settlement TEPPCO agreed to make pipeline improvements to increase the safety of its operations and protect the nation's waters. [More here]

• New Hampshire University First With Landfill Gas Power (8/14/2007) The University of New Hampshire (UNH) is set to become the first university in the U.S. to get 80 to 85 percent of its energy requirements from a renewable source - landfill gas. In conjunction with Waste Management of New Hampshire, Inc., UNH launched Ecoline, a landfill gas project consisting of a new gas processing plant in Rochester, NH and a 12.7-mile underground pipeline that will transport the gas from the plant to the university's Durham campus. Once completed by the fall of 2008, the use of landfill gas will reduce the university's greenhouse gas emissions by an estimated 67 percent compared to 2005 levels and stabilize the university's fluctuating energy costs, which have doubled over the last five years. [More here]

August 2007 Update

In the news...

• Explorer Seeks Citgo Pipelines (8/13/2007) ,,,,,,, Tulsa-based Explorer Pipeline Co., says it is in talks to buy pipelines and terminals from Citgo Petroleum Corp., the U.S. refining subsidiary of Venezuela's state owned oil company. The Eagle Pipeline system includes 10-, 9- and 3-inch lines going between Dallas and Houston with at least another 8-inch line running into Oklahoma. Houston-based Citgo owns a 6.8 percent stake in Explorer, which operates a 1,400-mile system. [More here]

• NEB Questions Crude Pipeline Capacity (8/10/2007) ......... A new report from the National Energy Board (NEB) warns that Canadian crude oil pipelines may face a transportation bottle neck as early as this fall. For the first time, last year, oil sands production exceeded traditional crude production. Because of the surge of oil being pumped from Alberta's oil sands, by the fourth quarter of 2007 western Canadian oil pipelines may require periods where pipeline space is shared or "apportioned" among shippers. The potential capacity constraints come at time when Canadian oil producers are ramping up operations. Total Canadian oil production is expected to rise nine percent to 2.9 million barrels a day in 2007. According to the NEB report, it's a different story for natural gas pipelines. There is some spare capacity, even in winter, when demand for natural gas historically jumps. [More here]

• Crews Cleaning Up Pipeline Rupture In B.C. Interior (8/10/2007) Environmental crews in northeastern British Columbia are cleaning up an oil spill from a pipeline rupture that occurred a few weeks ago. The rupture happened several hundred kilometers northeast of Fort Nelson, B.C. and was quickly contained but a reason for the leak has not been determined. The province has 43,000 kilometers of pipelines with more in the planning stages. [More here]

• The Next Energy Crisis - More Than A Quarter Of America's Oil Flows Through Southern Louisiana. Too Bad The Land Is Slowly Sinking Into The Sea (8/10/2007) Port Fourchon, 60 miles south of New Orleans, is home to pipelines through which the U.S. accesses nearly 20 percent of all the oil and natural gas it uses. Although it avoided most of the destructive forces of hurricanes Katrina and Rita, it is being ravaged by two much slower attacks - erosion and the sinking of land. Since the 1930s, each year 25 square miles of Louisiana has been collapsing into the gulf. A total of 1,900 square miles of land so far has disappeared, exposing thousands of miles of oil and gas pipelines that were originally built underground and not designed to withstand water, waves or boat impacts. In 2004, Ed Landgraf, environmental coordinator for Shell Pipeline, sounded the alarm in congressional testimony stating, "Much of [southern Louisiana's] infrastructure is at risk as the coastline continues to disappear." His conclusion, "National energy security can be maintained only if Louisiana's coast is restored and preserved." At some point, perhaps in the next 10 years Port Fourchon home to 250 tenants including BP, Chevron, ConocoPhillips, and Shell, will no longer be attached to the mainland and become an island. Although Katrina has increased awareness of land loss, little of the estimated $50 billion needed to restore the Louisiana coastline has been funded. Furthermore it will be hard to restore the coast without industry support. [More here]

• Pipeline Explosion Investigation Results Released (8/10/2007) Results from a National Transportation and Safety Board (NTSB) investigation concerning a natural gas line explosion in the West Cote Blanche bay oil field in southern Louisiana have been released. The explosion killed five people around noon on October 12th 2006. According to the NTSB's investigation, an uninspected towing vessel - Miss Meagan -- was pushing two deck barges in waters around 10 miles off Cypremont Point when a spud from a 5 ton steel shaft on one of the barges was dropped in the water. The spud struck a submerged and buried high-pressure natural gas line, releasing gas on impact and causing a massive fireball that engulfed both barges and tow boat. The NTSB concluded the probable cause of the accident was a failure to require barge crews to pin the spuds securely. [More here]

• Alaska Governor Extends Deadline For Companies To Apply To Build Natural Gas Pipeline (8/8/2007) Sarah Palin, the Governor of Alaska, has extended the deadline for applications to build a natural gas pipeline in Alaska from Oct. 1 to Nov. 30 because more companies have been inquiring about the project. The state has also received feedback requesting more time to prepare a complete application. Since July 3, applications have been made available after passage of the Alaska Gasline Inducement Act (AGIA). Alaska has struggled for decades to build a pipeline to run from the North Slope through Canada and into the Midwest. After a proposed deal between former Gov. Frank Murkowski and North Slope producers BP PLC, Exxon Mobil Corp. and ConocoPhillips fell apart last year, and passage of AGIA this year, Palin's administration has presented the project to other companies including three Chinese state-controlled energy companies and Houston-based El Paso Corp. An estimated 35 trillion cubic feet of natural gas sits untapped under the North Slope. [More here]

• Canadian Energy Company Plans Another Pipeline In U.S. (8/6/2007) TransCanada Corp. and Northwest Natural Gas Company are forming a new venture, Palomar Gas Transmission LLC, to design, construct and own the Palomar natural gas pipeline to serve residential and industrial customers in the state of Oregon. The pipeline could cost as much as $700 million. It would extend around 354 kilometers from northwestern Oregon to north-central Oregon. If approved, the pipeline will start service in late 2011. [More here]

• Attacks On Mexico Pipelines Show Extensive Knowledge of Energy Infrastructure, Officials Say (7/24/2007) U.S. officials said saboteurs who blew up natural gas pipelines on July 5 and July 10, 2007 also crippled a crude oil pipeline in one of Mexico's main industrial regions. In addition to the natural gas and oil pipelines, the bombers targeted shutoff valves along several pipelines responsible for national distribution, indicating extensive knowledge of Mexico's energy infrastructure. “These are massive steel valves,” a U.S. official familiar with the bombing investigation told McClatchy Newspapers. “These are major, very expensive shutoff valves that control the flow of all this petroleum (and natural gas). This wasn’t a round tube in the middle of nowhere.” Furthermore the bombers knew which side of the valve to attack to make sure crude oil did not flow to a nearby refinery and natural gas did not flow to foreign and Mexican manufacturers. [More here]

• Ottawa, Dene Tha' Reach Deal On Mackenzie Gas Pipeline (7/23/2007) The Canadian federal government and the Dene Tha' First Nation (DTFN) in northwestern Alberta have signed an agreement resolving concerns about the proposed Mackenzie Gas Pipeline that would run through a small portion of the Dene Tha' territory. The agreement stipulates DTFN will get C$25 million from the federal government to address possible economic and cultural impacts resulting from the construction and operation of the pipeline. In turn DTFN agreed to end any further litigation to delay or prevent development of the pipeline. [More here]

• North American Energy Partners Finalizes Contract With Kinder Morgan Canada (7/16/2007) North American Energy Partners Inc. has signed a $185 million contract to supply pipeline construction services to Kinder Morgan Canada's TMX Anchor Loop project. Phase 1 was scheduled to begin August 2007 and is expected to last 18 months. It will start near Hinton, Alberta and run 160 km through Jasper National Park and Mount Robson Provincial Park before finishing outside the Mount Robson Provincial Park. [More here]
  

July 2007 Update

In the news...

• Pipeline Sabotage Fuels Anxiety In Mexican Business Politics (7/13/2007) Mexico is one of the world's largest oil producers and despite a history of leftist extremism, it has never seen disruptions in production from attacks by radical groups like those at other oil-exporting nations such as Nigeria, Columbia and Iraq. Until now. A guerrilla group calling themselves the Popular Revolutionary Army or EPR have claimed responsibility for recent attacks on natural gas, oil and other pipelines feeding industrial facilities in western Mexico. The explosions one early July 10 and at least another two the first week of July forced Honda Motor Co., Nissan Motor Co. and Vitro SA (a glass manufacturer) to stop some production. The rebel group's statement claimed the contested election of the Calderón government as "illegitimate" thus leading to speculation that the anger from last years election was a motive for the sabotage. Repairs to the pipelines by state energy company Petróleos Mexicanos are expected to be completed today. [More here]

• Tidelands Oil & Gas Corporation Subsidiary Sonora Pipeline LLC Receives FERC Permits (7/12/2007) Sonora Pipeline LLC, a wholly owned subsidiary of Tidelands Oil & Gas Corporation, received a Federal Energy Regulatory Commission (FERC) Presidential Permit and authorization to site, construct, maintain and operate two bi-directional natural gas facilities across the U.S. and Mexican border. In addition, a Certificate of public convenience and necessity to site, construct, maintain and operate 29 miles of a 30-inch pipeline system on the U.S. side of the border. The natural gas pipeline systems, known as the Burgos Hub Export/Import Project, will be located in Hidalgo County, Texas, and extend into Mexico via two border crossings. The pipelines systems will supply natural gas into Mexico for power generation and industrial customer needs. The area is expected have a dramatic increase in demand for natural gas beginning in the year 2010. [More here]

• Deal Would Boost Capacity of Oil Pipeline Through S.D. (7/4/2007) TransCanada Corp. announced it has new contracts with a Cushing, OK--based refinery that will increase the amount of oil from 435,000 to 495,000 barrels per day flowing through its proposed Keystone Pipeline. Regulatory approval is expected this year with construction to begin in 2008-09. When completed, the Keystone pipeline will be the first crude oil pipeline in South Dakota. The 30-inch diameter pipeline will originate in Hardisty, Alberta, entering the U.S. at the North Dakota border before continuing down through South Dakota and onto refineries in Oklahoma, Missouri and Illinois. Alberta has 174 billion barrels of proven reserves or around 15 percent of the world's total. Only Saudi Arabia has more according to an Alberta government report. Oil production in Alberta is expected to grow from 466,000 barrels a day in 2005 to as much as 5 million barrels a day by the year 2030. [More here]

• Revoked Leases in Alaska Prompt Oil Major's Protests (7/3/2007) Several oil companies including Exxon Mobil Corp. and BP have asked an Alaskan judge to overturn a decision by the Alaska Department of Natural Resources that revoked leases on oil and gas fields located on the state's North Slope last November. They have held leases since 1970 on a field located at Point Thompson, 50 miles east of Prudhoe Bay. The area is thought to hold 300 million barrels of oil and 8 trillion cubic feet of natural gas. The state's justification for the revocation was that the companies involved had taken too long to develop the field. In the suit, Exxon-Mobil and the others involved claim the state is trying to force them to put a field into production before it is economically viable. Although more than $800 million has been invested in the field so far, according to Exxon-Mobil, but because it is mostly a gas field the lack of a gas pipeline for the area makes it uneconomical to develop at this time. Although recent legislation was passed to encourage development, Alaska has not been successful yet in getting producers or independent pipeline companies to construct a pipeline needed for the North Slope and the Point Thompson Field. [More here]

• Pine Prairie Energy Center Announces Open Season for Phase II Capacity (7/3/2007) Pine Prairie Energy Center, LLC (PPEC), an indirect subsidiary of PAA/Vulcan Gas Storage LLC and with 50% owned by Plains All American Pipeline, L.P., is conducting a non-binding open season for 16 billion cubic foot (BCF) of natural gas storage capacity in addition to the 24 BCF first phase of its salt cavern natural gas storage capacity currently under construction. Phase I of the facility, located approximately 50 miles from the Henry Hub in Louisiana with three storage caverns each with a volume of eight BCF and an extensive pipeline header system, is expected to begin service in early 2008. Targeted completion for phase II is beginning of 2010. [More here]

• Kinder Morgan Selling Pipeline in the Midwest (7/2/2007) Oneok Partners has agreed to buy from Kinder Morgan Energy Partners a 1,600 mile pipeline system located in the Midwest for $300 million. The pipeline can deliver up to 125,000 barrels per day of petroleum and natural gas derived-liquid from hubs in Kansas to Chicago. [More here]

• Will Environmental Lobby Curb Interest in Gas Line? (7/1/2007) Although Governor Sarah Palin's signing of the Alaska Gasline Inducement Act in May is supposed to spur development of Prudhoe Bay, environmental groups may block those efforts. Professional environmental organizations such as the Sierra Club, Alaska Coalition and Wilderness Society have made a business out of opposing development of any kind in Alaska. Environmental groups operating in Alaska have become much better organized and financed over the years, spawning a whole new industry composed of lobbyists, lawyers and consultants. In 1970, environmental groups stopped construction of the then--future trans-Alaska pipeline. After more than three years, only when VP Spiro Agnew voted to break a 49-49 tie in the Senate was construction of pipeline allowed. More recently these groups have blocked construction of the Kensington Mine near Juneau with a court order. Now the Alaska Wilderness League, whose honorary chairman is former President Jimmy Carter, has stated goals to stop oil exploration and development on the coastal plain of ANWR, the National Petroleum Reserve-Alaska as well offshore oil and gas. Given this grass roots resistance transformed into an industry juggernaut, Gov. Palin will have an uphill battle to get the gas and pipeline industries interested in bidding on Alaskan exploration and development contracts. [More here]

• Enbridge Files Commercial Terms for Alberta Clipper Mainline Expansion Project (6/28/2007) Enbridge Pipelines Inc. a wholly owned subsidiary of Enbridge Inc., has filed a commercial supplement to its National Energy Board (NEB) application to construct the Canadian section of the Alberta Clipper Mainline Expansion Project for CDN $2.0 billion. The project will construct a new 36-inch diameter, 1,000-mile long crude oil pipeline from Hardisty, Alberta to Superior, Wisconsin. Initial capacity for the pipeline will be 450,000 barrels per day with allowances up to 800,000 barrels per day. Subject to regulatory approval, Enbridge anticipates the Alberta Clipper project will be in service by mid-2010. [More here]

June 2007 Update

In the news...

• Palin Has Signing Ceremony for Gas Line Act (6/6/2007) -- Governor Sarah Palin held a ceremonial signing of the Alaska Gasline Inducement Act (AGIA) in Fairbanks, Alaska. The event took place at the Fox Visitor Center near the Trans-Alaska Pipeline. "This legislation is open to all comers, all viable, responsible, reasonable entities wishing to compete for the right to tap Alaska's resources," Palin said. "AGIA excludes no one; it's open, transparent, competitive." Due to logistical problems the Governor was unable to sign the actual bill but was expected to sign it into law on June 7, 2007. AGIA will establish a process for competitive bids to build a pipeline to the North Slope and includes incentives and a cash subsidy of up to $500 million. [More here]

• Exxon Mobil, Enbridge Consider Pipeline to US Gulf Coast (6/5/2007) Exxon Mobil and Canadian crude oil pipeline operator Enbridge are considering the construction of a new pipeline that would transport crude from a storage hub in Patoka, Illinois first to Beaumont, Texas and then onto Houston, Texas. It is targeted to be in active service by 2010. Enbridge operates the world's longest oil and liquids pipeline system. It carries Canadian crude to U.S. markets in the East and Midwest. [More here]
  

• Mobil Corp CEO Casts Doubt on Major Pipeline Projects (5/31/2007) In one of the biggest energy stories of the year, Exxon Mobil’s CEO Rex Tillerson told reporters; the company may scrap plans to build the Mackenzie Valley natural gas pipeline in Alaska and Canada. The cost for the pipeline has escalated to $16.2 billion. Tillerson went on to say in an article published by The Globe and Mail, “We are now in a situation where it's not economic at current costs. It may just be that the project is going to have to wait for a different cost environment." Without additional subsidies from the government, chances are slim this project and another planned near the existing Alaskan oil pipeline will go ahead. If the two pipelines are not built by 2014, around 10% of future natural gas supplies will disappear or the equivalent of 25% more energy than that contained in oil imported from Saudi Arabia. [More here]
  

• NEB Approves Emera Brunswick Pipeline Applications (5/31/2007) The Canadian National Energy Board (NEB) has approved Emera Brunswick Pipeline Company Ltd.'s (EBPC) application to build and operate a 30-inch diameter pipeline that will span 145 kilometers from Canaport LNG Terminal at Mispec Point, New Brunswick, to the US border near St. Stephen, New Brunswick. Several conditions were imposed in conjunction with the approval. The conditions included an environmental protection plan, an emergency procedures manual and response program, detailed public consultation program and progress reports. The pipeline is expected to be in service by the end of 2008. [More here]
  

• Hurricane Risks Higher than Usual for Most US Coasts (5/25/2007) A large part of the U.S.’s Gulf of Mexico and Atlantic coastlines have a higher risk than usual for hurricanes in 2007 according to two hurricane researchers. Mark Johnson, a statistics professor at University of Central Florida and Chuck Watson founder of Kinetics Analysis Corp. of Savannah, GA, say coastlines in a total of 20 counties including ten in Florida, eight in North Carolina and one each in Louisiana and South Carolina have the highest probabilities of hurricane-force winds according to their statistical forecast modeling. They expect La Niña weather conditions to develop this summer, causing warmer than normal Gulf of Mexico and Atlantic Ocean temperatures to increase the chance of oil and gas production disruptions from hurricanes. The researchers utilize a computer model that incorporates every oil platform, pipeline, refinery and terminal in the Gulf of Mexico to develop estimates for oil and gas production. By simulating every storm since 1851 the researchers found there is 98 percent chance that at least one week’s worth of oil and gas production will be disrupted during the years with La Niña weather conditions. [More here]

Product Installations – they should be easier

Making the decision to buy a natural gas application, whether it be to replace an existing system or to make the leap from spreadsheets can be tough. Not only for the energy company making the decision, but also for the vendor companies trying to provide solutions. In a perfect world, you buy an application, install it, add your data, and you are up and running. How hard could it be? Of course, the issue of the “slight configurations” often get in the way.

Companies buying products want to pay for a product, receive the upgrades, and not have to worry about customizations. Nor do they want to have to worry about either maintaining large IT staffs to run the application or having to go to the vendor every time an add or change needs to be made. One problem comes when companies aren’t willing to step back and look at different ways to do things. That leads to customizations that might not be necessary. When it comes to unique specifications, many might think, “You might as well add it to the product. It will make your product better and more flexible. Heck, you should pay me since you’re going to make all this money re-selling it.” The other mistake companies make is assuming that their business process will change. While it certainly makes sense to go to an “industry standard” way of doing things, it is often a very difficult task to convince the folks actually doing the daily work that the ‘the way we’ve always done it” needs to be changed.

One area where I see vendors and their clients getting into trouble is as follows. The vendor can comply and usually does provide a solution to a certain business requirement. However, the way it works in the application may not be acceptable to the customer for whatever reason. At that point, who needs to change? The company, because their requirement is not standard, or the vendor who said they complied? This can often lead to contentious discussions that no one really wants to get into. As a side note, in my personal opinion, if a vendor complies with everything you ask for in your Request for Proposal (RFP), with no comments, be careful.

The solution is to spend more time up front during the RFP process and the Functional Design Specification (FDS) once the deal is signed. Set expectations correctly, and everyone will be happy.

So, where does this leave us? It seems that vendors should provide solutions that offer flexibility without having to be everything to everybody. Trying to capture everything is a recipe for an application that is either continually being “debugged”, won’t have very many new releases, or won’t last very long. Energy companies should be realistic in their expectations as to what they expect and what their staffs will accept. Working together and spending a little more time up front will cause a lot less pain at the end of the process.

At the end, you just might end up with an application you are happy with that actually meets your business needs and keeps you and your customers happy. Then all you have to worry about is interfacing the application to the rest of your systems. Now those are really easy, right?

Robert W. Young
Product Manager

May 2007 Update

In the news...

• Alaska Gasline Inducement Act bill passes (5/11/2007) - Governor Sarah Palin's Alaska Gasline Inducement Act or AGIA has been passed by both houses of the Alaskan legislature. The bill will be finalized by the Senate Finance Committee to reconcile slight differences in versions passed by the Senate and House. AGIA establishes guidelines and inducements for companies desiring to compete for the rights to build a gas line in Alaska. On July 1st a request for applications to a competitive bidding process for the right to build a North Slope gas line will be issued. The winning bidder will have the right to construct a natural gas pipeline to the North Slope, which has an estimated 35 trillion cubic feet of gas. The line may eventually transport 4.5 billion cubic feet of natural gas a day, which is approximately 7 percent of the current U.S. demand. [More here]

• Ethanol: Boom or Bust? (5/8/2007) - As the market grows for U.S. produced ethanol products, skeptics wonder if the demand will be there in the future. In 2006 American farmers harvested its third largest corn crop ever of 10.5 billion bushels of which an estimate 3.2 billion bushels will go into ethanol production. Although this amount allocated to ethanol is 49% more than the previous year, skeptics worry about ethanol's efficiency (worse than petrol), economic benefits and effect on the environment and food prices. [More here]

• Gas line project could establish new standards for financing (5/8/2007) - Up to now most gas line projects required funding of well under $10 billion, according Frederic Rich of the New York law firm Sullivan and Cromwell. However the projected cost for a new Alaska gas pipeline could reach $30 billion. This unprecedented amount presents numerous challenges to obtaining necessary financing. Funding will have to be customized to the risk profile of the project before construction can begin. Risk will need to be allocated between numerous stakeholders including lenders, the project builder, and the owner each, with funds at risk as well as federal loan guarantees to have a successful project completion. [More here]
  

• Official pushes joint gas line with Alaska (5/3/2007) - As cost estimates to construct gas pipelines southward from the Arctic continue to escalate, a Canadian official called again for a single line serving both North Slope Alaska and northern Canada. The proposal recommends first building a line to Mackenzie River delta reserves on the Arctic seacoast of Canada, then adding another leg westward linking up Alaska, instead of building a separate Alaska-U.S. line. While not new, the proposal has renewed urgency because estimates to build the Mackenzie pipeline have risen from $7.5-billion three years ago to $16-billion today, said Brendan Bell, Northwest Territories industry minister. [More here]
  

• National Energy Board participates in Operation NARWHAL 07 in Norman Wells, NWT (4/24/2007) - The National Energy Board (NEB) of Canada participated in Operation NARWHAL 07 in Norman Wells, Northwest Territories. The NEB regulates gas and oil operations in the North and since 2005 has been responsible for the security of pipeline infrastructure. The training exercise involved military troops, aircraft assisting the Royal Canadian Mounted Police (RCMP) and other northern civilian agencies in response to a simulated threat to Canadian oil production and transportation infrastructure in the Northwest Territories. [More here]

• Transportation Safety Administration (TSA) Joins Private Firms in Securing 2.4 Million Miles of Energy Pipelines (4/2007) - In 2004 the TSA's Pipeline Security Division began its assessment of a 3,300 mile cross-border pipeline system responsible for carrying 2 million barrels of oil a day between the U.S. and Canada. From that assessment came two reports – one classified, one unclassified – on vulnerabilities, risk-based strategies for addressing them, and options as threat levels change. Critical information was shared with the Canadian government as well as the pipeline company. Cross-border assessments represent just one of the division’s initiatives. Others are domestic corporate reviews, monthly conference calls with company officials, a weekly suspicious incidents update shared with the companies, an annual pipeline security forum, and security training assistance. [More here]
  

Online Applications Offered as Standard Products

Installing online pipeline application software has always been seen as a major project (writing specs, testing applications, generating project specific documentation etc.). Naturally, this approach is often rather costly (since you pay for the software and a fairly large amount of overhead as well). In many cases this makes sense - but in the past years many pipeline software packages have matured tremendously and are today offered as more or less standard software packages.

A good example is leak detection and location software. Today Energy Solutions offer standard leak detection software that is easy to configure and install and yet provide superior performance. The latest innovations in User Interfaces also makes it extremely easy to use, so the need for training has diminished significantly. It is therefore possible to install this software using a completely new approach:

A sale includes software license as a minimum. The configuration and interface to a SCADA system can be done by the customer or by Energy Solutions (or typically as a joint effort). With the latest graphical configuration environment and standard communication protocols like OPC, this phase is rather easy and often takes just a few weeks.

Since the software is a standard product, detailed Factory Acceptance Testing and custom documentation can be bypassed, so within a fairly short time frame the system can be installed on site. The only thing remaining is a brief Site Acceptance Test where the data interface and configuration details are tested and validated.

This approach has been taken successfully for several customers and I highly recommend it for "standard" applications like leak detection. The benefit is a much shorter time frame and associated lower cost. The problem is getting pipeline operators used to this approach - it has been done differently for many years, and I realize this approach is drastically different!

Would you like to try this on your pipeline? You will be positively surprised. No more writing huge specifications, project management, weekly meetings, having contractors in your control room for months etc. Doesn't that sound nice?

Morten Kristiansen, Product Manager

How important is Customer Service to Natural Gas Pipelines?

Pipeline companies don’t care about customer service – unless it can make them a buck. That’s a bold statement any way you look at it. I would hasten to say that any pipeline company worth its salt would strongly disagree with it. Yet how many people could say that they’ve never heard that before? In my opinion, it depends on your definition of customer service. It’s one thing to complain about a pipeline just because they don’t do things your way – or resolve an issue to your complete satisfaction. However, do those people who complain try to look at the other side of the issue? Pipeline companies spend a lot of time trying to make sure they treat everyone consistently. Now, the amount of time and energy each pipeline spends is another matter.

Customer satisfaction surveys show that different types of pipelines value customer service at different levels. It seems that interstate pipelines care more about keeping their customers happy than do midstream and intrastate pipelines. At least that’s what the customer satisfaction surveys show. Certain interstate pipelines take great pride in touting their rankings that come out each year. However, midstream companies seem to still have a lot of work to do. EnergyPoint Research’s latest Customer Satisfaction Survey of the midstream sector shows that the overall rankings of the industry as it relates to customer satisfaction leaves something to be desired. On a scale of one to ten, the mean rating of the sector stands at 6.46. That’s right around the rating of the Internal Revenue Service. Doug Sheridan, founder and managing director of EnergyPoint Research, the Houston-based firm states “Providers of unregulated gas gathering and intrastate transportation services clearly have plenty of room for improvement when it comes to customer satisfaction. The group’s aggregate ratings are some of the lowest EnergyPoint has collected since we began conducting our surveys in the oil patch in 2003.”

The question remains as to why these ratings are so low. Compared to interstate pipelines, could it be that the big interstates are backed by rate bases that allow for the expense of keeping customers happy? After all, with a guaranteed margin and the ability to recover these costs in rates, wouldn’t it be wise to make sure that business systems and processes took the extra step to develop more bend-over-backward functionality? The midstream sector doesn’t have that luxury. The money they spend on improving systems for the benefit of their customers is a direct expense. Now that doesn’t justify a non-caring attitude, but it could certainly figure into the equation when coming up with a budget. Disregarding customer service will come back to haunt you in the end, but can a company be faulted for dividing the budget pie a little unevenly – and allocating more to immediate revenue generating projects?

Secondly, could it maybe be the perception of the customers themselves? I would venture a guess and say that an average producer or marketer views interstate pipelines as a basic requirement, much like interstate highways. They are necessary to move product, and a producer or marketer certainly would not think of building a pipeline to a major downstream market on their own. However, when it comes to the midstream sector, they are often viewed as necessary evils standing between the wellhead production and the mainline pipes. In fact, many assume that if they did not have more important designations for their dollars – like drilling for production, they would build their own midstream facilities.

With that type of attitude on behalf of many of their customers, can midstream pipelines ever catch a break when it comes to customer satisfaction? Maybe not. But focusing a little more on efficient business systems, business processes, and giving consistent and detailed data to their customers could only help. Certainly enough to be thought of in a kinder sense than the IRS.

Robert W. Young

The debate on disclosure continues

The debate on how much information pipeline companies should be expected to make public regarding their equipment and location of pipelines continues. The latest story is on seattlepi.com.

What's at issue in the public-records dispute is information such as the operating pressure, thickness of pipeline walls and the locations of features such as pressure regulators and the spots where pipes are tested for strength.

There are numerous articles on this topic lately. I've just listed a few here. Are there any other opinions that haven't already been stated?

From the Olympian.

How Much Security does Pipeline Software need?

Well, this is my first post on this blog. In the interest of full disclosure, I will introduce myself: my name is Richard Wagner, and I am a Product Manager working for Energy Solutions, the sponsor of this blog site. I am working with the development team on PipelineTransporter for liquids scheduling, PipelineOptimizer for pump and energy optimization on liquids pipelines, and GasLoadForecaster, which predicts natural gas demand based on historical data and available weather forecast data.

I joined Energy Solutions about two months ago, having spent many years working for software companies serving the pharmaceutical industry. I must admit, I wasn't quite sure what to expect when I joined, since the pharmaceutical industry is quite different from the petroleum and gas industry. Interestingly enough, the challenges we face as a software provider are quite similar across the two industries. Our biggest challenge, like most software companies, is to listen to the industry to determine what their biggest challenges are, and deliver really helpful applications without getting too caught up in the technology.

That being said, one interesting difference I have noticed between pharma and oil & gas is in the area of software security. Due to the incredibly tight scrutiny from the FDA, pharma companies have very demanding audit trail and security requirements for virtually all their software systems. On the other hand, I have noticed that many applications in oil and gas have little or no built-in security measures; many of them depend simply on the network administration team to determine who can or cannot use them. In many ways, this can simplify the management of the applications. But I am hearing and reading about increasing concerns concerning the vulnerability of the energy industry in America to radical groups who might want to attack energy assets, including pipelines.

The question is, what should be done to mitigate this potential threat? Dealing with the threat of physical attack on the pipelines is the most obvious place to start. This could include increased security patrols and surveillance, as well as more sophisticated sensors and leak detection software and emergency response teams. But is there anything we need to do to protect pipelines against cyber-attack? With a central control room able to control valves, pumps, compressors and more for hundreds, or even thousands of miles, and millions of barrels at stake, what measures are appropriate to record and protect the software systems that manage this complex interaction?

The physical security that controls access to the control room is part of the answer. The other part will need to be an assessment of the required system security built into the software. SCADA security has already been recognized as an area where improved controls are required, and vendors and independent industry organizations are both working on this. The question I have, and which I need to explore as a product manager, is whether we need to tighten security and auditing controls in our software. Does scheduling software require the same level of user control and auditing as SCADA or other systems?

This is my question to the readers of this blog: what security measures (if any!) do you require, or might you require in the next five years, from the software systems that interact with SCADA, like pipeline scheduling, leak detection, load forecasting, etc. Any and all feedback is welcomed!

Richard Wagner