Upstream, things look grim. But some midstream sectors, including storage, pipeline maintenance and operation, are thriving
BY NICK WILSON
“I don’t know any firm in our field that is firing staff in the recession,” says Greg Zinter of PureHM, an Edmonton-based pipeline inspection and integrity company. “For job security, pipelines rock.” Put simply: Big transmission lines will always carry products, even if they’re not running at full capacity during a slump, and they still need people to inspect them.
Pipeline firms such as Enbridge and TransCanada spend billions on maintenance and are not tied to exploration, so their maintenance divisions are pretty much recession proof, Zinter says. Calgary-based Inter Pipeline, which operates 7,100 kilometers of petroleum lines, is hiring field and technical positions to help maintain the operation of its network, according to spokesperson Breanne Feigel. Inter Pipeline saw strong growth in 2014-2015, and it’s still recruiting, she says.
PureHM’s Zinter says, “For the big transmission lines, throughput has never slumped in my career. Gathering lines are a different story.” As if to prove it, in December, PureHM picked up two more big contracts in Eastern Canada with TransCanada and Enbridge. It also did something that few companies can hope to achieve in the slump; in 2015, it boosted its revenue 50 percent and has set this year’s target at another 50-percent growth rate. It’s hiring too. Two years ago the company had 55 staff; today it has 80 and plans to hire more.
PureHM’s resilience in the recession is typical of pipeline inspection companies, but its extraordinary growth rate isn’t. Technology is key to PureHM’s sustainability, as is doing business outside of Canada. There is a lot of pipeline work in the growing U.S. market. It generates U.S.-dollar revenues while Canadians working there are paid in Canadian-dollar salaries. PureHM’s Armadillo remote tracking units allow tracking of any type of pig, in any type of pipeline, anywhere in the world. The company has invested $1 million in developing a web page that displays the pig position, velocity and estimated time of arrival in real time.
The slump still hasn’t reduced Canada’s output of crude, gas or NGLs. Enbridge made it to this year’s list of the world’s 100 most sustainable companies. The annual Global 100 list, which ranks big firms based on their environmental and corporate governance performance, is compiled by Toronto-based research group Corporate Knights.
Canada’s pipeline network is expanding, despite the slump. Maintenance and operations crews are still in demand
Photograph Gibsons Energy
“We think of pipelines in terms of variable capacity, but the majority of operation is fixed, staffing [is] stable,” says Stephen Bart, senior vice-president of pipelines at Gibsons Energy, which has pipelines and storage facilities across Canada. “We’ve had some growth in pipelines,” he says, adding that the inspection side of the business is growing. “In 2014, I was concerned; in 2015, I was wondering about it; in 2016, I am very pleased that we’ve gone into the market place,” he says. Pipeline firm Pembina is also still seeing growth, and is commissioning expansion projects on its Horizon and Vantage systems. When its Duvernay 1 project starts up it will bring 1.6 billion cubic feet of gas on stream and 75,000 barrels of NGLs per day, which, of course, will require pipelines. Jaret Sprott, Pembina’s vice-president of gas services, says he is confident that Pembina will deliver more projects in the future.
Not only have pipelines proved sustainable, but in Alberta, liquids storage is also booming. The immediate reaction of the market during a commodity price slump is to store more of it. And North America is awash with crude, NGLs and natural gas.
In addition, oil sands bitumen is still flowing in greater amounts, driving terminal and hub expansions. Gibsons Energy’s Bart says the storage expansion is primarily for crude oil. “It’s the big driver right now.” Most of the storage is at rail terminals due to the constant crude flow and lack of existing pipeline capacity. Furthermore, crude-by-rail requires more staging than pipelines, and so requires more storage for the same amount of oil transported. Rail terminal expansion projects currently underway at Edmonton and Hardisty will start commissioning by mid-2017. Hardisty was expected to be the starting point for the Keystone XL pipeline. Instead it’s becoming one of Canada’s biggest oil-by-rail loading facilities, and with the hub comes a vast tank farm.
Last year, Keyera Energy, Kinder Morgan and Gibsons Energy announced new storage projects in Edmonton as oil sands production showed no sign of easing up. As part of a long-term deal, Keyera and Kinder Morgan say they would build up to 4.8 million barrels of new oil storage near Edmonton, under a 50-50 joint venture. They said there is the potential to add a further 6.6 million barrels of capacity. Teck Resources is forging ahead with its $13.5-billion Fort Hills mega-mine joint venture, which will send a further 180,000 barrels a day of bitumen into Alberta’s pipelines, tanks and rail cars starting in late 2017.
Storage of NGLs, natural gas and crude oil is expanding to meet output and transport needs
Photograph Gibsons Energy
“Our storage terminal and pipelines [businesses] are doing well, with growth in cash flows from this business expected in each of 2016 and 2017 from projects currently under construction,” Bart says. For these years it has a high-level growth capital guidance of $200 million to $300 million. “In 2015, we conducted our largest capital program in our 60-year history; around $400 million,” he says.
Gibsons’ average volume handled at Hardisty is about 600,000 barrels per day. The expansion increases storage by 2.8 million barrels of crude to just under nine million. The company’s Edmonton hub capacity is increasing by 300,000 barrels to 950,000 barrels of crude and diluent. It is working with a number of customers on future projects for 2017-2018.
TransCanada and Enbridge are also boosting tank storage. Enbridge is poised to hook up even more oil sands projects to hubs by 2017. If this activity triggers a regional glut, the tank welders will get busy. USD Group, which loads crude from Gibsons strorage tanks to rail cars, plans to double its own facility at Hardisty to 280,000 bpd capacity. Chairman Dan Borgen says he sees the Hardisty terminal as a long-term game plan.
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