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I N N O V AT I O N S • V O L . V I I , N O. 3 • 2 0 1 5
When the Organization of the Petroleum Exporting Countries
(OPEC) moved to preserve market share by maintaining their own
production targets amid a worldwide supply glut, the strategy led to
collapsing global oil prices, the idling of shale oil rigs in the United
States, and cutbacks in capital budgets.
But OPEC’s decision isn’t the only reason for the current slump.
Structural factors, weak demand, and the strength of the United States
dollar also played a role. Today, those issues continue to exert downward
pressure on prices, as do geopolitical risks and events.
With the world concerned about China’s economy, Middle East
instability, and Russia-Ukraine relationships, it’s no wonder that the
Energy Information Administration (EIA) predicts that price volatility
is likely to persist throughout 2015.
At the same time, however, energy production in the United States
remains on the rise. In fact, the EIA notes that the quantity of shale or
natural gas produced per rig has increased by more than 300 percent
in less than five years. And that’s just one factor helping insulate the
pipeline sector from instability.
Because pipeline infrastructure isn’t fully developed in the areas
where much of the new energy production is occurring, projects that
were planned, approved, and funded before the price decline must
continue to progress just to catch up with E&P activity. A considerable
amount of this work involves reconfiguring existing pipelines rather
than new construction.
Pipeline operators are making some business adjustments. But those
activities would probably occur regardless of energy prices.
For example, over the past several years, I’ve seen more fine-tuning
of activities that lead to operational and capital efficiency. In addition,
there’s been more effort to prepare for and respond to increased
regulatory scrutiny, such as Pipeline and Hazardous Materials Safety
Administration’s (PHMSA) Integrity Verification Process (IVP).
By working with service providers who have field-seasoned
expertise and a broad base of technologies, operators can further boost
efficiency, better understand the condition of their pipeline systems,
and promote even greater safety and supply reliability.
All of which create a framework for greater profitability when
energy prices rise again.
CHAD FLETCHER
SENIOR VICE PRESIDENT,
GLOBAL SALES & SERVICE
T.D. WILLIAMSON
E X E C U T I V E O U T L O O K
Preparing for
Greater Profitability