Feb. 4, 2015

Positive Prospects for Large-Diameter Pipe
 
While the oil country tubular goods market is in a state of flux, the outlook for line pipe, especially large-diameter line pipe, is more positive, say the experts.

Demand for small-diameter line pipe, 16 inches and under, largely tracks with the OCTG market. Large-diameter pipe is more project-driven and thus less affected by the short-term movement of energy prices.

Nevertheless, the dive in prices could delay some approved pipelines, especially those transporting oil, and affect even large-diameter orders, says senior analyst Kimberly Leppold of Metal Bulletin Research.

One example is the pipeline that was to carry 340,000 barrels of Bakken oil per day from North Dakota to the Cushing, Okla., storage hub, which was canceled by Enterprise Product Partners LP.

Various pipelines in Canada’s tar sands region are said to be at risk, especially with the political turmoil surrounding the Keystone XL project. While Keystone has a good chance for a congressional go-ahead this year, it will almost certainly be delayed once again by a presidential veto. Certain other oil sands pipelines, such as Kinder Morgan’s Trans Mountain Expansion, also face opposition from environmentalists.

A push for new natural gas pipelines has the potential to increase large-diameter line pipe demand significantly for the next several years, says Christopher Plummer, managing director of Metal Strategies, Inc. He projects a 10.5 percent increase in line pipe demand in 2015 fueled by a lack of pipeline infrastructure in certain regions, including the Northeast, where lines are needed to transport gas from the Marcellus and Utica shale formations.

Plummer says there was more than a 50 percent increase in pipeline projects announced last year, representing a 40 percent increase in the market in terms of pipe length and a 33 percent increase in terms of dollar value.

This push has already resulted in better capacity utilization rates at the spiral weld line pipe mills commissioned in 2009 to 2010. Leppold says some mills are now running at 60 to 80 percent of capacity, compared with just 50 percent a short time ago, with orders booked even into early 2016.
(Reported by Contributing Editor Myra Pinkham)


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