Amid an unanticipated boom in inland oil output that turned the domestic market upside down last year, firms from Enterprise Products Partners to Shell Pipeline and Plains All American have launched a $20 billion bonanza to build, expand or reverse two dozen pipelines in the past year. But as they help effectively to switch the flow of oil from the north to southern refineries and relieve the glut of cut-price, landlocked crude, concerns are growing that the firms that make key pipeline components may be straining to keep pace.
"The supply chain hasn't quite caught up," said Terry McGill, president of Enbridge Energy Co Inc, the US division of Canadian pipeline giant Enbridge Inc, which has some $4 billion worth of US projects on the books. Thus far, there are no signs of project delays or cost overruns in what is the biggest build-out of oil and liquid pipelines since World War II. Executives say they are building in plenty of lead time to produce dozens of multi-ton valves and massive pumps essential for maintaining pipeline flow. Underutilized steel mills, meanwhile, can rev up furnaces to forge the pipes -- which have a diameter of up to 42 inches (107 cm). But the task is enormous.
After decades of moving US offshore or Middle East crude from the Gulf Coast to inland refineries, pipelines must flow in the opposite direction to accommodate surging output from Canada and shale oilfields such as North Dakota's Bakken. It all makes for a historic boom, said Larry Schwartz, senior analyst for natural gas liquids at consultancy Wood Mackenzie: "Midstream, which was the redheaded stepchild, is now in vogue."
RAMPING UP FAST Spending has already accelerated far faster than many expected. A year ago, the Interstate Natural Gas Association of America (INGAA) estimated North America would add 19,000 miles (31,000 km) of oil pipelines at a cost of $31.4 billion by 2035 as production surged 50 per cent to 12.7 million barrels per day. But industry monitor IIR Energy now estimates that $10 billion a year will be spent on crude oil pipeline projects in 2012 and 2013, four times the average of the previous seven years.
"You're not just connecting in to existing grids," Enbridge's McGill said. "The grid is being built." The biggest projects, those pumping 1 million barrels daily or more, face the greatest risk of delay, experts say. Each of the dozens of valves required on something like TransCanada Corp's proposed $7.6 billion Keystone XL pipeline -- which has a 36-inch diameter -- usually must be custom-made. "We definitely consider ours an 'engineered to spec' product," said John Starck, vice president of sales for M&J Valve, a division of multi-industry manufacturer SPX Corp that operators say is a leading valvemaker for liquids pipelines. "We do not actually build the product and keep it on the shelf because each customer has their own unique set of specs."
Source: http://economictimes.feedsportal.com/fy/8av2Fvy0cQOoI2qb/story01.htm
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