Printer Friendly

More storage tanks and pipelines needed to keep pace with production.

Byline: Sarah Terry-Cobo

TULSA Petroleum production is rising and the rig count is the highest it has been in three and a half years.

The need to move oil and gas out of the basins to the refineries and to store it near the export terminals that demand it remains significant. What's more, it's creatingopportunities for the companies that fabricate crude storage tanks, build pipelines and operate terminals that link suppliers with buyers.

University of Central Oklahoma energy finance professor Stuart MacDonald said the nation's aging oil and gas pipeline infrastructure is one reason why the demand for pipelines will remain strong in coming years. The medium and long-term outlook remains strong for those with backlogs in construction projects, he said.

Matrix Service Co. has a $3.1 billion backlog of projects that include crude, natural gas and refined products storage as well as for petrochemical plants. Those segments have more projects awaiting construction than other sectors (industrial and heavy metals plants and electrical infrastructure). Matrix Chief Executive Officer John Hewitt said he's enthusiastic about projects recentlyawarded for above-ground storage tanks, as well as liquefied natural gas, or LNG storage.

Chief Financial Officer Kevin Cavanah said though the total backlog is up 50 percent in the third quarter compared to the same period in 2017, the $3.1 billion in opportunities should be viewed as long-term opportunities. There are a number of small- and medium-sized projects for a total of $1.3 billion that are within the company's scope within the next year, including cryogenic equipment for LNG designed for exports, LNG-powered ships and crude storage.

"The markets continue to be strong," Cavanah said.

SemGroup Corp. CEO Carlin Conner said the company's Houston Fuel Oil Terminal recently saw the startup of newly built storage tanks. Though there was a declinein crude out for export in the third quarter, he said he expects that to shift upward in the fourth quarter. Customers want access to markets and they want options.

"We are delivering crude produced in regions with limited market access," Conner said. "We're providing clarity to producers and oil traders from the DJ (Basin in Colorado) all the way to the water. We can preserve that quality of crude at a very attractive tariff."

Oil and natural gas production is up in the month of November compared to the same month the prior year in the seven basins the federal energy statistical agency monitors. The U.S. Energy Information Administration reported oil production in Oklahoma's Anadarko region, which includes the SCOOP, the STACK and the Granite Wash, rose by 7,000 barrels per day from September to October. Natural gas production was up 89 million cubic feet per day from September to October. Both commodities have reached daily production levels that are the highest since 2009, according to EIA's Drilling Productivity Report.

Oklahoma had the highest number of rigs for the week ending Nov. 9, 148, since the week ending Feb. 20, 2015, when there were 155 rigs, according to Baker Hughes' weekly rig count.

The Permian region, the most prolific petroleum play in the nation, had a monthly increase in oil production of 53,000 barrels per day from September to October, according to EIA. Its natural gas production was up 243 million cubic feet per day for the same time period.

MacDonald said the EIA report on increased production shows the need for the nation's infrastructure to be updated. The majority of the pipeline and storage tanks were built between the 1950s and 1970s when conventional oil production peaked.

"There will be a need for infrastructure even if commodity prices go down, so these companies are a bit more insulated than exploration and production companies," MacDonald said. "The risk is, like everything, eventually the infrastructure gets built and then there is not much to do but maintain it."

Deborah Fleming, energy finance professor at Oklahoma City University, disagreed. Matrix will profit when customers in the energy sector are growing. The design and engineering firm is vulnerable when activity slows because customers are more hesitant to sign contracts. The maintenance work can help buoy it when crude production slows.

Matrix is in a good position because the firm started in Oklahoma and is the construction company of choice, she said. It built more than half the tanks at the Cushing crude storage hub.

"They know how to do it and are in a prime position right now," she said.

Copyright {c} 2018 BridgeTower Media. All Rights Reserved.
COPYRIGHT 2018 Dolan Media
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2018 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Publication:Journal Record (Oklahoma City, OK)
Geographic Code:1U7OK
Date:Nov 9, 2018
Previous Article:Ray: Election means more women will enter politics and industry.
Next Article:Tiny homes to provide place to live, lesson in life skills.

Terms of use | Privacy policy | Copyright © 2020 Farlex, Inc. | Feedback | For webmasters