What's coming down the pipe in 2024?

Josh Averitt: Welcome to Coming Down the Pipe, ARS Global’s monthly podcast on pipeline assets, pipeline construction, and the market in general. I’m Josh Averitt, President of ARS Global and today we have Mike Reed: I’m Mike Reed, I’m Editor in Chief of Pipeline & Gas Journal and what I do at the publication is we gather information on potential pipeline projects and things that might affect them like new government regulations and basically anything involving pipeline infrastructures is basically what I do. Josh Averitt: Great well Mike thanks for joining us today. Pipeline & Gas Journal has been a great publication for ARS and some of our other companies. We’ve done quite a bit of advertising and you guys definitely have a great reach of listeners and viewers and a lot of knowledge and insight into the market and where things are going. So thanks for joining us, and speaking of where things are going, the first question out of the gate is what are you guys seeing is to be expected in 2024? It looks like there’s been about a 10% increase in activity for pipeline construction. About 9,000 miles under construction right now and about another 11,000 planned. Can you give us some insight into what you guys see coming into 2024 on the construction side? Mike Reed: Well a lot of that has to do with the post-COVID build I suppose. And I don’t want to sound like a broken record, but the primary areas I believe will be Permian and Hainesville once again. Gas pipelines, in an effort to get gas to facilities so L&G can be shipped largely to Europe but to other locations as well. Yeah I think that would be it. Josh Averitt: I agree with that. We’re seeing a lot of activity in Permian And Hainesville as well. Up in the northeast it seems to be a lot of replacement activity. Are you guys seeing anything on the integrity side for replacement and repairs of existing lines that were built quite a while ago? Mike Reed: Well, yeah that’s kind of everywhere and I’ve kind of, and I think there’s been more of a push to that when larger projects became more difficult people were trying to keep what they have basically, so sure. There’s been something called a Dimp Program, a federal program in place on the east coast, well I mean nationally, but it requires companies to get cast iron and uncoated steel out of the ground, so those go on for 20 or 30 years at a time. But yeah, we see a lot of just trying to maintain assets with inspection, replacement sections, things like that. Josh Averitt: Sure, yeah. Speaking of the replacement sections, are those mainly kind of integrity digs and anomaly digs or are you guys seeing an up-tick in the replacement of 30 or 50 miles at a time? Mike Reed: Oh I think it’s probably anomaly digs for the most part. We’re not really a lot of, no I haven’t seen a whole lot of just replacement with 30-mile sections. Josh Averitt: Okay, I know there was a lot of news around specifically the Line 3 replacement over the last couple years, Mike Reed: Oh right. Josh Averitt: And maybe some political opposition to replacing the long-haul stuff. But let’s switch back to the new construction site. When you guys are looking at the stuff coming out of Permian and Hainesville like you were talking about, is that more new and expanded gathering systems or are you guys still seeing a lot of long-haul plays? Mike Reed: It’s a lot, excuse me I’ve got a bit of a throat thing. I think it’s primarily gathering but we are seeing some pipes that are primarily for, once again, getting gas to the coast. There’s a Real Bravo pipeline, ABCD pipeline, Corpus Christi Stage 3 pipeline. Those are all about getting gas to the facilities. Gator Express, there are a few bigger ones that people have known about for a while. Targa has one. So, yeah, primarily I think the work to be had is more gathering though. Josh Averitt: Got it. Gathering and then, of course, like you talked about, getting gas to those facilities. And when we’re talking about those facilities, L&G facilities seem to be the common denominator and getting all that gas to the gulf. And with that, I guess we kind of need to bring up the current political actions that have been taken with the pause on L&G exports and I was wondering if PGJ has heard anything rumbling about project cancellation or what that pause in L&G activity may look like for our industry. Mike Reed: Well, my take on that is that it’s pretty much political, I think a lot of other people feel the same way. I would think that that would be back on after the election is over regardless of who was elected. Like I said, very political. I would think of the ones that may have a little bit of a threat because of it would be Venture Global, I hate to just say something like that, Venture Global CP2. It’s because it’s been really heavily targeted by just opponents of just energy, you know, fossil fuels in general. So it’s got the light kind of shined on it. I don’t think that’s going to cause some kind of shortages because there are already so many people permitted to do it that. And like I said, inside of a year would be my guess that it won’t be an issue anymore. Josh Averitt: Sure. So in the election year it always seems like everyone takes a step back and puts down the hatches to just kind of see what happens. Are y’all hearing of anybody kind of pulling back the reigns just to see what happens in November and what might be the repercussions one way or the other depending on the outcome of the election? Mike Reed: Not particularly I don’t think. I think with, there are some CO2 pipeline projects that are running into some issues that may pass after the election although I don’t know about that. Part of the trouble there is that those projects got local support early on and then when they started saying things like “eminent domain,” ranchers and farmers just don’t like that word and they kind of turned it back on the local politicians that may have been supportive and the support is gone, strangely enough. Josh Averitt: Fair enough. Well, it’s interesting that you said that because obviously the support was there, it was on the news all the time right out of the gate, but now we’re kind of looking at maybe a shift on some of the CC US stuff and service conversion from maybe NAT gas to CO2. Are there any projects out there that have had kind of a dynamic shift from “Hey we’re gonna go out and get new right of way,” to “Hey let’s take a look at our existing infrastructure and try to do a conversion”? Mike Reed: Well, The Tall Grass Project has been successful in becoming a conversion. I think that when I first started hearing about CO2 Pipe and CC US, my impression was that these were genuinely going to be shorter distances to shorter storage, and the two biggest ones at the moment, the one that was canceled and the one that was having some difficulty, those cross into 5 states. And I just don’t know about getting permitting for stuff like that in the best of times, you know. Josh Averitt: Yeah. And even if you do get permits, you guys seem to be pretty tuned into all the stages of construction in general. Do you see any supply chain issues still coming out of COVID maybe will some specifications that are required for pipe or valves or any sort of equipment that might need to be used to build these pipelines, has supply chain pretty much caught up or do you see even more challenges down the road, even if they were to obtain the permits that they need? Mike Reed: That’s a tough one. I would say they are not completely caught up and it’s just, what people in the industry understand, it’s really hard to get equipment, and that large of equipment headed to that part of the country or right part of the state or whatever. And then when there’s a lot of cancellations and you know you’re right in the middle of moving something and all at once it’s off for three months because of this, you know, it’s always been tough, so I wouldn’t say it’s caught up exactly, but it’s better than it was a year ago. Josh Averitt: Great, well hopefully if some of the projects do get across the finish line, they won’t run into supply chain hiccups like we did a couple years ago because that seemed to be kind of a seesaw deal, it’s like the project is not gonna go because of commercial terms, well now we finally get the project approved, now how do we get pipe, how do we get this? And so, with the fluctuation and volatility of raw materials, those project economics, when the project does get approved, have just swung 180 degrees based on construction costs. So hopefully we can see some sort of balance there. So, after CCUS, the other buzz word, big buzz word right now, is hydrogen. And it seems that some of the new construction in Europe and some of the hydrogen project planning in the US seems to be picking up especially with the approval of the Hubs, I want to say a few months ago. What kind of outlook do you guys see on new hydrogen projects? Mike Reed: Well, like you said I think more so in Germany but to some extent it might be starting to gain favor in North America. Germany recently decided that they want an effective infrastructure in place by 2032 and they have come out with a national referendum that calls for I think 6,000 miles of pipe, over 6,000, and I think surprisingly to me, they were looking at 60% of that being new build, which is considerably more than when Europe started looking into hydrogen pipelines. It seemed to me they were talking a lot more about conversion and I personally wasn’t sure how well that would work because their infrastructure is so old, I didn’t know about the chemical aspect of it. Josh Averitt: Sure. Mike Reed: But in Europe I think primarily. Josh Averitt: Okay, great, and do you think that the geopolitical things going on over there will impact that or is Germany kind of a standalone beast in that world or how do all those pieces of the puzzle fit together? Mike Reed: I think EU as a whole is a dangerous thing that is pretty much behind it. And the thing with when someone like Germany decides they’re gonna do something, there’s basically a national mandate to it before they start announcing that they’re doing it. It’s not a bunch of individual companies or states saying they’re doing this and someone else saying no you’re not. I think Germany get a lot of that done. Josh Averitt: Got it, well that’s good news. We’ll see if they’re successful in that endeavor and then we’ll see if that kind of overflows into the United States and then we’ll see how all of that works out. And I guess moving backwards from all of the greener initiatives, you could say, let’s go back to crude. Are you guys seeing anything in the crude world as far as any new project development for long-haul stuff or even shorter development of trunk lines? Mike Reed: Not so much, transmountain may eventually. Josh Averitt: What’s the status on Transmountain? I think I read a different status everyday. Mike Reed: Oh, I’m sure it’ll change as I say this. A few days ago, they wanted to, I think the situation was I think they wanted to use a 2-or 3-mile area with a smaller diameter pipe to avoid some sort of geo-type hazard and it was rejected and they said ‘Well this might make us two years late,’ and so we said it’s been approved again, and so, this year, kind of the timeline, which is kind of what it was previous to this, yeah, I’m not seeing much in the way of crude. Sorry. Josh Averitt: No, it’s not a problem. We have to talk about the good and the bad so you know it just is what it is in this climate here. So listen Mike, we really appreciate you joining us today. Is there anything else that you may have for our listeners that might be a little bit of knowledge? You guys seem to see everything before it’s all released, so if you’ve got a couple seconds to throw something out there that maybe our listeners would enjoy we’d love to hear it. Mike Reed: Well, actually I think this kind of thing is easier read and with maps and things, so if you can get a hold of our January issues, we’ve got a construction report, a fairly big one, we do two of those a year. It’s easier for you to visualize in that manner. As far as new, no I guess I don’t have anything for you at the moment. Josh Averitt: Alright, well we’ll get our listeners to check out the January issue and look into that construction report. I know that we have a really good mix of listeners from owner operators to construction contractors, some material providers and suppliers, so that seems to be beneficial for everyone. I know we use it here at our office. Well, Mike we’re gonna wrap it up today, and Mike thank you for taking some time out of your day to join us and we really appreciate all of the news headlines and letters that we get in our email with insight into what’s happening in our industry because we can’t keep a pulse on everything, and it’s really nice to have information sources like PGJ. And like I said, thank you for joining us, and to our listeners, be sure to like and subscribe to our podcast on any major platform that you listen to podcasts on. Rate us so we can know how we’re doing and make improvements as needed, and we’ll see you next month on Coming Down the Pipe, ARS Global’s monthly podcast.