(by Paul Vivian and Rick Preckel, www.prestonpipe.com) Market Monitor Projects: As our readers are aware, pipeline companies identify opportunities to build pipelines in a variety of ways. Ultimately, it is about equalizing prices. If a region is receiving a lower wellhead price due to transportation constraints, therein lies the opportunity. Once the opportunity is identified, construction comes after shipping commitments and approval.
As our readers are also aware, we are currently in a situation where there are multiple bottlenecks. This has occurred because shale development has resulted in rapid production growth that tends to overwhelm the pipeline process. Combine that with the delays in getting pipelines permitted and built, and we end up with capacity constraints. This is likely going to be a problem that rears its ugly head from time to time. Capacity is built in a stair step pattern, and generally from behind, and production growth is linear. If production growth continues to be as rapid as it has been, we are either going to repeat the present situation over and over again or the pipeline process will need to change. The change would involve more speculation on the part of pipeline companies which would upset the balance between the focus on earnings and allocation of capex dollars. We would comment on how a Section 232 quota period renewal is affecting the import licensing, but we have no official data. All we have is anecdotal evidence to rely on. The trouble with anecdotal evidence is that it is very difficult to quantify. Large OD shipments continue to reflect strength in the projects market, including a host of activity around LNG. Subscribe to the Simdex Future Pipeline Projects Worldwide Guide to keep up with all the developments.