More than $11 Billion in North American Pipeline Construction Planned for Third-Quarter 2014

---

Written by Edward Weatherly for Industrial Info Resources (Sugar Land, Texas)--About $11.1 billion in planned pipeline construction is slated to begin in the U.S. and Canada in the third quarter of 2014, according to Industrial Info's database. Much of the $11 billion already has been spent, but on average 50% to 55% of the expansion costs are spent during the construction phase. Holding to this average, $5.55 billion to $6.1 billion remains to be spent, beginning in the third quarter of 2014 and distributed over the construction life-spans of the 158 pipeline projects. In addition, an unknown amount is to be spent during May and June.

Crude oil pipeline projects represent 85 of the 158 projects being tracked by Industrial Info, or roughly 54%. But these projects also represent 63.2% of the capital, or $7.02 billion. Projects related to natural gas pipelines represent 43% of the projects tracked, but only 35% of the total to be spent. The remaining five projects, about $158 million, involve pipelines carrying other products.

The majority of the North American pipeline construction start-ups will be in the U.S., representing 130 projects, with just more than 77% of the total capital at $8.62 billion. In Canada, 28 pipeline projects are expected to begin in the third quarter of 2014, representing $2.46 billion. The most active market region is expected to be the U.S. Southwest, accounting for 35 projects and $2.28 billion.

The market regions in descending order of number of projects are the Midwest region, with 33 projects and $2.65 billion; Western Canada, with 27 projects worth $2.31 billion; the Rocky Mountains region, with 23 projects worth $1.46 billion; the Great Lakes, with 19 projects and $1.69 billion; and rounding out the bottom with projects totaling less than $225 million in total are the Mid-Atlantic with nine projects, the Northeast with eight projects, and the Southeast with three projects.

The market regions with the highest density of crude oil-related projects are the Midwest, with 26 projects worth $2.12 billion; the Southwest, with 26 projects worth $1.69 billion; and Western Canada, with 25 projects worth $1.98 billion. The highest density of natural gas-related projects is the Great Lakes region, with 18 projects worth approximately $1.07 billion.

As the numbers suggest, the third quarter of 2014 will be weighted by almost twice as many crude oil-related projects as natural gas and other pipeline projects, suggesting the heavier activity in moving crude from relatively newfound shale sources, as well as the growing oil sands regions of Alberta, to upgrading & refining locations. This is almost a total reversal of the pipeline construction activity that Industrial Info was monitoring just a decade ago, when the pipeline construction activity was almost solely related to natural gas and some NGLs.

These numbers also suggest a real movement toward energy independence, with new sources of crude oil and NGLs being extracted from the shale plays, and that the movement will continue for the foreseeable future.

Looking a year ahead from the third quarter of 2014 to the third quarter of 2015, the number of crude oil pipeline-related projects jumps to 102, worth an estimated $11.5 billion in capital spending. Expect the trend in crude oil-related spending to continue as producers seek for ways to transport crude from new and growing sources, located mostly in shale plays, to upgrading and refining centers.

The absolute dollar values should increase in the coming years, as midstream transporters run out of oil pipelines to rehabilitate, pipelines that can be reversed, and old natural gas pipelines that can be converted to crude service. The focus will have to shift to building new pipelines and expanding existing ones by looping or pump additions--or a mix of both--to keep pace with the need to move greater volumes of crude oil from areas of production to areas for upgrading & refining.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.