North American Terminals Industry Sees Increased Spending

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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Capital and maintenance project spending in the North American Oil & Gas Terminals Industry is up sharply over last year, and a trend toward increased project spending looks like it will continue for the next 12 months. Through April, construction started on about $1.2 billion of Terminals projects in the U.S. and Canada, about 42% more than the value of the industry's construction starts for the comparable January-April 2012 period. Over the next 12 months, capital and maintenance spending related to Terminals is scheduled to reach about $7.4 billion across all of North America, according to Industrial Info's North American Oil, Gas & Chemical Terminals Database.

But Jesus Davis, Industrial Info's vice president of research for the Oil & Gas Production, Transmission and Terminals industries, cautioned against popping the champagne just yet. "We don't expect all of those projects to kick off according to their original schedule," he said in an interview. "But the upward trend of project spending is evident and welcome. The Terminals Industry has needed to increase investment for some time, and we are finally starting to see that take place."

"I'm particularly encouraged to see several grassroot Terminals projects scheduled to turn dirt in the near future," Davis continued. "But a lot of this planned spending is tied to a small number of big-ticket items, such as liquefied natural gas (LNG) projects or facilities tied to the Keystone XL pipeline. Companies should be aware of the high level of uncertainty associated with those projects."

Some of the big-ticket projects about which Davis cautioned include a $3 billion offshore LNG regasification terminal in Puerto Rico, nearly $1 billion of spending tied to the Keystone XL pipeline, and a $450 million LNG receiving terminal off the coast of Tampa, Florida. Neither LNG project has received the necessary licenses from U.S. federal energy regulators, though they say they expect them in the coming months, and the Obama administration has not yet granted Keystone XL the necessary approvals to move forward. Until those approvals are granted, spending on terminals projects related to LNG projects and the Keystone XL pipeline remains uncertain.

"Our project database also shows a lot of project spending for natural gas storage, but some of those projects have been delayed for several years," Davis said. "Natural gas storage projects are hard to finance, particularly given today's gas price of about $4 per million British thermal units (MMBtu). Even though today's gas prices are roughly double what they were a year ago, the reality is that companies see a producing gas field as a kind of storage facility. If you know you can produce the gas on short notice, why produce it today and put it into storage when gas prices are $4 per MMBtu? Why not wait until demand pushes up prices and produce it then?"

The Industrial Info VP also noted increased spending on crude-oil railcar facilities in certain parts of the country, such as the Bakken Shale in North Dakota.

Some of the larger, traditional Terminals projects that are scheduled to kick off over the next 12 months include:

• Edmonton Crude Oil Storage Terminal Phase II tank additions, a $300 million project also located in Alberta
• Wellsville Grassroot Crude Oil Terminal, a $300 million project slated for Ohio
• Osceola Grassroot Rail-to-Barge Crude Oil Terminal, a $200 million project scheduled to be built in Arkansas
• Reynosa Grassroot Refined Products Terminal, a $200 million project set in Mexico

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, 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.