February 2009 Vol. 64 No.2
Features
Demand, Maintenance To Keep Gas Distribution Market Stable In ’09
The United States saw an increase in total natural gas consumption in 2007, the first since 2004. According to the Energy Information Administration, consumption increased by 6.2 percent in 2007 to 23 Tcf, compared with 21.7 Tcf in 2006. The EIA’s Short Tern Energy and Winter Fuel Outlook, (released Oct. 7, 2008), noted significant increases in all end use sectors except the industrial sector, where consumption increased by a modest 2.1 percent. Residential natural gas consumption rose significantly in 2007, reaching 4.7 Tcf and increasing for the first time since 2003, while the electric power and commercial sectors consumed 9.9 and 6.2 percent respectively, more than in 2006.
While increased consumption, plus an exceptionally large 9 percent increase in natural gas production between first quarter 2007 and first quarter 2008 are positive indicators, the U.S. Commerce Department reported that nationwide housing starts declined 6.3 percent in September to a seasonal rate of 817,000 units, the slowest building pace since early 1991.
For this reason, Underground Construction’s latest survey figures indicate gas utility spending to serve new customers and rehabilitate, repair and replace the nation’s mains and services, meters, valves, regulator, cathodic protection, SCADA networks and peak shaving facility will total about $12.1 billion in 2009, compared to $11.9 billion in 2008.
Looking longer term, the outlook for significant amounts of new gas mains and services should be strong, given the increasing demand for natural gas.
All of this comes at a time when LDCs have seen a 15 percent decrease in the overall level of natural gas deliveries since 2000 and some of their larger volume customers switching to mainline pipeline systems.
Nevertheless, the LDC remains the backbone of the natural gas distribution network. In 2006, the EIA reported that each day, 70 million customers in the U.S. depend upon the nation’s natural gas distribution network, including natural gas distribution companies and pipelines, to deliver natural gas to their home or place of business. The customers currently consume approximately 20 Tcf of gas per annum, accounting for 22 percent of the total energy consumed in the U.S. each year. This end use customer base is 92 percent residential units, 7 percent commercial businesses, and 2 percent large industrial electric power generation users. However, the large volume users, though small in number, account for more than 60 percent of the gas used by end users.
Lower gas price
Like oil prices, natural gas prices have dropped in recent months. However, even with the recent decreases in spot prices, the average household winter heating fuel expenditures forecast in EIA’s Outlook,, indicate households heating primarily with natural gas are expected to spend on average $155, or 18 percent more, this winter. The increase in natural gas expenditures reflects the combined effects of a 17 percent increase in price and 1 percent increase in consumption. In the Midwest, where 72 percent of all household rely on natural gas, a projected 17 percent increase is expected in average household expenditures as a result of a 19 percent increase in prices and a decline in consumption of 2 percent due to the forecast of slightly warmer weather than last winter.
More and more companies are finding programs like the Gas Technology Institute’s Registered Gas Distribution Professional (RGDP) certificate program a mainstay to train new employees, distribution supervisors and engineers.
GTI is currently involved in a training program with ConEdison of New York and recently completed a program with Washington Gas Light that provides natural gas service to almost one million residential, commercial and industrial customers in Washington, DC, and the surrounding area through a distribution network that comprises approximately 9,700 miles of mains. Washington Gas brought the RGDP program onsite to train a group of employees. The diverse class included supervisors and engineers from its field operations, gas supply operations, compliance, and construction groups. Four one week sessions – each lasting 4½ consecutive days – were presented over a four month period. Two required courses covered distribution operations and distribution engineering, the latter included piping systems and materials, and system design. Attendees also learned about internal and external corrosion, gas measurement, and regulator station design.
Impact of corrosion
Corrosion continues to be a problem for all facets of the oil and gas industry. The most extensive study to date on corrosion costs was carried out several years ago by CC Technology in cooperation with NACE International and funded by the Federal Highway Administration. The report placed direct corrosion costs in gas distribution at $5 billion a year.
With corrosion costs a major problem, products to control steel pipe corrosion remain a top priority. One solution is a flamespray field applied coating system and application method developed by GTI.
The flamespray liquid epoxy system provides technically and economically practical pipeline protection for field applications on pipeline girth welds, repair sites and irregular shaped fittings. It combines a brushed on epoxy primer with a sprayed on thermoplastic polyethylene (PE) or polypropylene (PP) topcoat that provides impact resistance.
Although not currently licensed, the product has been successfully field tested and GTI expects the system to be available in the market place within the next year.
Survey results
As in past years, Underground Construction survey recipients were asked to comment on legislative issue, the cost of finding and repairing leaky mains and a host of other questions. Responses clearly indicate that the gas utility industry is focused on replacing older, leaking, inefficient and structurally deficient mains and services. As to ongoing long term replacement programs, 69 percent of those surveyed reported programs in progress, while 14 percent indicated they had no cast iron or bare steel in existing systems. Those reporting bare steel in existing systems citied this as a primary replacement focus at this time.
Approximately 2 percent of those surveyed indicated they had not yet started a long term replacement programs.
Once again, Underground Construction’s latest figures provided by survey participants indicate that 2 and 4 inch diameter PE pipe is widely used in the gas utility industry and currently accounts for 95 to 98 percent of all new main installations in developed area. As to cost, the following figures reflect the average cost per foot reported to install plastic and steel mains. Costs for plastic main installations ranged from $4 to $9.32 for 2 inch diameter; $10 to $32for 3 inch; $8 to $15.56 for 4 inch; and $10 to $32 for 6 inch.
Respondents reporting protected steel main installation costs listed the following: $12 to $35 for 2 inch; $16 to $32 for 4 inch; and $33 to $75 for 6 inch.
As in past years, most of those surveyed said they do not track the average cost for finding and repairing leaky mains. While most of those surveyed cited surface conditions, street vs. lawn, as a factor in the cost of finding and repairing leaky mains, 36 percent gave $2,000 as an average cost.
Of those reporting finding and repair costs per occurrence, regardless of size, the following were given as the highest costs: $1,530 $2,700. Those reporting costs by size provided the following: 1 inch, $500 to $775; 2 inch, $1,050 to $2,200; and 4 inch, $1,800.
One gas utility with 100,000 customers that provided costs by pipe diameter said the following represented its average costs for finding and repairing leaky mains: 1 inch, $500; 2 inch, $1,200 and 4 inch, $1,800.
Fusion technology
For several years now, the response to our question on fusion technology shows that both butt fusion and electro fusion are well received and pose few problems. Once again, respondents indicate that problems with butt fusion and electro fusion have more to do with operator error than the technology. In fact, butt fusion was consistently mentioned as a widely used trouble free, low cost technology, while electro fusion was cited as being widely used for live main tie ins and dealing with tight or confined spaces.
Once again, the response to our questions on causes of plastic pipe failure in service have identified third party damage as the major cause of distribution pipeline incidents. Supporting this are statistics from the DOT’s Office of Pipeline Safety. According to the latest OPS summary report on distribution pipeline incidents by cause, of the 153 incidents in 2007, 48 were caused by third party excavation damage. Third party excavation damage also led to the deaths of four persons and resulted in 12 injuries. Other primary causes fire and explosions (17) and failure due to a car, truck or other vehicle (14).
As to incidents in 2008, OPS reported that through Aug. 31, 2008, distribution operator incidents totaled 109 and accounted for 39 injuries and three fatalities.
What’s needed
To our question on improvements to existing construction equipment tools and technology, respondents consistently said they would most like to see trenchless and keyhole technology improvements. Others indicated a need for affordable tools to locate plastic lines, improved steel pipe insertion technology and tools, along with paving removal and restoration improvements.
On the wish list of one gas utility was technology and tools for steel pipe insertion with plastic pipe. Another saw a need for aesthetic gas meters.
Contractors continue to provide a sizeable portion of the nation’s new distribution construction to install gas utilities. The figures provided by survey participants indicate that 82 percent rely on contractors to carry out 75 to 85 percent of all new construction on projects, while 12 percent indicated they relied on contractors to perform 50 to 70 percent of this work. Of the remaining 6 percent, 4 percent, with fewer than 5,000 gas customers, indicated they didn’t use contractors at all and the remaining 2 percent reported using contractors to perform approximately 25 to 35 percent of their work.
Integrity management for LDCs
The Pipeline and Hazardous Materials Safety Administration (PHMSA) has published a proposed rule that would establish integrity management requirements for gas distribution pipeline systems. This is the final phase of PHMSA’s implantation of integrity management. While writing of the final rule – and the completed guidance document – is not expected to be released before next year, respondents clearly see the final integrity management rule as having an adverse financial and operational impact on the LDC. The most common response was concern over the extensive documentation that will be required, plus the potential for software and hardware upgrades and additional administrative personnel.
A number of small LDCs said they felt particularly vulnerable. One described it as an “added burden for smaller companies that would grow over time.”
Regardless of size, more than 75 percent of those surveyed said they expected the rule to prove far more costly for the LDC than the PHMSA has suggested.
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