May 2012, Vol. 67 No. 5
Features
Surviving The South Texas Pipeline Boom -- Profitably
There’s a pipeline installation boom under way in South Texas, yet despite the promising outlook for steady work, contractors are still struggling with challenges — many of which are situations they’ve faced before.
The recent influx of new pipeline jobs — most notably within the Eagle Ford Shale region — has brought about an increase in upstart pipeline installation contractors, many with limited experience in effectively bidding jobs that will actually yield profit.
“Profitability is being trumped by ‘let’s just get the work,’” says Luke Duncan, vice president of operations for Advanced Pipeline Services (APS), a midstream construction and maintenance services contractor headquartered in Sinton, TX. “With the boom cycle we are in right now, a lot of new contractors are getting into the pipeline installation business. Additional competition in the market place isn’t a problem; the problem is the willingness of many competitors to underbid the jobs simply to get the work. It’s tough to compete when there are so many willing to cut their own throats. In the short-term it makes it more difficult for those who understand the business to get profitable work.”
According to Duncan, the increase in competition — with many contractors falling into the trap of underestimating costs in hopes of securing additional work — is only part of the equation. Having so many new contractors come onto the scene has also made it difficult for more tenured contractors to source and secure competent subcontractors and qualified labor and supervision, adding yet another challenging component to the bidding process. “This type of work has been going on in Texas for the last 50 years,” says Duncan. “It isn’t anything new to us; just some of the conditions make things a little tougher. As a general rule, contractors who consistently underbid jobs will likely not be in it for the long haul. That practice has a way of catching up with a company’s bottom line.”
Path to profitability
Despite the changing oil and gas pipeline installation landscape, Duncan is happy and modestly proud to report that APS, the small, Texas-based company he recently joined in 2012, is enjoying a busy, steady and profitable year. APS works with oil and gas exploration and production companies, in addition to natural gas transportation entities, to maintain and install pipeline and field processing infrastructure, mainly in the states of Texas, Louisiana and Oklahoma. During its 20-year history, APS has gained an outstanding quality and safety record, and a reputation as one of the leading services companies in South Texas.
Proud of its strong relationship with Enterprise Products Partners — a leading North American provider of midstream energy services — APS is currently constructing a 60-mile rich gas pipeline near the Texas communities of Kenedy and Yorktown. APS was awarded the job after successfully competing in an open bid process. When complete, the multi-phase expansion pipeline project — situated in the heart of the Eagle Ford Shale — will serve as a gathering system for this massive oil and natural gas reserve. Discovered in 2008, the Eagle Ford Shale formation ranges in depth from 5,700 to 10,200 feet, covers 3,000 square miles and is estimated to contain 20.8 Tcf of natural gas and 3.35 billion barrels of oil.
“We have a strong relationship and history with Enterprise,” says Duncan. “They know our work ethic and recognize the importance of establishing and maintaining strong supplier partnerships. Our relationship is about much more than simply being the low bid. The folks at Enterprise understand that a low bid doesn’t always translate into ‘low cost’ at the end of the job. Our goal is to be the low cost provider at the end of the project, not simply the low bid. It’s nice working with a customer that understands that ‘sometimes you get what you pay for.’ ”
Trenching trio
The project APS is completing for Enterprise Products Partners involves installing a main gathering system composed of six-inch and 8-inch .250-inch pipe in the heart of the Eagle Ford Shale. The two roughly 30-mile long pipeline systems will serve as a main hub for the gathering field and will tie into a larger line that will transport gas to a refinery or on to another market. The lines are being installed using two Vermeer T655 and one T555 Commander 3 tractor trenchers to prepare an approximately 18-inch-wide, four-foot deep trench for the line. Duncan explains the three-trencher installation approach is Advanced Pipeline’s solution for complying with many of the landowner’s requirements that specify segregating the topsoil from the remainder of the spoil.
“We are using the three trencher machines, and leap frogging down the right-of-way,” says Duncan. “We’ll run one machine for ‘top-soiling’ that cuts the first 12 to 18 inches of topsoil, followed by the next trencher that cuts the remaining depth of the trench, to approximately three to 4 feet. The majority of the soil is typical clay: South Texas gumbo-type dirt, which really hasn’t presented much problem. It’s all pretty decent to cut. Production rates have been averaging 6,000 to 7,000 feet per day.”
As the trench was being cut by the trio of track trenchers, other APS crews were welding the continuous stretch of six and 8-inch diameter material. Duncan explains that the decision to employ a trencher versus excavators for opening the trench was driven specifically by speed and efficiency.
“We can typically get more production with fewer pieces of equipment,” says Duncan. “Plus, with a trencher, we’re not over-excavating the trench. The trench is being cut in such a way that you’re getting exactly what you need and not a whole lot more. As a result, you can move along a lot more efficiently. It’s quicker, easier and with a lot less impact on the surface and surroundings.”
Upon encountering rivers, streams and road crossings along the route, APS has employed the horizontal directional drilling (HDD) method of construction, completed by a quartet of Vermeer drills that included a D24x40 Series II Navigator HDD and two D36x50 Series II Navigator HDDs. Rounding out the foursome was a Vermeer D100x120 Series II Navigator HDD, which Duncan’s crews used for longer bores.
Landowner sensitivities
Within the 30 miles along the installation route of the first phase, Duncan estimates that his crews will traverse the fields, woods and pastures of more than 100 individual landowners; each of whom pay close attention to the activity taking place on their sacred soils. Duncan reiterates the importance of keeping each landowner informed so that his trenchers can continue trenching, and production moving forward.
“They understand what it means having property above one of the most productive oil and natural gas reserves in the country,” says Duncan. “Yet while these property owners stand to gain financially as a result, they are adamant defenders of their property. We understand that and work in tandem with Enterprise to make sure we communicate with them and address any concerns. A couple of the biggest issues are fence repair along property lines and avoiding oak trees. One of the spreads we had to cut as many as 180 fences. Some were cedar posts, some metal and some treated; keeping track of all the differences was a challenge.”
One of the spreads was comprised of thick, fairly dense brush containing a large number of stately oak trees. Advanced Pipeline had secured aerial photos of the entire pipeline route; yet as Duncan explains, the photos aren’t always indicative of what is on the ground.
“We had to avoid the large oak trees, which was difficult in some of the more heavily-wooded areas,” says Duncan. “You can imagine the network of roots extending out from a century-old oak tree. Large oaks are pretty valuable to the property owners, so we tried to lessen the impact as much as we could. Obviously there were many trees that were in the direct line of the trench that had to be removed. It was tough having to take those out.”
Soil, mulch combo proves beneficial
The unavoidable removal of mature trees and tons of brush led Duncan’s crews to create a soil/mulch combination that ultimately proved beneficial. By grinding the downed trees and brush, then mixing the mulch with the topsoil that was then land-applied, Advanced Pipeline was able to incorporate an eco-friendly, environmentally sustainable approach for disposing of the wood waste as an organic soil amendment.
“The approach helped lessen the emotional impact of having to remove so many trees,” says Duncan. “The soil-mulch combination will, over time, help to enrich the soil by introducing an organic additive that actually helps to improve soil quality. It’s been a good job for us, in a good part of the world; and we really couldn’t ask for a better client. It will be a good project for us to have under our belt, and also one that proves you don’t have to underbid a job just to get work. There’s really no point to that approach.”
FOR MORE INFO:
Advanced Pipeline Services, (361) 364-0327, www.advancedpipeline.com
Vermeer Corp., (888) 837-6337, www.vermeer.com
Vermeer Equipment of TX, (800) 777-5128, www.vermeertexas.com
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