The utility installation market is strong, especially for horizontal directional drilling contractors.
That’s the assessment of Robert Carpenter, the editor-in-chief of Underground Construction, based on an annual survey his magazine conducts. In a recent video posted on Navigator Nation, he said electric, water and, especially, telecom projects are keeping directional boring crews busy.
One market you might assume is struggling is pipeline installations. The price of oil has plummeted the past year and a half, and the oil industry has made headlines for its struggles.
North American pipeline construction, oil and gas, is going strong, however. The reason is that when times are tough, companies try to be more efficient. And pipelines help energy companies meet that goal.
“A pipeline is a much more cost-effective and efficient way to transport energy compared with rail or truck — not to mention, it’s safer,” says Jon Heinen, commercial business manager for pipeline at Vermeer. “The tighter the margins get, the more need an owner company has for pipelines, actually.”
This is one of the trends Heinen, who travels the world meeting with executives of energy and pipeline construction companies, has identified for contractors who install pipelines. Others include a shift toward larger-diameter pipes, continued headaches from government regulations, and the use of technology in pipeline projects and equipment.
Going bigger
Heinen’s bullishness follows a dip in action in the pipeline market in 2015, as the overall oil industry struggled while the price of oil dropped to previously unimaginable levels. But along with the efficiencies pipelines bring, there’s the simple fact that oil and gas still need to be transported, so that infrastructure must be developed.
This is reflected in the number of pipeline projects being planned, with bids for jobs in 2016 and into 2017 up significantly compared with 2015.
“There’s a lot of confidence in the industry again,” Heinen says. “A lot of contracts have been awarded already for upcoming work, and permits are pending. Contractors are gearing up. The vibe is positive.”
A change is occurring in the types of projects being undertaken, however. In recent years, the midstream business drove the North American pipeline construction market. But it’s slowing down. Now, the focus is on installing transmission lines, and that’s where much of the activity will be in 2016 and 2017, according to Heinen.
These transmission pipelines are larger in diameter at 36 inches, 42 inches and even 48 inches (91.4 cm, 106.7 cm and 121.9 cm), compared with the 20- and 24-inch (50 and 61 cm) pipelines of the past. This upsizes the equipment needed for pipeline jobs. For horizontal directional drilling rigs, contractors will be looking for machines with pullback forces of 500,000 pounds (2,224.1 kN) and greater.
Heinen predicts this will lead to more specialization because of the size of equipment needed to do this work. Some contractors, however, will buy larger rigs and other equipment that lets them get into the emerging transmission line market.
HDD contractors that don’t have maxi rigs don’t need to worry. There will still be plenty of work for the smaller (relatively speaking) directional drills, such as those with pullback forces of 220,000 pounds (978.6 kN) and 330,000 pounds (1,467.9 kN). Those sizes of directional boring machines will be ideal for large-diameter installations over short distances, like road crossings, when mobility and jobsite setup and teardown time is critical.
Another opportunity is in replacing aging infrastructure, much of it in urban settings where smaller footprints and mobility are desirable. These pipelines often are 16 to 24 inches (40.6 to 61 cm) in diameter, although sometimes they reach 30 inches (76.2 cm).
“I think this is going to be a bright spot in our industry in the next couple years,” Heinen says.
Regulatory challenges
Not so bright are the regulatory challenges that continue to burden the underground construction industry.
“I think the regulatory piece is the largest risk to the North American pipeline market,” he says. “We have the people, we have the equipment, we have the technology, we have the know-how, but regulations are such a moving target that it’s hard to plan a business around them.”
A major issue in the horizontal directional drilling market is drilling fluid. Heinen says it’s not unheard of for half of a contractor’s expenses on an HDD job to be related to fluid management. He’s even seen contractors walk away from a job because the disposal process was too much to overcome.
He says, “The dumping station was two hours away. They had to double up on vacuum excavators, and if the vacs are gone, it shuts down the crew and becomes too costly of a project.”
Reclaimers and large vacuum excavators can help make this more manageable. But industry associations, equipment manufacturers and colleges are studying the issue, too. Some results suggest that not only is the material not hazardous, but it could have some positives. Some disposal alternatives being explored are drying drilling fluid onsite, using it in a farming application and incorporating it with compost.
HDD goes high-tech
Technology is coming in a big way to the pipeline construction market. The oil and gas companies are advocates of the use of data and technology to improve their decision-making and to enhance their efficiency and productivity. Heinen says they expect the people they work with to also embrace technology.
Telematics, project planning and jobsite tools and digital reporting are examples of the type of technology that is already used and will become more common in the coming years.
“There is going to be a huge demand for data,” Heinen says. “For job performance data, for operator-specific data, for ground conditions data, for tooling data, for the mud pump, everything you can imagine. That is definitely a trend in the industry. It’s being driven by the oil companies because this type of data tracking is possible to do. We definitely are adopting that into the pipeline construction industry.”