Pipelines sustain America. Without pipelines, much of America wouldn’t have electricity, air conditioning, and heating. To provide these necessities, energy companies have invested in pipeline infrastructure (Exhibit 1). Investment in new pipelines has continued since then including the 1,179-mile Keystone XL, the 1,031-mile Line 3, and the 1,172-mile Dakota Access Pipeline.
Access Sophic Capital’s full pipeline integrity analysis industry HERE.
In the United States, pipelines transport the bulk of petroleum and natural gas, and based upon U.S. Energy Information Administration (EIA) estimates, this won’t change soon. Exhibit 2 shows U.S. consumption across energy groups. Exhibit 3 shows U.S. energy production across the same groups. What these Exhibits illustrate is that the U.S. will depend upon petroleum and natural gas for at least 20 more years. Those promoting renewables should be pleased that demand for renewables should consume all renewable production. However, the United States won’t be renewable independent for the foreseeable future, with natural gas and crude oil filling the void. This means is that pipelines are here to stay. Therefore, pipeline operators will need to continue infrastructure inspections to meet regulatory and safety requirements.
There are 2.7 million miles of pipelines across the United States, and about 513,000 miles in Canada. Although these energy transportation systems are generally considered safer and more efficient than truck or train transport, pipeline failures are typically more catastrophic and generate far more attention due to the deaths, injuries, and the scale of the clean-up. As illustrated in Exhibit 4, the industry has not been able to consistently reduce the number of incidents, fatalities, injuries and costs associated with pipeline failures.
IT WOULD TAKE A CONSTANT LINE OF TANKER TRUCKS, ABOUT 750 PER DAY, LOADING UP AND MOVING OUT EVERY TWO MINUTES, 24 HOURS A DAY, SEVEN DAYS A WEEK, TO MOVE THE VOLUME OF EVEN A MODEST PIPELINE. — SOURCE: PHMSA
The consequences of a ruptured pipeline can be disastrous. Explosions and/or fires can occur as well as pipeline discharges. Product discharges and fires can cause environmental damage, affecting wildlife and water supply contamination. Economic impacts can also occur if ruptures happen in residential or business areas, resulting not only in damaged property but also loss of fuels to heat and air condition homes.
Regardless of what the media and popular opinion say, the energy pipeline industry is generally safe. Some may balk at our opinion and point to the incidents, fatalities, and injuries presented in Exhibit 4, but the industry is promoting a goal of zero incidents and has taken steps to achieve this. In 2016, there were 298 incidents in the United States – 298 across 2.7 million miles of pipeline or 1 incident per 9,000 miles. This means that ruptures are a low-probability event; however, when ruptures occur, they have high visibility. Some of these pipeline incidents are caused by tiny fractures or even pinholes – anomalies that can occur between inspections; anomalies that traditional pipeline data analysis methods can miss.
However, the industry has stated a goal of ZERO ruptures. Even though the industry has low incident rates across vast networks of pipeline infrastructure, members acknowledge that they can and will do better.
Pipeline Inspection Technologies
Pipeline ruptures cost on average $2.3 million to clean-up. Worse, one out of two pipeline failures causes an injury or a fatality. Given this, pipeline operators are mindful to minimize the possibilities of pipeline ruptures and usually follow the pipeline inspection workflow shown in Exhibit 5. Typically, pipeline operators have employees inspect the pipeline exteriors or they use airplanes and drones. Digital sensors that monitor pressures, temperatures, and sense leaks are also used. Operators also inspect pipeline interiors using acoustics devices that move through the pipeline to listen for leaks. To do these tests, pipeline operators run “pipeline intervention gadgets” (PIGs).
OneSoft Solutions, a company providing a machine learning SaaS solution for pipeline data analysis, estimates that a typical PIG run covers 30 miles at an average cost of $250,000. PIGs move through the pipeline and measure things like diameter, bends, curvature, corrosion, and metal loss. On average, 6,500 PIG runs are completed each year, with each one taking at least six months to analyze discrepancies that could be problematic in the pipeline.
Pipeline Data Analysis
This is where the industry falls flat. At PPIM 2017, we met several services companies that convert PIG data into information. Several qualification steps prepare the data before it makes it to the analysis team, and each step compromises the data’s fidelity. When the data does reach the analysis stage, integrity teams will generally use proprietary software that is continuously evolving. At PPIM 2017, we encountered some pipeline services companies that will print several years of PIG data onto sheets of paper and manually compare the datasets to look for differences that could represent pipeline anomalies. Either of these methods introduce additional risks to pipeline services companies since:
- Human error can occur due to fatigue, inexperience, or indifference;
- The more time a real pipeline anomaly is not detected, the more time that it has to become a pipeline failure, and;
- Certain employees hold crucial skills and knowledge that could cripple or destroy the company should those employees quit.
We’re a couple of tech geeks, here at Sophic Capital. We’ve seen the PIGs and the extensive software offerings that many energy service providers have developed to analyze PIG data. However, for us, we wonder why the industry has not moved beyond Excel spreadsheets. Artificial intelligence and machine learning are prevalent across many data intensive industries including: asset management, driverless vehicles, and IoT. One of the reasons we attended PPIM was to see if any innovative software companies mirror our opinion and have developed machine learning solutions. We found one! To read more and to receive future Sophic Capital news and research, please register HERE.
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