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Pipeline additive sales boom as bottlenecks continue

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World Pipelines,

Reuters are reporting that the pipeline bottlenecks which have vexed North American oil producers this year, have provided an absolute windfall for companies that make a fairly unknown additive called drag-reducing agent (DRA).

DRA is injected into pipelines to reduce the contact between the oil and the wall of the pipe, allowing more crude to flow through. It is a small but booming business, accounting for approximately US$500 million in global sales (50% of that in US sales) but is growing nearly 8% annually, said Brian Watt, Senior Vice President at specialty chemicals producer Innospec Inc., based in Englewood, Colorado.

Pipeline companies are increasing DRA usage because of bottlenecks in the key North American producing regions of Texas’s Permian Basin and Western Canada. Those crude grades have traded at greater-than-usual discounts to benchmark US futures CLc1 this year because of inadequate pipeline space.

Planned pipelines in the Permian will not largely start coming online until late 2018, while new Canadian pipeline capacity faces scrutiny by politicians, activists and regulators.

“Anything that cost-effectively allows you to increase capacity or reduce the energy pumping those lines is going to look like a good investment,” Watt said. Adding DRA, which sells for US$15 - US$25/gal., allows pipeline operators to reduce pump pressure.

“We’re using a lot more DRA in the system,” said Guy Jarvis, Executive Vice-President of Liquids at Canada’s biggest pipeline company Enbridge Inc., because it can “provide a bit of a boost” to flow, as well as reduce power bills.

Recently, companies have started including DRA into pipeline designs to reduce capital costs by using smaller pipe, said Marina Kaplan, LiquidPower’s Director of Strategy, Marketing and Business Development.

DRA has been around since the 1970s, but pipeline operators kept its use quiet, believing it gave them a competitive advantage. Even now, few companies disclose how much DRA they produce.

Innospec announced this week that it has broken ground on its new facility to manufacture DRAs. The site is at Pleasanton, Texas, and is an extension of the existing Innospec site. The project is well advanced and the company expects beneficial production later in the second half of 2018.

Patrick S. Williams, President and Chief Executive Officer said, “DRAs are a fast growing, exciting, cutting-edge technology which has the dual benefit of both improving productivity and cutting costs for our customers. We are delighted to have developed our own proprietary products and manufacturing process, which will be very complementary to our existing portfolio and will allow us to serve our customers globally.”

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US pipeline news Crude oil pipeline news


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