Changes—in the world and in local, regional, and international energy economics—are affecting the pipeline industry more than ever.
Economic realities have led to an ongoing "shake out" of companies and assets. Firms are spending their capital where they will reap the highest return and defining themselves as domestic, regional, or global players.
Technology becomes even more important when one examines the new set of pipeline owners now emerging from the financial turmoil of the past year.
"Many of them have no history of owning or operating pipelines," says George W. Tenley Jr., president of Pipeline Research Council International Inc. (PRCI). "They have no native, innate sense or intuition about how to maintain and operate these assets." Technology, and its ability to generate, organize, and interpret information, he feels, must be directly incorporated into their emerging business plans.
This is a message Tenley and PRCI feel is vital to the future health of the pipeline industry.
His organization just celebrated 50 years of existence, during which time its member companies contributed more than $185 million towards research, development, and application of pipeline technology.
Tenley leads the not-for-profit corporation from its base in Washington. PRCI consists of 23 natural gas transmission companies from the US, Canada, Europe, and the Middle East.
Pipeline business
Tenley says a typical pipeline company's principal asset is under constant pressure because it continues to be a cash cow that finances a range of opportunities under a holding-company umbrella. Some of these opportunities have turned into "recent, well-chronicled misadventures," diverting cash flows to balance-sheet repair rather than business expansion.
"Once these industry-wide financial dislocations are remedied," says Tenley, "and pipelines have rebalanced their assets and liabilities, they will get back to basics."
In addition, the industry must constantly find ways to extend the life of the infrastructure. Tenley feels the industry must make the case to the public and regulators that pipelines, if properly maintained, have a substantially unlimited life.
Integrity-management programs, he says, will be important in maintaining the economic viability of pipelines. There is simply less margin for design, operational, or financial error these days.
Legislation, regulation
"The pipeline industry is facing legislative, regulatory, and public concern as to its commitment to safety," says Tenley. "This concern in many countries is driving legislation and regulation that will require the industry to raise the bar on integrity management.
"This issue transcends borders," he says. In the West particularly, the desire for a "zero-risk society U motivates the public, [its] elected representatives, and the regulators that oversee pipelines to implement increasingly stringent operating and integrity assurance requirements.
"The costs for all these demands are borne by pipelines with capital that would otherwise be available for system expansions."
That greatly influences the direction of technology development in the industry. That direction, particularly with respect to system integrity and reliability, will be determined, Tenley suggests, largely by the interplay of two key considerations:
•Responding to and managing the increasing scrutiny from the public and governments.
•Ensuring the most efficient, credible, cost-effective means to identify, prioritize, and fund technology needs.
Turning to technology
"It is clear that accidents drive both the public's view of the pipeline industry and government's regulatory oversight," says Tenley. "As the pipeline industry and regulators struggle to find a consensus on just what is needed to both assure the integrity and reliability of pipelines and the public's confidence in their operation, increasingly the focus is turning to technology."
Funding for technology development is more important than ever in government relationships with the industry. The US government is just beginning to play a role in its industry's technology development, something that is more prevalent elsewhere in the world.
This government involvement, says Tenley, challenges the pipeline industry and the future of technology development. "The key for industry is to maintain a lead role in determining the technology and development agenda."
In 2002, the US Department of Transportation (DOT) and the US Department of Energy (DOE) provided nearly $8 million for improvements in pipeline integrity and reliability. DOT's pipeline technology budget for 2003 is about $8.5 million.
Tenley feels that pending US pipeline safety legislation, currently attached to the energy bill, is likely to pass even if the larger energy bill does not.
This legislation includes $100 million over the next 4 years for DOT, DOE, and the National Institute for Science & Technology.
Needs, opportunities, solutions
There is one significant difference between the pipeline systems in North America and those of the rest of the world: the age of the pipe in the ground. In the US, nearly 50% of the pipelines are more than 50 years old.
"As new supplies come on line," says Tenley, "the existing infrastructure must be as reliable as the new systems to be built. This need to build new infrastructure upon existing pipe is common to all regions of the world.
"Technology development in the US has traditionally followed pipeline operations rather than leading them. Fortunately, for many countries in the world, US technology has provided the foundation on which to build their systems."
The future of pipeline technology development, Tenley says, is based on four basic questions.
Why, what, how, how much
The technology worthy of funding, he says, is that which enables the pipeline to fulfill its essential function. In countries where the pipeline asset is the cash cow for a larger energy enterprise, its essential function is to provide low-cost, reliable capacity and deliverability.
"In countries just developing a pipeline infrastructure," says Tenley, "there is typically greater government control and direction."
Regardless of the motivations underlying operation of the pipeline, however, there are four drivers to which technology can and should respond:
•The growing need for system flexibility to address changing demand and markets.
•Strategic interconnects to enable new supplies to come on line to meet growing demand and to relieve and avoid bottlenecks.
•Accelerating operations to keep pace with faster transactions. The dichotomy between the speed of transactions and the speed of operations, always present, is now increasingly important, says Tenley.
•Developing better pipeline design and construction practices to enable faster permitting of new facilities. In many cases, the technology advances in this area follow, and build on, technologies advancing elsewhere in the fields of computing, electronics, and robotics.
"The design and construction phase of a project is [we hope] the last time that the public sees or hears much about a pipeline," says Tenley, "because the goal is to keep it in silent service indefinitely and thereby foster public acceptance.
"Building or increasing public confidence in the pipeline infrastructure is fundamental to the success of every pipeline endeavor, and technology is a unique means to help establish it."
In pipeline operation, technology is the one thing substantially free of bias; it is forward-focused, and its applications and impacts are capable of assessment.
Tenley says that technology development means not only the work that needs to be done, it also means the context in which the work takes place. It includes key opportunities for its application and bringing about the payoffs of greatest impact.
"What is important," says Tenley, "is integrity and reliability."
Work areas
Tenley says there are five areas of concern: materials, damage prevention, corrosion prevention and control, improved inspection techniques, and improved pipeline design.
•Materials should focus on lighter, stronger steels with higher design factors to provide greater defect and damage resistance. This would enable higher-pressure design, richer gas compositions, and the means to join and repair existing and new steels more cost-effectively.
•Damage prevention should be dedicated to predicting, preventing, and limiting the damage caused by external activities around the pipe.
•Corrosion prevention and control can be improved through damage-resistant coatings, improved cathodic protection, and a growing attention to internal corrosion.
• Improved inspection techniques are needed to locate, characterize, and size all defects and damage. Better tools need to be developed for aboveground detection and assessment.
•Improved pipeline design should take advantage of new, more-powerful and diverse computing capabilities.
"Organizations like PRCI," says Tenley, "have learned the painful lesson that the new generation of pipeline CEOs, with their marketing and business development backgrounds and biases, will not tolerate an overall funding target to determine technology development.
"While I generally do not advocate a set funding level, history suggests that in the US $12-18 million annually will be necessary to sustain the outstanding integrity and reliability record of the industry."
Tenley says that individual companies are unlikely to make the commitment to technology because of the huge cost.
This suggests that only through a leveraging mechanism—in which the whole far exceeds its component parts—will the essential technology be pursued.
Tenley believes strongly that R&D needs everyone working together. Collaborative technology will ensure the integrity and reliability of the pipe in the ground and foster development of the new facilities.
For the past 8 months, the natural gas transmission industry and the liquids pipeline industry have been developing a new business plan for collaborative technology development. The goal, Tenley says, is to enable a sustained net R&D program of $15 million/year.
The plan calls for this program to be built upon an enhanced and redefined PRCI and its successful operating model.
It is no longer feasible from a funding or knowledge standpoint, Tenley says, for individual companies to confront these issues alone. Success will come through pooling of funding and expertise and sharing solutions that transcend competition.
"The key for industry is to maintain a lead role in determining the technology and development agenda."
Career highlights
George Tenley is president of Pipeline Research Council International Inc. (PRCI), which began in 1952 as the Pipeline Research Committee and is operated for and by member companies. The group, says Tenley, has produced key technologies underlying every aspect of design, construction, testing, inspection, operations, and maintenance of onshore and offshore pipelines and related facilities.
Employment
10 years as senior executive in the US Department of Transportation, serving both as chief counsel of the Research and Special Programs Administration and as head of DOT's pipeline safety program.
During his tenure in DOT's Office of Pipeline Safety, he worked with the leadership of the pipeline industry to lay the foundation for the introduction of risk management in the pipeline safety program. His work in the passage of significant pipeline safety and hazardous materials legislation earned Tenley the Presidential Rank Award of Meritorious Executive.
In addition to providing leadership to the pipeline safety program, he was also DOT's principal spokesman in Congress and before the media in the aftermath of several pipeline accidents of national significance.
2 years at Battelle Memorial Institute, Columbus, Ohio, helping develop the firm's energy market-sector program.
Education
Tenley holds a JD from the University of Maryland School of Law.
