The recently published CSCMP’s State of Logistics 2019 is the single best annual snapshot of where logistics stands in the United States. One important mode that does not get nearly enough attention is pipeline. Pipeline accounted for $53 billion in logistics costs in 2018. That was up 12.7 percent from the previous year. Pipeline costs are also projected to grow by over 12 percent over the next five years.
In 2018, demand for oil and gas remained strong, with production increasing —17 percent for oil and 11 percent for natural gas. In 2018, natural gas fueled more than 60 percent of newly installed US electric generating capacity. Demand increases can squeeze pipeline capacity, but by the fourth quarter of 2018, constraints had eased as a result of recent pipeline investments. In mid-2018, the price of crude oil in Houston far exceeded the inland price in Midland Texas in the Permian production area because some of that Permian oil had to be transported through more expensive non-pipeline modes. In the report, they state that constraints will continue to loosen through 2019, as capacity could increase by about 50%.
Pipeline Scheduling Solutions Provide Operational Improvements
But in addition to building new pipelines, pipeline scheduling solutions can help carriers get more throughput from the assets they already own and operate.
ARC Advisory Group’s Tim Shea has done a global market study on the pipeline scheduling solutions market. It is a surprisingly small market considering the overall size of this mode of transportation. Nevertheless, Mr. Shea reports that the market for pipeline scheduling solutions continues to develop and evolve as an increasing number of pipeline operators and transporters now view automation of the scheduling operations as a positive investment in productivity and operational improvements. This is being done with increasingly reduced staffing levels due to layoffs experienced during the extended decline in oil prices. Users are realizing that reliance on manual approaches or legacy pipeline scheduling solutions are no longer sustainable in today’s margin compressed markets, especially when relatively cost-effective automated pipeline scheduling solutions are readily available.
Pipeline Scheduling Functionality Can Be Quite Complex
These solutions contain the following functionality:
Batch Forecasting – forecasting when different batches of different products or grades of product will flow through the pipelines.
Batch Management – Batches can include varying grades of crude, natural gas liquids or finished products and these product properties need to be managed properly.
Bi-directional/Multiple Segments – Pipelines can have multiple ingresses (pick up) and egresses (drop-off) and the liquid may flow both in directions.
DRA Management – DRA means “drag reducing agent” which help reduce turbulence and the associated reduction in frictional pressure drop can provide significant benefits to pipeline operators by providing additional pipeline throughput, the ability to operate in reduced pressure-drop conditions, or a combination of these effects.
Junctions/Splits – Complex pipeline networks needs to be optimally routed through the junctions and splits.
Multi-blend Optimize/Transmixing – Different batches of finished or refined products flow through the pipes. This functionality minimizes the mixing of these batches. Few suppliers can provide this complex functionality.
Nomination Management – A nomination is what a shipper is saying they want to send in terms of product and volume by from origin to destination in a given timeframe. It is similar to the tendering process in other transportation modes.
Siphoning/Blending via Injection – A siphon is a natural phenomenon that can occur in any piping system that transports a liquid from a higher elevation to a lower elevation. As gravity pulls the liquid in the piping downstream of the high point, the flow of liquid can create a vacuum at the high point that pulls on the liquid in the upstream piping, allowing the flow to continue. Failure to take the siphon effect into account can lead to collapsed tanks and pipelines, downtime, lost production, safety hazards, and environmental excursions. Blending via injection may involve a need to optimize a batch’s quality or to allow for mixing of similar quality of products from different shippers or customers.
Storage Management, Tank and Terminal Management – An understanding of the capacity that can be stored at origin, various midpoints, or the final destination. An understanding of these capacities is critical to scheduling and managing logistics efficiently and cost effectively.
Virtual Batches – Simulating the batches for the purpose of throughput optimization.
When logistics folks think about transportation, the pipeline mode is an afterthought. But it is a very important mode that gets far too little coverage and is not sufficiently understood.