North American Oil & Gas Pipelines

FEB 2017

North American Oil & Gas Pipelines covers the news shaping the business of oil and gas pipeline construction and maintenance in North America, including pipeline installation methods, integrity management innovations and managerial strategies.

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Page 24 of 43 FEBRUARY 2017 | North American Oil & Gas Pipelines 25 While the pipeline market has been punished by low commodity prices since 2015, the distribution construction market is largely disconnected from exploration and production impact. A low natural gas price actually creates more demand for distri- bution construction services. Long-term, the pros- pects for both the pipeline and distribution markets are solid and will continue to exhibit growth. We still face many challenges in both markets. Regula- tion and protest in the pipeline space will serve as an obstacle and as the pipeline market returns to health in 2017-2018, we will again face workforce availability issues for the pipeline market. In the dis- tribution market, the availability of skilled workforce and supervisory personal is the greatest challenge. We do, however, have high paying jobs, clear career progression, superior skill development and training, innovative technologies in many jobs, and an entre- preneurial culture. Each aspect is largely unknown and unobserved outside of our industry. It is time we stopped hiding our light under a bushel and sing like the sirens to draw talented individuals to the shores of our industry. Canada Transmission & Distribution Spending Forecast Economically, Canada exited its short 2015 reces- sion in early 2016 and GDP growth for 2016, while positive, is well below 2 percent and the forecast for 2017 is at a similar level. Canada is an export based economy and the slow global growth and resulting low commodity prices hurts Canada more severely than the United States. Ultimately, Canada needs faster global growth and high commodity prices to thrive. The Canadian pipeline and distribution construc- tion market is much more influenced by liquid gath- ering and transmission activity. In Exhibit 2, the history and forecast of the Canadian transmission and distribution markets demonstrate the volatile nature of the Canadian market. Today, there is ap- proximately $2 billion in annual distribution system capital spending with transmission spending making up the rest of the market. Total spending peaked dur- ing 2014 and 2015 with a substantial drop forecast in 2016 and 2017. After this point, we forecast a leveling off of spending and an acceleration in 2018/2019 as the improving price of oil drives pipeline construc- tion activity. The Canadian distribution markets re- main stable and slow growing. U.S. Transmission & Distribution Spending Forecast The U.S. pipeline and distribution market is much more diversified than Canada and the pipeline por- tion of this market is a smaller percentage and has

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