03/29/2013

Safety and the Shale Boom

How NAHAD is helping manufacturers and distributors preserve the environment and future business opportunities

Shale gas production in the U.S. is expected to quadruple by 2040, according to a report from the James A. Baker III Institute for Public Policy. In fact, the boom has already been compared to the oil rush of the early 1900s.

Eighty-seven percent of respondents to the recent NAHAD 2013 Shale and Fracking Survey indicated they operate in or serve the oil and gas industry, and of those, 92 percent have seen growth in the past five to 10 years.

Campbell Fittings President Tom Paff says oil and gas business has more than doubled from three or four years ago for the Boyertown, PA–based manufacturer. The growth, he says, is the result of the discovery of more shale plays and of improvements in the extraction of shale gas. “The technologies have changed so that fracking has become a less expensive way to go than it had been in years’ past. The finds in the Marcellus and other shale plays exemplify that, and there’s a lot of growth in the oil fans up in Canada. There’s really a remarkable amount of new finds in North America,” he says.

IVG USA, Houston, TX, the U.S. division of global industrial hose manufacturer IVG Group, has seen 25 percent year-over-year growth in oil and gas markets for the past three years. The division has received more calls for frac hose in recent years, which has offset slowdowns in other areas, says Paolo Valente, general manager for IVG USA.

The Importance of Safety
About 65 percent of the oil and gas products Valente’s division manufactures are for offshore use. He says offshore hoses are more or less uniform, largely because of regulations. “On-shore is a different story,” he says. “They’re a lot less regulated.”

Valente says companies in the U.S. are using many different kinds of hose for the same application, he says, since regulation doesn’t dictate what to use. Instead, the type of hose being used seems dependent on regional cultures, attitudes and each person’s or company’s experience.

Many manufacturers are starting to produce fracking-specific hose, Valente says, but it’s not always used. “Like in any industry, there is always a tendency to try to find a cheaper solution. It turns out that in the big scheme of things, that when you’re on an oil rig and you have hundreds of things you need to look after, the hose is really an afterthought,” Valente says.

The absence of regulation and a focus on cost has led to the use of cheap foreign import parts in oil and gas applications, according to Paff. “There are applications out there where cheap is OK, and there’s nothing wrong with that. But that same product may up in an oil field situation; if that frac fluid spills, it’s a serious problem,” he says.

Many argue that the true environmental impact of fracking is still unknown. Others say that the media have blown the issue out of proportion. Still, many manufacturers and distributors say it’s in the industry’s best interest to harvest oil and gas as safely as possible.

Nearly 90 percent of respondents to NAHAD’s recent survey said they agree that environmentally sound drilling, handling and transport of oil and gas protects the reputation of the oil and gas industry, preserving future business opportunities.

Paff says the media attention on fracking and its potential environmental impact, warranted or not, has resulted in companies voluntarily improving their safety procedures, which Paff says is a good thing. It’s tempting to do things more cheaply to save money. “But that just doesn’t pay off in the long run, for anybody,” he says.

Lauren Witter of Omni Services, a distributor based in Worcester, MA, agrees that a voluntary focus on safety will pay off in the future. “This is one of the largest things that’s ever happened to our industry, especially in the Northeast, which is not generally a booming region. It’s attractive to jump at those dollar signs and jump at those sales, but if you’re a career person in this industry, and you have a company you want to see grow decade after decade, you’ve got to step up to the plate and kind of be the police here,” Witter says.

Increased Demand for Standards
Manufacturers and distributors focusing on safety are already working to meet a growing demand for safety-oriented products from customers. Witter has seen more customers asking for details on the testing and standards of their products, and one of his biggest fracking customers has requested facility audits of their components.

Valente says he’s seen this trend in offshore markets, where customers are requesting quotes specifying a product’s desired country of origin, with some, for example, only accepting hose from the U.S. or Europe. “You’re starting to see more of that because end-users are recognizing that it’s worth spending a few dollars more for the peace of mind, for knowing you are buying the best product out there that will prevent, or at least minimize, liability down the road,” he says.

Paff says NAHAD has taken the lead in promulgating industry standards for products going into the industry, and those standards get stronger every year. [Note: see www.HoseSafetyInstitute.org for details]

Witter says it’s challenging for hose distributors to handle so many different products and applications while also ensuring that the right product is provided for each customer need. “NAHAD’s Hose Safety Institute Handbook© provides guidance to put those puzzle pieces together in a safe way,” he says. In addition to other resources, Witter says he uses the S.T.A.M.P.E.D. process and the Handbook© pressure ratings and fitting attachment selection charts for all hose assemblies headed for oil and gas applications.

While prices for natural gas have dropped over the past 12 months, resulting in a slower market, Paff said he expects the production slowdown to be short-lived. “I suspect toward the second half of this year, we’ll all see the oil plays, and the shale plays in particular, get busy again.”

This is the first in a series of articles on the shale boom and its impact on NAHAD members.