Opportunities in the Energy Transition

By Brad Kramer March 4, 2022 View Profile

Contractors Discuss the Future of the Pipeline Industry

Global concerns over climate change and carbon emissions have driven changes in how and where humanity gets its energy. The phrase “Energy Transition” has become a hot topic throughout the pipeline industry, but what does that mean for the companies that build energy infrastructure?

For contractors, the Energy Transition impacts how they approach their business, as there may be fewer traditional oil and gas pipeline projects, says Nathan Eastway, P.E., vice president of HDD and specialty projects for Gabe’s Construction. However, the change in the industry presents a number of opportunities, as long as contractors are ready to adapt.

“I see Energy Transition as a positive for the globe and the global population,” Eastway says. “Therefore, it is up to the pipeline industry to see it in the same light and adjust our industry’s means and methods in the types of energy we are transporting.”

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The Energy Transition is the transformation of existing global energy from fossil fuels to lower carbon sources, says Robert Osborn, president of Michels Energy Holdings Inc., a division of Michels Corporation. The trend is driven by the U.S. government’s — as well as other countries — goal of reaching net-zero carbon emissions by 2050.

“The Energy Transition to me is basically the process of reducing our carbon footprint,” Osborn says. “That poses a number of logistical challenges, and the question of where we get electricity being the biggest driver with coal going away.”

While the Energy Transition has become a big buzzword in the last couple years to limit climate change, Osborn says that lowering carbon emissions from energy has been in progress for many years.
“The United States as a whole has done a good job on this,” he says. “I don’t think another country has reduced emissions as much as the U.S. since the year 2000.”

Despite efforts to speed up the transition to low-carbon energy, Osborn says that you can’t just flip a switch and get rid of fossil fuels.

“The reality is that oil and natural gas provide more of world’s energy than any other source,” Osborn says. “I see that continuing into the foreseeable future. We’ve been getting rid of coal power plants for years, which has led to natural gas demands to increase. Statistically, as the global population continues to increase, the demand for energy will also continue to grow. I think 2050 is a good goal, but it will take a lot to get there.”

It will take time for lower carbon renewable sources of energy to supplant oil and gas, Osborn says. With current research and development focused on adding hydrogen, renewable natural gas (RNG) and carbon capture, usage and storage (CCUS) to the energy mix, Osborn adds that there will be opportunities for contractors to maintain existing pipelines and construct new infrastructure capable of withstanding the rigors of hydrogen.

“Hydrogen is more volatile than natural gas,” Osborn says. “You can only inject so much into the system for it to be safely blended. But the result of that is emissions from furnaces are less, and that is a form of reducing the carbon footprint. If they can get that technology dialed in, that’s a lot of homes around the country. Then, how do you do that with fuel? There are a lot of logistics to figure out, but if we can get a start at it, a little bit would add up to a lot.”

For the pipeline industry, Osborn suggests that economics will drive the Energy Transition.

“It has to be economically feasible to invest in projects,” he says. “We’re going to be very interested and very dialed in watching the economics of the Energy Transition and how that plays into new markets, such as carbon capture, hydrogen and renewables. Will it depend on government subsidies? How is it going to be funded? Or will it become economical? If these new energy sources can maintain or become more commercially viable, then that will be the driver for the pipeline industry. I also think the industry is going to be driven more by politics.”

Eastway adds that in the near-term government subsidies will provide opportunities for contractors in the
Energy Transition.

“With various government financial investments occurring in renewable energy, including the Biden administration’s Infrastructure Bill that was signed in November 2021, there is ample money being made available over the next five years for renewable infrastructure,” Eastway says.

Furthermore, Eastway suggests that traditional pipelines will also continue to be built.

“I still believe that we will be constructing pipelines, as we will not ween our society off of oil and gas,” Eastway says, referring to the use of plastics in a majority of everyday products and the need for natural gas heating in the Midwest, Northeast and other colder climes. “New pipelines will still be built, just in fewer and fewer numbers. Pipeline maintenance and updates as older infrastructure ages out will be a key market in the coming decades.”

The biggest challenge for pipeline contractors when it comes to the Energy Transition is how to adapt to the changes in the industry.

“We need to be able to adjust to the markets, and figure out ways to utilize our knowledge, equipment and personnel in those new markets,” Eastway says. “We may not be welding and stringing/lowering steel pipe, but we may be trenching and laying other types of energy infrastructure.”

Eastway and Osborn both agree that diversifying business will be key for contractors in the future to secure business in markets beyond oil and gas.

While the market outlook for the pipeline industry may be “less than ideal for traditional oil and gas,” Eastway says, “but there are similar opportunities out there if companies are willing to adjust and pursue non-traditional pipeline work” in the years ahead.

“Pipelines simply move energy from where it is created to where it is needed. That does not limit the pipeline industry to oil and gas only,” Eastway says. “We can figure out ways to move power created by more sustainable methods from point A to point B. But just as when North American Oil & Gas Pipelines changed their name to North American Energy Pipelines, I believe the pipeline industry needs to evolve toward more of a ‘Energy Transmission’ industry.”

Osborn feels optimistic about the future for the pipeline industry and the Energy Transition.
“There will be work out there, but I think it will be competitive,” he says. “The contractors that are successful will be the ones who adapt to change. There will continue to be more scrutiny around safety and pipeline integrity. Everyone has to up their game.”

Osborn adds that contractors also may be asked by clients about their environmental, sustainability and governance (ESG) efforts.

“That’s been a big focus of ours, and that kind of increases costs to have that expertise in-house to monitor and track improvements,” Osborn says. “It’s important to clients, and it could also become a requirement if the government gets involved. There are always going to be more compliance issues with lowering emissions, and we’re already seeing that with equipment. The Energy Transition is going to take investment from all parties.”