Drag-reducing agent, or DRA, sales in the US and Canada are booming as pipeline companies struggle to get ahead of bottlenecks in their systems due to rising output. TransCanada photo.
DRA sales growing by about 8 per cent annually
Companies making a drag-reducing agent, or DRA, say their sales have gone up this year, mostly due to bottlenecks in a number of North American pipeline routes.
DRA is added into oil pipelines to reduce contact between crude and the wall of the pipe, allowing crude to flow through more easily.
The use of drag-reducing agent is critical to producers in North America as this year, Permian and Canadian crude producers have seen the discount between Brent and their crudes widen, mostly due to inadequate pipeline capacity.
Total global DRA sales amounted to $500 million and half of that is in the United States. Projected growth is about 8 per cent annually, according to Brian Watt, senior advisor at Innospec Inc.
“Anything that cost-effectively allows you to increase capacity or reduce the energy pumping those lines is going to look like a good investment,” Watt said.
By adding drag-reducing agent to the line, pipeline operators can reduce their pump pressure.
“We’re using a lot more DRA in the system,” Guy Jarvis, executive vice-president of liquids Calgary-based Enbridge told Reuters. He added it can “provide a bit of a boost” to flow, as well as reduce power bills.
Drag-reducing agent sells between $15 to $25 per US gallon.
According to Reuters, TransCanada Corp used DRA to maintain flows on the Keystone pipeline after restrictions were put in place following a leak in South Dakota late last year.
Data from the National Energy Board shows that while operating under 20 per cent pressure restrictions one month after the leak, throughput on Keystone was at 583,000 barrels per day, just 2 per cent below nameplate capacity.
And, in the first quarter of 2018, average flow on Keystone was above capacity, even though the restrictions were in place until May.
Citing commercial sensitivity, TransCanada did not comment on the use of drag-reducing agent.
Reuters reports that even though drag reducing agents have been around since the 1970s, pipeline operators, believing it game them a competitive advantage, have been quiet about its use. Few pipeline operators report how much DRA they use.
“Because the demand picture is shifting pretty rapidly, matching up supply and demand is critical to maintaining a profitable business,” Greg Jones, head of downstream products at General Electric unit Baker Hughes told Reuters.
“Everybody’s a bit cautious about not tipping their hand.”
On Monday, Innospec said it will build a new DRA production plant in Texas and LiquidPower Specialty Products Inc., doubled its manufacturing capacity late last year.
Private equity is getting in the game with CSL Capital Management funding Optum Energy Solutions’ 60 proposed 60 acre DRA plant in Oklahoma.
“We saw an opportunity for steady and growing demand for DRA for the next several years,” CSL founding partner Charlie Leykum told Reuters. He added the agent can help maintain volumes on aging pipelines that need to be carefully managed.
The use of DRA can also help pipeline companies save money by allowing them to use smaller pipe, according to Marina Kaplan, LiquidPower’s director of strategy, marketing and business development.
As well, pipeline companies operating in politically volatile regions are taking advantage of DRA. Patrick Bayat, chief executive of Partow Ideh Pars Co, a Tehran-based DRA producer tells Reuters that older pipelines in Iran are using DRA to boost or maintain output.
Donato Polignone, NuGenTech Chief Executive, told Reuters his company sells drag-reducing agent to Kuwait Oil Company.
“I’ve seen insane demand for this for the last three years.”