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Structural Pipe: Where we are at and where will it go?
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Contrary to common perceptions, recycling and repurposing have been common practice in the oilfield, if you know where to look. Nowhere has this been more implemented than repurposing used OCTG for Structural applications.
The economics and environmental benefits of this practice go hand in hand. Not only has used pipe typically been plentiful which has kept used structural steel at a great price in comparison to new, but repurposing used steel prevents the need for new steel to be generated, saving an average of 1.4 to 1.9 tonnes of CO2 in greenhouse gas emissions according to the IEA and World Steel Association.
However as we transition to a post Covid world, the landscape for structural tubing has greatly changed. The shockwaves of -$37.63/bbl are still reverberating, and even though oil prices have definitely recovered, the new capital discipline being practiced by the oilpatch (which is revolutionary in itself) has created the perfect storm for the supply of used tubing.
To break it down: during covid, drilling and workover activity basically shut down. As the economy began to recover, the demand for used tubing quickly outstripped the amount of pipe that existed on the ground. This caused a shortage of pipe, and without rig activity to keep the supply replenished, the cost of structural tubing began to climb higher and higher. One would expect higher oil pricing (right at $75/bbl WTI as of this writing) to spur an onslaught of drilling / workovers, but probably for the first time in history of the oilfield that is not the case.
Most oil companies depend on outside capital to operate, and investors are hesitant to put money in. This lack of financing for new wells, and especially workovers, has severely restricted the amount of used steel being pulled out of the ground. The unique situation this presents makes it had to forecast where the turning point is, economically speaking.
But looking outside the economic sphere, the Biden administration plans to invest 16 Billion in Plugging Orphan and Abandoned oil and gas wells. Although the actual dollar amount is subject to change, the bill currently has strong bipartisan support and could pass both houses. This would definitely be a shot in the arm to get quite a bit of tubing out of the ground.
Although the number is hard to pinpoint, there are estimates of 2 to 3 million abandoned and orphaned wells in the US. Drilling companies in the 1860’s didn’t have the best records, and this practice over the years until regulatory agencies began is the reason for the vagueness. Needless to say, that’s a whole lot of steel out there sitting idle in the ground that could be repurposed.
There are always other economic factors that government intervention brings, but for those needing better pricing for structural pipe this is surely a promising development on the horizon.
Additional Websites used for research:
https://welldonefoundation.com/
https://www.cbsnews.com/news/plugging-abandoned-oil-gas-wells-jobs-environment/
https://www.youtube.com/watch?v=iAf2k9b0drY
https://qz.com/1994440/texas-has-a-cautionary-tale-for-bidens-infrastructure-plan/
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