Oil Price Fall will Impact Revenues for Flow Control and Treatment Equipment
Revenue forecasts for pumps, valves, instrumentation, filters, turbines, etc. have to be reviewed due to the dramatic fall in world oil prices. Here are aspects to be considered:
Chronology
• Time from order date to revenue posting by flow equipment supplier.

Large capital equipment such as big pumps experience a multiyear revenue cycle, so 2015 revenues are in part based on 2013/2014 orders.

• Duration of oil prices at any one level:

o OPEC policies:

Could be permanent dissolution of OPEC or temporary.

o Chinese and world demand:

Chinese demand could slow down reducing oil consumption. However, lower prices will boost expenditures in the rest of Asia and total demand could rise as in the past. World GDP growth pegged at 3.6 percent next year.

o Shale oil/gas cost vs. oil price:

Some shale gas will be economic at less than $40/barrel oil but at $60/barrel oil possibly only two thirds of current production would be above break-even. At the low price point for shale, production stops and the price of oil then rises. This is one possible OPEC strategy.

o CTG and CTL cost vs. oil:

The cost of these alternatives sets the price of oil. At low coal prices synfuels are more attractive even with low oil prices.

Relationship to price of other fuels:

• Natural Gas

In some regions the price of natural gas is pegged to oil. In the U.S. this is not true. Natural gas prices are already low and may even increase this winter.

• Nuclear

Lower oil prices will further weaken the nuclear investment.

• Coal

Coal prices have fallen by more than 30 percent making coal still the fuel of choice in much of Asia. However, U.S. utilities assured of long-term low gas prices would replace up to 100,000 MW of coal-fired boilers.

Measurement metric:

• Dollars or world currencies

The oil price rise based on the increasing strength of the dollar has to be discounted. For example, if oil costs 50 Euros/barrel and it takes two dollars to equal one Euro then oil prices are $100/barrel. But at parity the price in dollars is only $50.

Impact of oil prices on the world economy:

• GDP and consumer expenditures and savings

Expenditures by consumers due to cheaper oil offset reduced purchases by oil suppliers. So the net effect is positive.

• Impact is unequal

Russia will be the most negatively impacted, but this could lead to instability and then conflict throughout Europe.

These potential impacts have been factored into adjustments in future revenue forecasts for pumps, valves, filters and instrumentation as follows:
McIlvaine Revenue Adjustments For Changes In Oil Price From $80/bbl - % Change From Present
Oil Price/bbl $60 $50
Industry 2015 2016 2015 2016
Combined Cycle Gas Turbine 1 3 1 5
Coal 0 (4) (1) (7)
Nuclear 0 (2) 0 (3)
Oil and Gas Production (5) (10) (8) (15)
LNG and Gas to Liquids (5) (15) (5) (30)
Subsea Processing (5) (20) (7) (25)
Shale Gas and Oil (10: (20) (10) (25)
Chemical Plant 2 8 3 10
Pharmaceuticals and Health Care 1 6 2 8
Iron, Steel and Mining 1 5 2 7

The main effect of steep reductions in the price of oil is a redistribution from oil producers, who receive less for the effort of extraction, to consumers who benefit from cheaper transportation and energy. This enables them to spend more money on other goods and services or to boost savings. The expenditures by the consumers exceed the reduction in expenditures by the producers creating a rise in net world consumption.
There are no precise consequences at any price level. Some projects will proceed at low prices and some will be uneconomical at relatively high prices. Consumption of steel for automobiles will increase, but consumption for oil well equipment will decrease. It is necessary to avoid false precision of the type displayed by the child given an Indian arrowhead. When asked how old it was, he replied: 201 years and one day. When queried about the precision he explained that it was 200 years old when given to him and he had owned it for one year and one day. False precision was on display during the last energy crisis.
McIlvaine has been following energy since 1974. Here is the optimistic outlook as contained in Exxon’s “The Role of Synthetic Fuels in the United States Energy Future," which appeared in the early summer of 1980. Synfuels were to be a 15 million barrel-per-day answer to the nation's thirst for energy. Cracking rocks laced with oil would provide 12 percent of our energy needs by the early part of the 21st century, and 8 million barrels would come from oil shale in Colorado's Piceance Basin and the Uintah Basin to the west. Another 7 million barrels would come from coal, mostly from the Powder River Basin in Wyoming and Montana, the Dakotas, and the Southern Rockies. As for workers, there would be one million people employed by the synfuels industry in Western Colorado. Wyoming would house nearly three times its current population.
The arc from excessive optimism to complete abandonment was only a few years. Here it is chronicled in McIlvaine newsletters.
McIlvaine Coal Gasification and Liquefaction Newsletter
Issue 1- September 15, 1979 Carter announces huge synfuels program with 2.5 million barrels/day of petroleum substitutes in just 12 years.
Issue 10 - June 15, 1980 Exxon spending $ billions on oil shale.
Issue 12 - August 15, 1980 $25 billion energy security act could lead to another $68 billion investment.
Issue 22 - June 15, 1981 Fluor/Cathedral Bluffs oil shale is $3 billion investment.
Issue 34 - June 20 1982 Lower oil prices but synfuels picture still bright.
Issue 40 - December 20, 1982 Oil prices could remain depressed for several years, some synfuels projects postponed.
Issue 60 - September 20, 1984 House cuts $5 billion from SFC budget.
There is the potential that there could be a repetition of this experience where the price of oil plummets and remains low for decades. Experience tells us that we were overly optimistic about a quick rise in oil prices. We were also optimistic about the willingness of the U.S. to pay for energy security. The situation is different this time around since the shale oil and gas is a proven technology with predictable costs. More important is that production can be reduced or accelerated quickly. The problem with the earlier experience was that billions of dollars and years of construction would have been needed to start producing the product. The shale industry can produce at various levels depending on the current price. So we are not likely to repeat the experience of the 1980s. But the bottom line is that our precision is no better than with determining the age of the arrowhead.
Revenue adjustments are being made to:
N028 Industrial Valves: World Market
N019 Pumps World Market
N031 Air and Water Monitoring: World Market
N024 Cartridge Filters: World Market
N049 Oil, Gas, Shale and Refining Markets and Projects
N043 Fossil and Nuclear Power Generation: World Analysis and Forecast
Boom in Industrial Purchases of Pollution Control Equipment in the U.S.
Chemical plants, refineries, pulp mills and cement plants are expanding and upgrading facilities in the U.S. They are also investing heavily to meet the latest environmental regulations. These activities are continually tracked in N032 Industrial Emitters published by the McIlvaine Company. (www.mcilvainecompany.com)
The shale boom has resulted in lower energy costs for U.S. industry. The result has been fewer imports and greater exports of chemicals, cement, steel and other products of heavy industry. The steep fall in oil prices over the last few months has eliminated some of the doubts relative to the long-term competitive position for the U.S. and will ensure a continuation of expansion plans.
The American Chemistry Council predicts that U.S. chemical output will increase by 3.7 percent in 2015. Growth is expected to reach 3.9 percent in 2016, and the consensus of the ACC's year-end report is that U.S. output will continue to expand well into the second half of the decade, exceeding that of the overall U.S. economy.
The air toxic regulations affecting industrial boilers, cement plants and incinerators will have a significant impact on 2015 outlays. Deadlines for compliance were 2016 with the potential for extensions into 2017. The extent of the outlays is exemplified by Archer Daniels Midland who is completing a program to install thermal treatment systems consisting of 34 RTO/RCOs and 6 flares. Scrubber purchases will result in a 60 percent SO2 reduction on 5 boilers and 20 additional scrubbers have been purchased for other processes. Eleven SNCR systems have been purchased for NOx reduction.
One of the big challenges is to purify and move gas produced in the U.S. to industrial plants. This is increasing the market for air pollution control for the gas turbines used with pipeline compressors. There is also a need for additional VOC recovery equipment.
The U.S. cement market grew close to 8 percent in 2014. The strong economy and the MACT regulations will contribute to growth in pollution control outlays in 2015.
For more information on Industrial Emitters, click on: http://home.mcilvainecompany.com/index.php/databases/2-uncategorised/93-n032
Headlines for Utility E-Alert –December 19, 2014
UTILITY E-ALERT
#1204 – December 19, 2014
Table of Contents
COAL – US

 Bonanza Power Plant will need to add Emissions Controls
 Duke to repair leaky Pipe at Coal Ash Dump near Charlotte
 Merom to install Activated Carbon Injection Systems

COAL – WORLD

 China to help Serbia build 350 MW Kostolac Power Plant Addition
 Hyundai Engineering to build 2x100 MW Tanjung Power Plant in Borneo, Indonesia
 GDF Suez to build 375 MW Power Plant in Mejillones, Chile
 Tiroda Power Project (Maharashtra, India) needs Approval from Wildlife Board
 CEZ to close Varna Power Plant in Bulgaria
 Bosnia to expand Tuzla Power Plant by 450 MW
 Waigaoqiao Power Plant said to be violating New Chinese NOx Standard
 150 MW Power Plant planned by Grange Power Ltd. in Punjab, Pakistan
 Alsons to build 105 MW Ramon Power Plant in Philippines
GAS/OIL – US

• Two New Power Plants approved for Minnesota
• Moundsville Power plans 549 MW Combined Cycle Power Plant in West Virginia
• Grand River Dam Authority to build 495 MW Power Plant at Grand River
• Tucson Electric to acquire Part of Gila River Power Plant
• Towantic Energy Center plans to Increase Power Production
• GE Gas Turbines for Calpine’s 760 MW York 2 Energy Center
• PSNM issues RfP for 150-200 MW Expansion at San Juan
GAS/OIL – WORLD

• Mass Global, Iraqi Banks to fund $3 Billion Power Plant built by Turkey's Enka in Iraq
• Isolux and Samsung C&T to build 383 MW Bibiyana in Bangladesh
• The Philippines’ Ilijan Power Plant to test firing Diesel
NUCLEAR

• NY Court says Indian Point Nuclear Power Plant exempt from State Coastal Protection Program
• Takahama Power Plant in Japan could come back Online in 2015
• India to Identify New Site for Russian Built Nuclear Power Plants
BUSINESS

• Chinese Air and Water Monitoring Revenues to Exceed $5 Billion by 2019
• URS AND ARVOS Group market SBS Injection along with LJUNGSTRÖM Air Preheater to improve Power Plant Efficiency
• Graymont to enter New Zealand Market
• Metso to provide Automation to Power Plant in Hungary
• SCR Coal-fired Catalyst Sales to exceed $1 Billion By 2017
• K-Power Plans Power Improvements in Pakistan
• Fuel Tech to provide ESP Retrofit to comply with MATS and SNCR Systems
• Oil Price Fall will Impact Revenues for Flow Control and Treatment Equipment
HOT TOPIC HOUR

• Boiler Feedwater Purification has to deal with varying Water Quality – Hot Topic Hour December 18
• Media Selection for Coal-fired Boilers will be the Hot Topic January 8, 2015
• Upcoming Hot Topic Hours
For more information on the Utility Tracking System, click on: http://home.mcilvainecompany.com/index.php/databases/2-uncategorised/89-42ei
Media Selection for Coal-fired Boilers will be the Hot Topic January 8, 2015
The webinar on January 8th will focus on media selection for coal-fired boilers. It will be free of charge for filter equipment suppliers, media specifiers and power plants. There will be a charge for filter element, media and fiber producers.
This webinar will be part of a comprehensive initiative to help purchasers and specifiers make the best media selections. There are many potential unique determinations. For example, 6 fiber types x 4 media types x 6 plant specific conditions x 6 gas conditions x 3 different element shapes x 4 major type cleaning designs = 10,368 different determinations.

fiber pps p84 ptfe glass ceramic acrylic
Media Non-woven Membrane
laminate Woven Sintered
Plant conditions Emission
limit Area available Fan limits Mercury
removal SCR FGD
Gas conditions Flyash load Sulfuric acid Sulfates Activated carbon Temperature Other acid gases
Bag shape Tubular Pleated Cartridge
Cleaning High volume, medium
pressure air High pressure air Reverse
air Shaker
There are controversies over the maintenance of membranes, the efficiency of non-wovens, the new 5 mg/Nm3 limits in China, installing elements in an existing ESP, sulfuric acid corrosion, activated carbon bleed through with absorbed mercury, the ability to handle heavy sulfate loads, the cost of pleated elements and the influence of cleaning type on media selection.
The options as refined in the webinar will then be posted in Power Plant Air Quality and will be continually available to power plants around the world. An article with highlights will appear in Filtration News. Further review will take place at the AFS Spring meeting.
Panelists will include individuals from Testori, Donaldson, Clear Edge and ETS.

Click here to view schedule and register
Hot Topic Hour Registration
On Thursdays at 10:00 a.m. Central time, McIlvaine hosts a 90 minute web meeting on important energy and pollution control subjects. These Webinars are free of charge to owner/operators of the plants. They are also free to McIlvaine Subscribers of Power Plant Air Quality Decisions and Utility Tracking System. The cost for others is $300.00 per webinar.
See below for information on upcoming Hot Topic Hours. We welcome your input relative to suggested additions.
DATE SUBJECT DESCRIPTION
January 8, 2015 Fabric Selection for Hot Gas Applications More Information

January 15, 2015 Valves for Gas Turbine and Combined Cycle Plants More Information

January 22, 2015 FGD Components Including Blowers/Compressors More Information

January 29, 2015 MATS Compliance Choices More Information

February 5, 2015 Gas Turbine Regulatory Drivers More Information

February 12, 2015 Coal Gasification Air Pollution Control More Information

February 19, 2015 Mercury Measurement and Capture More Information
February 26, 2015 Power Plant Wastewater Treatment More Information
March 5, 2015 Dry Scrubbing and DSI More Information
Click here for the Subscriber and Power Plant or Cement Plant Owner/Operator Registration Form
Click here for the Non-Subscribers Registration Form
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You can register for our free McIlvaine Newsletters at: http://home.mcilvainecompany.com/index.php?option=com_rsform&formId=5

Bob McIlvaine
President
847-784-0012 ext 112
rmcilvaine@mcilvainecompany.com
www.mcilvainecompany.com