Energy Capital-The Magazine-January-February 2021-Edition 01 by energycapital

FOR INFRASTRUCTURE DEVELOPERS, INVESTORS AND INDUSTRIAL USERS JAN-FEB 2021, ISSUE 01

Infrastructure Projects: Following the Money • Energy Investment Trends

• Improving Asset Efficiency: best practices • Gas Exports, a bright spot for Midstream growth INSIDE THIS ISSUE: look for our video interviews

• Offshore Unit Reliability

Video Interviews

Energy Capital Magazine ANALYSIS 8 Energy Capital Follow the money: Where is the energy capital going in the next five years? LNG, clean energies, and downstream projects are currently at the center of major infrastructure investments in North America. Will energy capital flows continue on this path by 2025?

26 Todd C. Frank & Martin Van Sickels Commoditized Risk: The future of the Engineering & Construction industry As cost became the prime evaluation criteria, Engineering & Construction (E&C) companies have evolved to focus singularly on that goal regardless of the long-term impact in the industry.

14 Christine Spiro Post-2020: What does the future hold for energy investment? With all the COVID-19 uncertainty, where do energy companies invest in 2021? Two areas stand out: sustainability and reliability.

POWER

18 Energy Capital Could the USMCA protect your energy investments? Energy investors have wondered if under USMCA their investments can be protected from violations in North America. Discover how can this frameworkâ&#x20AC;&#x2122;s provisions protect your capital. 22 ISME Strengthening the North American Energy Supply Chain. How the private sector can make the difference The energy sector is transforming itself and adapting to new rules. Competitiveness and economic growth will depend on how these new challenges are addressed. 2

32 Pierre Alarie Hydroelectric power assets Hydropower remains the largest renewable energy source in Mexico. Clean energy and renewables have been resilient to the COVID-19 crisis, but not to policy uncertainties. 36 Andrew Gilligan Realizing potential: How Sol Systems transformed unused land into an important solar project for Maryland When building a large-scale solar array within a community, transparency and communication are crucial to keeping your neighbors informed and comfortable. 40 Calixto Mateos-Hanel Infrastructure financing that strengthens the US-Mexico relationship Since 1994, NADBank has sought to support the development of infrastructure projects to advance the wellbeing of the people on the US-Mexico border region.

Table of Contents

Energy Capital Magazine

44 Laurie Fitzmaurice The potential for climate progress in Latin American Covid recovery plans While many countries are looking to low carbon investments, it is unclear if Latin America will be able to seize the opportunity of post-Covid economic plans.

MIDSTREAM

UPSTREAM 60 Darren Wesneske Offshore units lifecycle management â&#x20AC;&#x201C; safety and operational reliability review For addressing both safety and operational reliability, the offshore assets are always on the top of any major oil company. The maintenance of critical equipment over time becomes crucial.

48 Jesus Cordoba Dominguez Veracruz Refined Products Storage Terminal The Energy Reform was a decisive step on the path to modernize the Mexican energy sector. It is in this context that IEnova began the design of the Veracruz Refined Products Storage Terminal. 52 John Hilfiker Gas exports, a bright spot for midstream growth Over the next five years, LNG export demand will more than offset an anticipated fall in the power sector gas consumption. This will likely drive future midstream growth. 56 Matthew Small Meeting RNG demand with power-to-gas technology The RNG business has seen significant growth in recent years. Buyers seeking low carbon solutions often find value in RNG, based on its ease as a substitute for natural gas.

DOWNSTREAM 64 Geoff Ryan The golden age of information management for Advanced Work Packaging in Capital Projects The industrial construction industry has a cavalier history of construction behind, and the age of Advanced Work Packaging (AWP) is ahead.

INFRASTRUCTURE 68 Stephen Mulva Decisive leadership in trying times After nearly four decades, the purpose of CII is highly critical and extremely valuable: innovate and improve its members’ viability and reach to make a difference around the world.

INTERVIEW 72 Blake Moret, Aldo Santillan & Miroslava Fuentes Automation strategies in the face of the industrial sector’s reconstruction The outlook for the industry’s future is being reassessed as a result of the pandemic. Therefore, enterprises have sought strategies to build a more sustainable world. 76 Joel Moxley GPA Midstream Association's vision for 2021: adaptability to keep things going Throughout 2020, the GPA Midstream Association faced the challenges of COVID-19. The most crucial and overarching aspect of the pandemic has been the adaptation to new practices.

OPINION 80 Aldo Santillan Why do innovation and technology matter? Not every company visualizes the importance of innovation, automation, digitalization, and connectivity. However, nowadays, technology and innovation are essential.

Contact Information MANAGERS Rubi Alvarado General Manager Aldo Santillan Managing Director & Editor in Chief Noe H. Saenz Editorial Board Chairman DESIGN Ignacio Ortiz Art Director

Gonzalo Rivas Senior Designer

Cristian Martinez Digital Strategy

Ivan Ledezma Digital Strategy

EDITORIAL STAFF Ana Tafoya Editorial Team Coordinator Eduardo Medina Editorial Analysis SALES & MARKETING Javier Galla Data Mining Energy Capital The Magazine is published by Capital Media Group LLC © Capital Media Group LLC 2020. All rights reserved. Digitalized and distributed by Capital Media Group LLC. Capital Media Group LLC accepts no responsibility in respect of opinions, products or services obtained through advertisements carried in this magazine. www.energycapitalmedia.com

Editorial Letter

The first cross-sec energy magaz Dear Reader Welcome to the first edition of ENERGY CAPITAL THE MAGAZINE. We are excited to have you as a reader and look forward to bringing you business stories and interviews with the ones making things happen in the energy industry. We will keep you 'in the know' of new developments, capital projects, and existing assets. And more importantly, we connect the whole supply energy chain with energy users.

WHY ENERGY CAPITAL?

ecause we want to help energy infrastructure developers, investors, and their end customers (industrial users) succeed in developing, building, and operating capital assets. We understand that making an infrastructure asset, in reality, means starting a new business from scratch, including all the challenges related to business development, project planning, funding, site selection, regulations, project execution, commissioning, operations, understanding local cultures, and doing business. The energy industry is very fragmented, as it is comprised of multiple sectors and subsectors that are siloed, so we are committed to linking all the actors involved. We know how cross-sector knowledge makes companies and professionals much more competitive and adaptable when they are connected. Finally, because our energy industry is transitioning , and it is critical for our infrastructure -and all supply chains involved- to be ready, adaptable, reliable, resilient, and sustainable.

ctor zine Therefore, our mission is to inform and connect the main stakeholders of energy infrastructure to enable more business and project developments that benefit local communities. And for that reason, we are the first magazine for infrastructure developers, investors, and industrial users, across all energy sectors: power, upstream, midstream, and downstream. Through your reading, you will find that our content pieces are short and to the point, with stories and executive summaries that can be read in less than 10 minutes, focused on providing you practical information that can be used for business planning, client development, project management, and asset operations. In 2021, we will center on North America, covering new business developments, capital trends, technology, and regulations. We will also put the spotlight on new and ongoing projects, and on operating infrastructure assets, for you -and your customers- to learn about. Again, welcome and enjoy the edition! We look forward to helping you succeed. The Energy Capital Team

Analysis

Follow the money: Where is the energy capital going in the next five years? By Energy Capital www.energycapitalmedia.com

NG in the United States, clean energy in Canada, and downstream projects in Mexico are currently at the center of major infrastructure investments. These trends answer to international markets, energy transition commitments, and efforts to achieve energy self-sufficiency. Will energy capital flows continue on this path by 2025?

IN THE US: THE FOCUS IS ON THE LNG MARKET On one hand, major projects in the United States are currently focusing on developing liquefied natural gas (LNG) infrastructure for export

activities. On the other, there are several efforts in clean energy. Many firms are now working on LNG projects for export activities, each accounting for an investment ranging from $10 to 45-billion. Their production capacity is expected to be up to 7 to 20 million tons per annum (mtpa). Here are some projects in this regard: Corpus Christi LNG Export Terminal (Train 3) by Cheniere Energy • Expected in-service date: 2021 (Train 1-2 already on commercial operation) • Authorized export amount: 5.32 mtpa • Location: Texas Golden Pass LNG (Trains 1-3) by Qatar Petroleum, Exxon Mobil, and Conoco Phillips • Expected in-service date: 2024-2025 • Authorized export amount: 5.20 mtpa • Location: Texas Calcasieu Parish LNG Export Facility (Trains 1-10) by Venture Global LNG, Inc • Expected in-service date: 2023 (Trains 1-5) and 2024 (Trains 6-10) • Authorized export amount: 6 mtpa • Location: Louisiana In 2018-19, a wave of investment in liquefaction projects delivered additional export capacity in North America. Early in 2020, the Energy Information Administration (EIA) still expected global LNG demand to grow at an annual growth rate of 5.8% by 2027. After a 4% drop in global natural gas demand in 2020, the International 9

Analysis

Energy Agency (IEA) foresees it to progressively recover in 2021, returning close to its pre-crisis levels in mature markets. However, the 2020 crisis will still have medium-term repercussions by 2025. In this sense, slower growth in gas demand is expected to result in an oversupply of liquefaction capacity additions over the next five years. Nevertheless, and according to IEA, the Asia Pacific region will still account for over half of incremental global gas consumption in the coming years. According to 2019 forecasts of the Asian Development Bank, this region will increase its LNG consumption at an annual rate of 2.4% until 2030, faster than the expected global average rate of 1.5%. This demand will be mainly driven by China, India, and emerging Asian markets. 10

Therefore, LNG imports will be highly dependent on these countries' future recovery policies. LNG consuming and supplying countries will continue to diversify over the next ten years. For instance, Europe should return to its pre-2019 consumption levels over the next five years. Additional pipeline trade is expected to come from the progressive ramp-up of export infrastructure in Eurasia. In this context, companies in the sector should adopt diversification in services and customers shortly. When it comes to electricity, the United States is undergoing a shift towards the energy transition. Solar, wind, and biomass infrastructure projects are booming. Here are some examples of notable projects: Black Rock Wind Farm Project by AEP Energy and Toyota (Wind) • Expected operational date: late 2020. • Expected capacity: 110 megawatts (MW) • Location: West Virginia

Additionally, the organization predicts long-term trends in increasing solar and wind electricity generation for 2050.

IN CANADA, THE TRANSITION IS KEY Energy capital projects in Canada are currently focused on developing sustainable, reliable, and low-carbon infrastructure. In this regard, here are some examples of large companies that are cross-financing renewable projects:

Roadrunner PV Solar Park by Enel Green Power North America (Solar) • Expected operational date: late 2020 • Expected capacity: 110 MW • Location: Texas Wild Springs by Geronimo Energy and Electric Power Cooperative (Solar) • Expected operational date: 2022 • Expected capacity: 128 MW • Location: South Dakota North Fork Bioenergy Plant by EQTEC (Biomass) • Expected operational date: 2021 • Expected capacity: 2MW • Location: California According to the EIA, in the span of 2018-2021, the US is adding 72 gigawatts (GW) of new wind and solar photovoltaic (PV) capacity. Globally, the nation ranks third in renewable energy production.

Trans Mountain Expansion Project (TMX-Pipeline) by the Canada Development Investment Corporation • Expected in-service date: 2022 • Expected capacity: 300-890 thousand barrels per day (MBPD) • Location: Alberta-British Columbia. Note: Since 2019, the project must reinvest its earnings (500 million dollars a year) in Canada's clean energy transition. Pacific Future Energy Refinery by Pacific Future Energy • Expected in-service date: 2021 • Expected capacity: 200 nearly solid bitumen MBPD • Location: British Columbia. Note: Its owners' goal is to build the greenest bitumen refinery in the world Some companies are also transitioning into the clean power market through upgrades to their electricity transmission and distribution assets. Some noteworthy projects include: 11

Analysis

Keeyask Hydropower Generating Station by Manitoba Hydro and 4 Manitoba First Nations • Expected in-service date: 2021 • Expected capacity: 695 MW • Location: Manitoba Old Crow Solar Array Project by ATCO Electric • Expected in-service date: 2021 • Expected capacity: 900 kilowatts (kW) • Location: Yukon Travers Solar Project by Greengate Power • Expected in-service date: 2021 • Expected capacity: 400 MW • Location: Alberta 12

In its energy transition commitment, the Canadian government has said the country will not phase out fossil fuels overnight. However, various demand forecasts show that the use of renewable energy will increase steadily. According to 2019 data, Canada had a higher share of renewables (16.3%) in its energy supply chain than most OECD countries (10.8%). Additionally, the nation ranks seventh in global clean energy production.

IN MEXICO, LOOK TO STATE-OWNED PROJECT OPPORTUNITIES: Energy capital trends in Mexico are going to the development of upstream and downstream infrastructure and combined-cycle gas plants. Through various projects in this regard, the current Mexican administration seeks to achieve an energy self-sufficiency goal.

A well-known project is the Dos Bocas Refinery of Petróleos Mexicanos (PEMEX), located in Tabasco. The government expects this $ 8 billion refinery to be in service by 2022, with a capacity of 340 MBPD. Other PEMEX projects are the exploratorydrilling activities and infrastructure additions to the existing facilities of Ku-Maloob-Zaap and Crudo Ligero Marino in Campeche and Tabasco, with a capacity of 800 and 78 MBPD each. Regarding electricity, the Federal Electricity Commission (CFE) also has infrastructure modernization projects. For example, the upgrades to the Agua Prieta and Empalme combined-cycle generating stations in Sonora with a capacity of 400 MW ($ 1 billion) and 700 MW ($ 2 billion) each. Despite the current uncertainty related to the country's centralization of energy activities, some contractors are already seizing development, execution, and operation opportunities within PEMEX and CFE. Most of these contracts were subscribed within the framework of the 2013 Energy Reform. A few examples are: • Diavaz Offshore: PEMEX upstream and midstream facilities’ operation (full and shared) in Tamaulipas, Veracruz, Chiapas, Puebla, Monterrey and San Luis Potosí • Petrobal Upstream Delta & Fieldwood Energy: PEMEX upstream facilities' operation for shallow and deepwater activities in Campeche • ENI Mexico, Qatar Petroleum, Lukoil, Citla Energy: PEMEX facilities drilling and pipeline operations in Tabasco. Although public entities are tending to centralize energy activities, industrial leaders can provide the knowledge and resources to

achieve Mexico's self-sufficiency goals. The technological lags of PEMEX and CFE would, in fact, require an economical and technical commitment with private companies.

FINAL REMARKS Although energy capital projects follow different paths in North America, a regional perspective is crucial. According to the information shared by Energy Capital, companies in the region can take advantage of infrastructure projects' capital opportunities. Whether the focus is on the LNG market, renewable energy, or energy autonomy efforts, the exchange of experiences will provide energy developers, investors, and suppliers with a comprehensive view of business opportunities and innovative solutions to offer. 13

Analysis

Post-2020: What Does the Future Hold for Energy Investment? By Christine Spiro Energy and Sustainability Manager â&#x20AC;&#x201C; Our Energy Manager info@ournergymanager.com www.ourenergymanager.com

Video Interview

In many ways, 2020 has been like a rollercoaster - one that ends against a brick wall - for most of the world.

Analysis

he energy industry has fared even worse, with excess supply driven by a production race between Russia and Saudi Arabia, above-normal temperatures, and a sudden, steep drop in demand brought on by COVID-19. With all this uncertainty, where do energy companies invest their resources in 2021? We see two main areas: sustainability and reliability.

Global primary energy consumption by region (2010-2050) quadrillion British thermal units 1,000 900

history

projections non-OECD

800 700

Asia

600 500

Middle East Africa Americas Europe and Eurasia

400

300 200 100 0

2010

2020

2030

2040

2050

OECD (Organization for Economic Cooperation and Development)

Sustainability Consumers are rewarding companies that embrace sustainability practices, and companies are responding by setting zero emissions and carbon neutrality targets with aggressive deadlines. In the US, states have mandated similar goals. Throw in COVID, and companies are looking for ways to boost revenue and cut costs everywhere. What does this mean for energy investors?

CONSUMERS ARE REWARDING COMPANIES THAT EMBRACE SUSTAINABILITY PRACTICES, AND COMPANIES ARE RESPONDING BY SETTING ZERO EMISSIONS AND CARBON NEUTRALITY TARGETS WITH AGGRESSIVE DEADLINES. IN THE US, STATES HAVE MANDATED SIMILAR GOALS. 16

We anticipate seeing continued investments that reduce energy usage, including lighting retrofits and equipment upgrades. From a renewable standpoint, we see companies implementing renewable technologies, such as solar PV panels. To comply with state mandates and customer expectations, we expect utilities to continue adding renewable generation and providing incentives for their customers to â&#x20AC;&#x153;go green.â&#x20AC;? Finally, we see energy companies investing in renewable energy assets and

exploring new technologies to expand the renewable portfolio, such as hydrogen and battery storage.

Reliability

As we are currently witnessing in the US, a change in leadership can significantly impact regulations. The project that looked favorable at the time of approval may not be economical - or even approved - if the rules change. The second area of concern involves unforeseen consequences of trading one form of energy for another. An example of this is using batteries to store excess power, which addresses sustainability unless more emissions are produced in manufacturing the batteries. Similarly, the components used to make batteries are currently sourced from other countries, making the option less reliable - and potentially less attractive. Now more than ever, energy is an essential component of daily life, and companies will find ways to invest in this resource. Looking forward, no matter where companies choose to invest, the ability to adapt to a changing environment will continue to be essential for success.

To operate, companies need uninterrupted access to energy. While the world has made great strides in adding renewable energy, we are not at the point where we can replace all carbon-based fuels. We have seen the consequences of surging ahead too quickly in California last summer, where insufficient power supply and transmission triggered rolling blackouts. Even service sector companies are vulnerable. In 2018, Delta Airlines had to cancel many flights and lost $150 million in revenue when a power outage shut down its reservations center. Therefore, we anticipate companies making investments that make them less susceptible to energy outages, including solar retrofits and cogeneration. We also see energy and utility companies making investments to minimize interruptions, GRAPH 2 Expected Evolution of Demand for Natural Gas, by Region such as adding or upgrading transmission and distribuUnits: Tm / yr tion systems, adding battery 5 storage projects, installing NAM 4 LAM microgrids, and developing EUR SSA 3 additional renewable fuel MEA NEE sources like hydrogen. CHN 2 INF SEA While this looks like the OPA 1 current path for investment, 0 there are other factors to 1980 1990 2000 2010 2020 2030 2040 2050 consider. The first is geoSource: EIA (HISTORICAL UNTIL 2019) ,DNV (FORECAST) political risk. 3

Analysis

Could the USMCA protect your energy investments? By Energy Capital Team www.energycapitalmedia.com

n July 2020, the United States-Mexico-Canada Agreement (USMCA) became active. One major concern surrounding this North American economic integration framework has been the removal of an Investor-State Dispute Settlement (ISDS) Mechanism. This is a significant move from the previous North American Free Trade Agreement (NAFTA). Energy investors have wondered if under USMCA, with supposedly lower provisions for investment protection, their money can be protected from violations. With the introduced changes compared to NAFTA, these concerns are not surprising. The 18

current Mexican government's efforts in taking back the energy sector's state control have also increased the uncertainty.

USMCA INVESTOR-STATE DISPUTE SETTLEMENT: A NEW SCENARIO Unlike NAFTA, USMCA does not directly give foreign investors the power to make arbitration claims for mistreatment against the host country. Now, they will need to resort to a domestic court and their governments' guidance first. Investors under USMCA can start claims by 2023; this is within three years of NAFTA's expiration.

What remains of NAFTA's ISDS mechanism (Chapter 11, which protected foreign investors from unfair treatment or expropriation by host countries) is found in USMCA's Chapter 14. This change preserves an automatic dispute resolution framework only between Mexico and the U.S. For Mexican and Canadian investors to resolve their disputes, they can resort to the Comprehensive and Progressive Agreement of Trans-Pacific Partnership (CTPP) of 2018. Between Canada and the U.S., there is no such mechanism. The Agreement separates investors into two main categories: privileged and non-privileged. Investors from the U.S. and Mexico can apply for

a privileged ISDS regime in five "covered sectors": oil and gas, power generation, telecommunications, transportation, and infrastructure. The same NAFTA's jurisdictional hurdles and waiting periods apply for these investment sectors. A less favorable regime applies to all other investors under the USMCA, who must request arbitration proceedings in local courts for 30 months with State-to-State guidance before submitting their litigations to a regional mechanism. However, Chapter 14 also requires non-privileged investors to raise their claims in a period no longer than four years. In this context, such a limitation means these investors would 19

Analysis

only have 18 months to claim for arbitration in their disputes. Non-privileged investors are subject to a limited number and types of ISDS claims - direct expropriation, National treatment, and Most Favored Nation treatment. Nevertheless, a bright spot for both the privileged and non-privileged regimes is the introduction of provisions on transparency and panel selection. USMCA requests arbitrators to comply with the International Bar Association Guidelines on Conflicts of Interest in International Arbitration, 20

thus forbidding them from acting in any capacity under another pending arbitration.

ENERGY UNDER THE USMCA FRAMEWORK Unlike NAFTA's Chapter 6 on Energy and Basic Petrochemicals, the USMCA does not include an energy-specific chapter. Instead, it has energyrelevant provisions in Chapter 14: Investment, Chapter 15: Cross-border trade in services, and Chapter 2: National treatment and market access for goods.

USMCA maintains the same NAFTA's provisions on rules of origin and a zeropercent tariff for energy goods such as natural gas and derived products. Additionally, the previous rules for renewable energy components' investing and trading remain the same under USMCA. This regulation would allow regional investment in wind, hydroelectric, solar, geothermal, and bioenergy. Nevertheless, USMCA also includes significant changes to consider, like the removal of NAFTA's proportionality requirement, allowing the U.S. and Canada to restrict their energy exports in times of scarcity. Another change is the introduction of the supplementary letter between the U.S. and Canada (US-Canada Side Letter), which encourages bilateral cooperation and transparency in the energy sector. It supports non-discriminatory and non-preferential conduct between Parties and promotes the right to appeal certain decisions through an independent regulatory authority.

CONTROVERSY WITH CHAPTER 8 Mexico's Chapter 8 on its inalienable ownership of hydrocarbons establishes the country's right to modify its legislation on foreign investment in the oil and gas sector at any time. This Chapter's interpretation has generated conflicting opinions among investors. For instance, some people in the industry have understood that, under this Chapter, Mexico has no obligations in the hydrocarbons sector with respect to its U.S. and Canadian counterparts. However, experts in the legal field have pointed out that this Chapter only recognizes the existing regulatory framework for hydrocarbons in Mexico.

More importantly, the text obeys the principle of sovereignty in International Law, which establishes that countries can modify their national laws and regulate their industries in the way they see fit. This Chapter does not mean Mexico should not comply with its USMCA obligations, specifically in the energy sector. Nor does it imply that it may violate established investment agreements. Instead, Chapter 8 is more symbolic and discursive than binding. For U.S. investors in Mexico, the protection will remain in effect in the country as long as they have signed their contracts through a public tender, as established by the 2013 energy reform. Under the USMCA, these agreements would fall into the category of government contracts.

CONCLUSION With differentiated provisions (between privileged and non-privileged investors), USMCA regulations can protect energy investments. Potential expropriation, or violations of established energy agreements, are issues that can be claimed under a new ISDS scheme independently of the nvestment regime. In the same way, Chapter 8 of the Agreement should not raise significant concerns. Mexico has the right to modify its energy legislation at any time. However, such changes should not violate the country's international obligations. This means the Mexican government can be legally indicted in case of breaking previously subscribed investments. Although USMCA has considerable differences from NAFTA's legal framework, energy investors can resort to different mechanisms to ensure their investments' security. To the extent that these mechanisms are encouraged, it will be possible to identify opportunity areas in the USMCA regional legislation, and strengthen North America's economic integration process. 21

Analysis

Strengthening the North American Energy Supply Chain How the private sector can make the difference By ISME https://isme.clubexpress.com

he world is starting a new decade, which will be marked by a deep economic crisis and increased uncertainty. Managing these circumstances will be a priority for governments and the private sector. The disruption of COVID-19 and the measures deployed to respond to the new environment have impacted all regions and societies. In this context, a renovated trade treaty between the United States, Mexico, and Canada, has entered into force, with the redefinition of supply chains and trade patterns at its core. Moreover, new consumption trends are emerging while a new sustainable agenda is shaping. Industries are accelerating their transition 22

to comply with new environmental, governance, and social standards. Under this scenario, the energy sector is also transforming and adapting to the new rules. In this new world, competitiveness and economic growth will depend on how these new challenges are addressed. Therefore, energy policy and trade are key drivers for industrial success, which in turn will be material for economic recovery in a postCOVID North America. Achieving a strong and integrated North American energy supply chain is of critical importance for the three countries to remain globally competitive as a block.

EVEN THOUGH THE USMCA NEGOTIATIONS REINFORCED THE ALREADY HIGH INTEGRATION LEVEL BETWEEN THE THREE COUNTRIES, DEVELOPING A NORTH AMERICAN ENERGY AGENDA REMAINS A COMPLEX ISSUE TO TACKLE

Even though the USMCA negotiations reinforced the already high integration level between the three countries, developing a North American energy agenda remains a complex issue to tackle, especially for government agencies with limited administration terms and changing priorities. “The opportunity is for the private sector to take the lead. Companies, organizations, and professionals can greatly benefit each other by becoming more integrated -as a community,” said Noe H. Saenz, president of the Houston-based non-profit organization, International Society for Mexico Energy (ISME), and associate at Burns & McDonnell. In this regard, ISME organized a Trilateral Taskforce in mid-2020 to plan and organize a series of trade webinars 23

Analysis

THE OPPORTUNITY IS FOR THE PRIVATE SECTOR TO BECOME MORE INTEGRATED -AS A BUSINESS COMMUNITY- TO FACILITATE TRADE BETWEEN THE THREE COUNTRIES

to identify a series of ideas and to start conversations between stakeholders on how to strengthen the energy supply chain as a North American block. “The webinar series were aimed to find common ground and to generate proposals for solutions; the idea of further integration has yet to be reconciled,” said Karla Mendoza, founding partner of the public affairs firm, Agile, and ISME’s public affairs advisor. “The relationship between the three countries will necessarily evolve and change as a result of the global post-pandemic economy, and the private energy sector will play a key role in helping to set an agenda, proposing ideas for policy development, and infusing a spirit of integration in the region,” said Andrea Calo, Mexico Market Intelligence Director of Customized Energy Solutions (CES) and ISME’s Membership vice president. The natural question then is, who should start? And how and where to begin? This is where ISME has stepped up, by organizing its trilateral taskforce and by managing the 2020 trilateral trade webinar series that will continue in 2021. “The webinar series will continue promoting knowledge-sharing and collaboration across the energy supply chains between the three countries,” said Sandy Basler, ISME’s Administration vice president and chairwoman of its Trilateral Committee. ISME will be presenting the three main conclusions from the 2020 trilateral series in a Free Webinar on Wednesday, January 27th, at 12 pm central time. You can register at www.ISMexicoEnergy.org 25

Analysis

Commoditized Risk: The Future of the Engineering & Construction Industry By Todd C. Frank Regional Marketing Manager, Burns & McDonnell

By Martin Van Sickels President, MVS Consulting LLC, and Executive Director, Rice Global E&C Forum

re We on a Sustainable Trajectory?

In the late 1970s, a shift occurred in industrial engineering and construction (E&C), the ripples of which continue today. Plant "owner" organizations started to focus their E&C services procurement efforts primarily on price. Over time, this approach has commoditized the E&C industry and significantly impacted the way it operates, more so with each economic downturn. 26

Video Interview

The oil crash of the mid-1980s, the Asian Economic "Flu" of the late 1990s, the 2008 U.S. foreclosure crisis (which led to the Great Recession), and most recently, the COVID-19 pandemic, have been key major events that have further reinforced this culture of commoditization. In order to stay competitive, E&C's have sought ways to optimize workflows and use technology to improve project

Analysis

execution efficiencies while concurrently seeking lower labor costs by driving engineering and design work overseas using "high-value" centers. The economic principle known as Goodhart's Law is best summarized this way: "When a measure becomes a target, it ceases to be a good measure." As cost became the prime evaluation criteria, E&C's have evolved to focus singularly on that goal regardless of the long-term impact on our industry.

Technology "Enablers" Advances in computer systems allow for faster, more accurate engineering calculations and designs that can be built entirely virtually. Technology improvements allow engineers to rely more heavily on tools. Unfortunately, these tools avoid applied engineering's crucial learning steps, particularly for young engineers, necessary to know if these yield value outputs. If a human error occurs in either programming or data input and the computer's answer is wrong, an engineer will not intuitively recognize that there is a problem. The same is true of having field experience. Engineers who have been to the types of facilities they are designing 28

or have been on actual construction projects to see how the design comes together are inherently better engineers and can identify and correct flaws during the project design phase. This results in avoiding the costly correction of errors during construction. Unfortunately, many young engineers today havenâ&#x20AC;&#x2122;t had the opportunity to work onsite, primarily due to a lack of entrants into the industry in the late 1980s through the early 2000s, along with the timing of recent downturns which allowed owners to demand E&C firms assign only experienced engineers to their projects. Big data, 5G, artificial intelligence, and advanced robotics are all advancing technologies that will set the next generation stage. These technologies will likely re-shore many of these jobs to the U.S. (albeit less will be required). Still, this will also make many engineers merely stewards of data, telling IBM's Watson what they want while the AI-driven computer entirely designs it? Will this stifle creativity and innovation? And can robots then build it, reducing the need for field labor?

Globalization of the E&C Workforce Further, the migration of engineering work to non-U.S. design centers is another factor directly resulting from commoditization. U.S. E&C firms partnered with, built or bought these "offshore engineering centers" to bring down hourly rates. But as salaries increased over the past decades and the pool of talent pool 29

Analysis

became fully employed, the industry pursued the same model in other cities, regions, and countries. Concurrently, as companies honed their ability to workshare overseas, more significant percentages of projects are shifted to these offshore centers. Attempting to emulate this model to offset deficits in qualified craft, the same has happened in the construction industry. Companies are designing modularized facilities and having them built overseas, thereby reducing the number of craft required onsite for final assembly. The global E&C industry is running out of places to go to lower costs. And if the engineering and construction professions fully migrate overseas, might this create, for the U.S., future domestic security challenges such as those seen in 2020 in the pharmaceuticals and industrial manufacturing sectors?

A Symbiotic Supply Chain As more E&C companies file for bankruptcy or consolidate to mitigate financial losses, we must seek ways to improve the health of the supply chain. Owners, E&C firms, technology providers, and manufacturers must focus on developing a sustainable solution, one that allows everyone to be competitive while making a reasonable profit. Although "partnerships" remains a negative term when trying to pair owners with suppliers, maybe we should consider the idea of a symbiotic supply chain, where mutually beneficial terms make everyone stronger. Rather than price alone, we should consider performance-based contracting models that drive innovation resulting in benefits for all involved. As engineers and constructors, we love to tackle challenges, and we will 30

Todd C. Frank

need to work together as a community of companies to find a path forward that sustains us all.

Mr. Frank is the chairperson of the board of directors for the Rice Global Engineering & Construction Forum. He has over 25 years of experience working for several major industrial engineering and construction firms in a variety of marketing, communications, and business development roles. He is currently with Burns & McDonnell, a leading U.S.-based engineering, construction, environmental and consulting firm.

About the Authors Martin Van Sickels

About the Rice Global Engineering & Construction Forum

Mr. Van Sickels is the executive director of the Rice Global Engineering & Construction Forum. Currently through his firm, MVS Consulting LLC, he provides technology and management consulting services for the process and E&C industries ranging from R&D to technology sales. Prior to forming his consulting firm, he was VP and Chief Technology Officer and a member of the executive committee at KBR.

The Rice Global Engineering & Construction Forum is an organization made up of members from engineering and construction (E&C) and supporting firms based at Rice University for the purpose of discussion and analysis of issues, problems, and opportunities facing the contracting side of the global E&C industry. Rice University provides a neutral site for these activities and access to the academic and research facilities of Rice, primarily the George R. Brown School of Engineering, the James A. Baker III Institute for Public Policy, and the Jones Graduate School of Business. 31

Power

Hydroelectric Power Assets By Pierre Alarie ATCO Managing Director Latin America pierre.alarie@atco.com

Condesa, ATCOâ&#x20AC;&#x2122;s Hydro Facility in Mexico. 32

he energy capacity from renewable sources in Latin America and the Caribbean amounted to more than 262 gigawatts in 2019, up from approximately 250 gigawatts a year earlier. In comparison to 2010, this represents an increase of over 56 percent. In this same order, the region's hydropower capacity went up to nearly 200 gigawatts in the past year, a fact that represented around 76 percent of the region's overall renewable energy capacity. * South America saw the fastest hydropower growth rate after the East Asia and Pacific region in 2019 with close to 5,172 MW of capacity added. *

56% OF INCREASE IN ENERGY CAPACITY FROM RENEWABLE SOURCES IN LATIN AMERICA AND THE CARIBBEAN IN THE LAST TEN YEARS. The region is moving to a diversified renewable electricity mix. Countries like Colombia and Ecuador have installed hydropower capacity exceeding two-thirds of the electricity share. Chile and Argentina are also moving away from fossil fuel generation with extensive untapped renewable energy resources of hydropower, wind, solar, and geothermal. Chile currently has almost 16 GW, and Argentina nearly 33 GW of hydropower potential. With an ambitious goal of producing 60 percent of its electricity from renewable energy resources by 2035, Chile has achieved an installed capacity of 10.8 percent 33

Power

Condesa, ATCOâ&#x20AC;&#x2122;s Hydro Facility in Mexico.

from solar and 8.6 percent from wind in its national electricity grid. ATCO is already there to pursue new opportunities. Hydropower remains the largest renewable energy source in Mexico, making up about 80 percent of the country's renewable energy supply. At the end of 2017, ATCO acquired a 35 megawatt (MW) hydroelectric plant in the state of Veracruz, marking a milestone in our growing global portfolio of renewable energy. Our plant avoids 48,950 tons per year of carbon dioxide (CO2) into the atmosphere, equivalent to 10,230,817 liters of gasoline. The electricity generated supplies more than 200 convenience stores in Mexico, delivering clean energy at a competitive cost, helping our customers meet their clean energy obligations. 34

SOUTH AMERICA SAW THE FASTEST HYDROPOWER GROWTH RATE AFTER THE EAST ASIA AND PACIFIC REGION IN 2019 WITH CLOSE TO 5,172 MW OF CAPACITY ADDED. This hydroelectric plant has created employment opportunities for the surrounding communities as part of a long-term and mutually beneficial agreement. Working with our neighbors is essential to our operations and in completing infrastructure projects. Central to these efforts are our people, who live, work, and volunteer in the hundreds of communities we serve worldwide.

Clean energy and renewables are resilient to the Covid crisis but not to policy uncertainties. Governments can provide the Public Policy framework to bring about a sustainable recovery and accelerate clean energy transitions. However, in countries like Mexico, the lack of clarity due to a substantial policy shift in the government's electricity sector has brought to a stop billions of dollars of investment in the Renewable energy sector. In 2025, renewables are set to become the largest electricity generation source, ending coal's five decades as the top power provider. ATCO leads the energy transition within our energy infrastructure and utility businesses; our goal is to enable the transition to a lower-emitting future.

80% OF MEXICO’S RENEWABLE ENERGY SUPPLY COMES FROM HYDROPOWER. “CONDESA”, ATCO´S 35MW HYDRO FACILITY IN MEXICO AVOIDS 48,950 TONS PER YEAR OF CARBON DIOXIDE (CO2) INTO THE ATMOSPHERE, EQUIVALENT TO 10,230,817 LITERS OF GASOLINE.

*Source: Statista.com

Power

Realizing Potential: How Sol Systems Transformed Unused Land into an Important Solar Project for Maryland By Andrew Gilligan Vice President for Sol Latin America and Lead

Video Interview

Sol Customer Solutions, Sol Systems andrew.gilligan@solsystems.com

For 30 years, on the edge of the Nation’s capital, 20 acres of land deemed unsuitable for residential development sat unused within the small town of Capitol Heights in Prince George’s County, MD. In 2016, however, Sol Systems found a better use for it: a 3 MW solar energy project that now helps power one of the state’s most prominent businesses with affordable and clean energy. 36

ol Systems was able to work with all relevant stakeholders to develop, finance, and deliver a solar project that is financially viable –generating revenue (or saving costs) for all involved parties – and doing so in a sustainability and community impact focused manner. When building a large-scale solar array within a community, transparency and communication are crucial to keeping your neighbors informed and comfortable. After the initial project proposal and plan were created, Sol immediately began outreach in the surrounding area. Through door-knocking, community meetings, and digital outreach, Sol Systems ensured adjacent residents could

WHEN BUILDING A LARGESCALE SOLAR ARRAY WITHIN A COMMUNITY, TRANSPARENCY AND COMMUNICATION ARE CRUCIAL TO KEEPING YOUR NEIGHBORS INFORMED AND COMFORTABLE.

ask questions and bring up concerns before construction even had started. Sol worked closely with the town of Capitol Heights to make sure all of the town’s needs were met during the zoning and permitting process. Sol Systems secured state and county-level approval for the project through the Certificate of Public Convenience and Necessity process and Maryland National Capital Parks and Planning Commission Mandatory Referral process. The project will contribute approximately $1.4 million in tax revenue to Prince George’s County over its service length. 37

Power

$1.4 MILLION IN TAX REVENUE DUE TO SOL SYSTEMSâ&#x20AC;&#x2122; CAPITOL HEIGHTS PROJECT OVER ITS SERVICE LENGTH.

Solâ&#x20AC;&#x2122;s in-house engineering team designed the 3 MWdc solar project, which produces the energy equivalent to the annual use of 333 homes. The design also included 1.5 acres of newly planted and existing trees, including maple, oak, pine, and cedars, to serve as a visual buffer for the site. The new plantings constitute a woodland conservation easement that will be conserved in perpetuity beyond the project's life. As the project worked to offset carbon in the energy grid, Sol was able to bring new carbon consumers to life as well. In unison, Sol Systems looked to secure a long-term investor in the project. Sol Systems successfully secured a deal with a large renewables capital investor. Although WGL Energy Services would initially purchase the energy from the project through a direct connection to the grid, facilitate a virtual power purchase agreement (PPA), wherein an energy buyer without direct access to behind-the-meter solar can purchase the electrons generated by the array at a fixed rate ($/kWh) directly applied to their utility bill. A major American company was secured as the off-taker under this arrangement, which will purchase the energy for 12 years. This large corporation can procure energy at a competitive price point, thus helping with economic savings in addition to sustainability goals. 38

SOL’S IN-HOUSE ENGINEERING TEAM DESIGNED THE 3 MWDC SOLAR PROJECT, WHICH PRODUCES THE ENERGY EQUIVALENT TO THE ANNUAL USE OF 333 HOMES. Working with our construction partners, the project was built over six months, including two months of grading to prepare the installation site. As the project reached completion, Sol Systems and its partners celebrated the success with a ribbon-cutting event that featured speeches by the CFO of the off-taker, U.S. Senator Chris Van Hollen, and U.S. Congressman Anthony Brown. The event showcased the excitement at the local, state, and national level in Maryland’s public sphere, placing added emphasis on how much projects like these mean for the state’s private sector, providing one of the state’s largest companies with access to renewable energy. A memorable start to the life of a unique project. 39

Power

Infrastructure Financing that Strengthens the US-Mexico Relationship By Calixto Mateos-Hanel

Video Interview

Since 1994, the North American Development Bank (NADB) has sought to support the development and implementation of infrastructure projects to preserve, protect, and enhance the environment to advance the well-being of the people on the United States-Mexico border region.

Managing Director - North American Development Bank

he last ten years have broadened its original focus on basic infrastructure to include clean energy projects. NADB has financed 38 clean power projects, including 19 solar, 15 wind, two biogas, one biodiesel, and one energy efficiency project. These projects represent a total investment of US$ 6 billion. Most of the energy projects financed by NADB involve private companies building the plants and supplying the energy produced to public utilities or private sector off-takers. To date, NADB has financed four projects that deliver energy to the Electric Reliability Council of Texas (ERCOT) power grid, which manages the flow of electricity to 26 million Texas customers: Los Vientos 1A and Los Vientos 1B Wind Farms in Cameron and Willacy Counties, FRV Bryan Solar Park in Presidio County and Alamo 4 Solar Park in Kinney County. The Los Vientos projects consisted of constructing two wind farms with a combined capacity of 401.7 megawatts, providing electricity to over 28,791 households,

and displacing 790,732 metric tons of carbon dioxide (CO2), among other greenhouse emissions per year. The solar projects include installing a 10-MWAC solar park in Presidio, Texas, where electricity is purchased by Bryan Texas Utilities (BTU) and a 39.6-MWAC solar park in Brackettville, Texas, with CPS Energy in San Antonio as the off-taker. These solar parks generate electricity equivalent to the annual consumption of 2,634 households. When these projects were approved in 2011, approximately 9% of the electricity generated in the ERCOT power grid was supplied by renewable sources. As of February 2020, that figure had climbed to around 26%, thanks in part to projects like those financed by NADB. NADB prides itself on its ability to build and cultivate relationships between both sides of the border. The Energia Sierra Juarez project in Tecate, Baja California, is a prime example of this binational cooperation. The 155.1-MW wind farm 41

Power

was built in the Sierra Juarez mountain range in Baja California, Mexico, which also included constructing a substation and transmission line to the United States. The energy produced is sold across the border to San Diego Gas and Electric (SDG&E), which provides power to more than 2.25 million customers, mostly in San Diego County and part of Orange County, California. The electricity generated by this project is equivalent to the annual consumption of approximately 58,657 households and displaces over 100,686 metric tons per year of CO2. Additionally, the socio-economic benefits of this project truly impacted and improved the lives of the residents through the royalties received from leasing the land, which had no other functional use.

NAD BANK'S $6 BILLION INVESTMENT IN CLEAN ENERGY PROJECTS FOR THE LAST TEN YEARS INCLUDE 38 CLEAN POWER PROJECTS: 19 SOLAR, 15 WIND, TWO BIOGAS, ONE BIODIESEL, AND ONE ENERGY EFFICIENCY PROJECT.

THE 155.1MW ENERGIA SIERRA JUAREZ WIND PROJECT IN TECATE, BAJA CALIFORNIA, GENERATES THE ANNUAL CONSUMPTION OF APPROXIMATELY 58,657 HOUSEHOLDS AND DISPLACES OVER 100,686 METRIC TONS PER YEAR OF CO2.

28,791 HOUSEHOLDS NOW ACQUIRE ELECTRICITY FROM THE “LOS VIENTOS” WIND PROJECTS. LOS VIENTOS 1A AND 1B HAVE A COMBINED CAPACITY OF 401.7MW, AND DISPLACE 790,732 METRIC TONS OF CARBON DIOXIDE (CO2) PER YEAR.

The project sponsor also donated computers and other equipment for the children to utilize for educational and conservation purposes. This is an excellent example of a project where everyone wins! NADB is always looking for innovative ways to serve the border region. In its 25 years, the institution has widened its scope from basic infrastructure to significant renewable energy projects. With its recent recapitalization from the United States and Mexico governments, NADB will continue developing infrastructure that preserves, protects, and enhances the environment, while also strengthening relationships between the two nations. 43

Power

The Potential for Climate Progress in Latin American Covid Recovery Plans By Laurie Fitzmaurice Executive Director - Center on Global Energy Policy, Columbia University SIPA laurie.fitzmaurice@columbia.edu

early a year after the first outbreak of Covid-19, the devastating health and economic impacts have led governments to spend US $15 trillion globally to boost economies. While many countries are looking to low carbon investments as part of longer-term economic recovery, it is unclear if Latin America will be able to seize the opportunity of post-Covid economic plans due to economic, political, and structural conditions. Latin America has been particularly hard hit. The region contains 8.4% of the world's population but represents 30% of COVID-19 fatalities.1 Forecasts now predict real GDP for 2020 will be 9% lower than early-2020 expectations, and the loss of output is projected to persist into 2021.2 Economic issues stoked social unrest prior to the pandemic, and governments appear unable or unwilling to address the underlying wealth distribution issues. Those tensions could be further inflamed should the pandemic's long-term economic effects outpace the short-term impacts of stimulus packages.

Globally, governments responded to the pandemic with stimulus plans based on cash transfers, which provide short-term palliative results -- mainly to members of the informal economy.3 Longer-term plans are needed, and for countries looking to cut their carbon footprints, such as China, India, and the EU nations, these plans can include zero or low carbon investments. However, Latin America's capacity to emulate such programs is limited by structural and financial challenges that affect access to capital, made worse by the pandemic. Many countries in the region face high levels of public indebtedness, currency depreciation, credit rating risk, insufficient tax revenue bases, and cumbersome tax regimes.

LATIN AMERICA HAS BEEN PARTICULARLY HARD HIT. THE REGION CONTAINS 8.4% OF THE WORLD'S POPULATION BUT REPRESENTS 30% OF COVID-19 FATALITIES.

Power

LONGER-TERM PLANS ARE NEEDED, AND FOR COUNTRIES LOOKING TO CUT THEIR CARBON FOOTPRINTS, SUCH AS CHINA, INDIA, AND THE EU NATIONS, THESE PLANS CAN INCLUDE ZERO OR LOW CARBON INVESTMENTS.

These factors impede the implementation of robust recovery packages.4 But there is potential to overcome these challenges to long-term investments with creativity and the private sector's help. Governments could choose to retain cash transfers only if other subsidies such as those on fuels are removed. They could also utilize public-private partnerships or government development bank financing with green goal linkages, access offset markets, or target Sustainable Development Goal (SDG) bond issuances. Lessons can also be found in the private sector, as seen in two recent transactions: Brazilian pulp producer Suzano closed a financing with a 10-year maturity that includes a 25 bp step up if the company fails to reduce emissions by 10.9% from a 2015 baseline by 2025.

https://coronavirus.jhu.edu/map.html

Similarly, ENEL's sustainability-linked bond proceeds can be applied to operating expenses or capital expenditures, with a variable coupon rate linked to increases in the share of renewable installed capacity from 46% in 2019 to at least 55% in 2021, and reducing GHG emissions.6 Solutions such as these would be more tailored to Latin American nations' realities, than the green investment COVID recovery strategies implemented by larger or more developed economies. These are just a few ideas. Creative, private sector solutions could yield even more progress in linking Covid recovery with climate change ambitions.

THESE FACTORS IMPEDE THE IMPLEMENTATION OF ROBUST RECOVERY PACKAGES.5 BUT THERE IS POTENTIAL TO OVERCOME THESE CHALLENGES TO LONG-TERM INVESTMENTS WITH CREATIVITY AND THE PRIVATE SECTOR'S HELP.

1: https://coronavirus.jhu.edu/map.html 2: September 2020, Mauricio Cardenas & Juan Jose Guzman Ayala, Planning a Sustainable Post Pandemic Recovery in Latin America and the Caribbean 3: November 2020. Mauricio Cardenas, Eduardo Levy Yeyati, Andres Velasco, The Covid Reset Latin America Needs, Project Syndicate. 4: September 2020, Mauricio Cardenas & Juan Jose Guzman Ayala, Planning a Sustainable Post Pandemic Recovery in Latin America and the Caribbean 5: September 2020, Mauricio Cardenas & Juan Jose Guzman Ayala, Planning a Sustainable Post Pandemic Recovery in Latin America and the Caribbean 6: https://www.enel.com/investors/investing/sustainable-finance/sustainability-linked-finance/sustainability-linked-bondsw

Midstream

Veracruz Refined Products Storage Terminal By Jesús Córdoba Domínguez Chief Engineering & Construction Officer, IEnova

The Energy Reform was a decisive step on the path to modernize the Mexican energy sector, which, without privatizing the Productive State Companies engaged in the production of hydrocarbons and electricity, establishes since 2016, hydrocarbons should be imported freely to be able to meet the demand for fuels in Mexico.

@IEn ova_MX

IEnova

Video Interview

t is in this context that IEnova began the design of the Veracruz Refined Products Storage Terminal in July 2017. This Terminal was assigned through a Public Tender, via a Partial Assignment of Rights, to develop a refined products terminal in the New Port of Veracruz. The Terminal has a net nominal storage capacity of 2.1 million barrels, distributed in 12 atmospheric storage tanks covering an area of 14.7 hectares (36.32 acres) with a 300-meter (984 ft.) seafront for the specialized maneuvering of bulk fluids containing petroleum derivatives. The refined products stored and distributed are diesel, Methyl tert-butyl ether (MTBE), premium gasoline, and regular gasoline. The Veracruz Refined Products Storage Terminal is part of a comprehensive project that also consists of two refined product storage terminals, located in Puebla and Mexico City, with a net capacity of 640,000 barrels each. IEnova receives the products in a mooring zone that allows their arrival in tanker vessels. In this zone, the fuel is unloaded through five discharge arms and then goes through a metering system, before being sent to storage. The Terminal dispatches fuels to tanker-trailers in five filling bays using six filling arms to deliver gasoline, diesel, and kerosene; then distributes them throughout the state of Veracruz. The Terminal also sends hydrocarbons via railroad to land-based terminals located in the State of Mexico and Puebla, strengthening the

THE ENERGY REFORM WAS A DECISIVE STEP ON THE PATH TO MODERNIZE THE MEXICAN ENERGY SECTOR, WHICH, WITHOUT PRIVATIZING THE PRODUCTIVE STATE COMPANIES ENGAGED IN THE PRODUCTION OF HYDROCARBONS AND ELECTRICITY, ESTABLISHES SINCE 2016, HYDROCARBONS SHOULD BE IMPORTED FREELY TO BE ABLE TO MEET THE DEMAND FOR FUELS IN MEXICO.

Midstream

2.1 MILLION BARRELS OF STORAGE CAPACITY, DISTRIBUTED IN 12 ATMOSPHERIC STORAGE TANKS COVERING AN AREA OF 14.7 HECTARES (36.32 ACRES).

THE VERACRUZ REFINED PRODUCTS STORAGE TERMINAL IS PART OF A COMPREHENSIVE PROJECT THAT ALSO CONSISTS OF TWO REFINED PRODUCT STORAGE TERMINALS LOCATED IN PUEBLA AND MEXICO CITY, WITH A NET CAPACITY OF 640,000 BARRELS EACH.

supply, at competitive prices, to a large part of the country's central region. The distribution to land-based terminals is possible through 26 tanker car dispatch positions, with a pumping capacity of 15,600 GPM for the simultaneous filling. In this regard, the facility's design meets the highest national and international standards, thereby guaranteeing IEnova's commitment to quality, safety, health, and to the environment. The technological equipment is firstclass. It has mechanical pantograph-balanced coupled discharging arms that provide stability and resistance necessary for the most demanding tasks, metering skids, and a pumping system to meter and transport fuels. Additionally, it has an automated tanker trailer and tanker car filling system; a vapor recovery system to prevent atmospheric emissions; a process control system; an emergency shutdown system, firefighting foam and water system; sectioning and emergency valves that operate and ensure operational safety through control links; also, a terminal communication management system to control product reception, send-out, and inventory. Moreover, the entry of fuels into the country has been diversified with the operation of the Veracruz Refined Products Terminal, thereby strengthening the supply chain. Previously, a large majority of the demand of the central region of the country used to enter through the Port of Tuxpan, Veracruz.

Midstream

Gas Exports, a Bright Spot for Midstream Growth By John Hilfiker Senior Energy Analyst â&#x20AC;&#x201C; North American Gas & Power,

Video Interview

A slowdown in US gas production growth will limit the supply-push for long-haul midstream projects. Growth in midstream infrastructure will center on future gas demand from US Gulf Coast liquefied natural gas (LNG) export facilities. Otherwise, gas demand prospects in the US are highly limited despite the chronically low gas price, even in regions where midstream constraints are persistent. 52

S&P Global Platts Analytics jhilfiker@spglobal.com

ver the next five years, LNG export demand will more than offset an anticipated fall in power sector gas consumption. It will likely drive future midstream builds, with only 4.1 billion cubic feet per day (Bcf/d) of additional midstream capacity to emerge from key Northeast and West Texas basins. Horizontal fracturing technology supported the buildout of midstream projects over the past decade, but the demand-side of the equation has struggled to keep up. Even with the LNG growth, demand is struggling to keep up with supply availability, leading to a slowdown from the past five years' heady days. The pace of future midstream projects will slow as investments are pulled back at both the upstream and downstream end of the value chain. S&P Global Platts Analytics data shows that US dry gas production increased by 19.2 Bcf/d since 2015, but will only grow by an incremental 9.2 Bcf/d during the first half of this decade. In the northeastern US, dry gas-targeted drilling in the Marcellus and Utica basins has sent gas production up

Bcf/d

US LNG Export Feedgas Demand

15 10 5 0 2015

2016

2017

2018

2019

LNG Export Feedgas

2020

2021 2022

Forecast

2023 2024 2025

LNG Feedgas Capacity

Source: S&P Global Platts Analytics

Northeast US Dry Gas Production & Pipeline TakeAway Capacity Bcf/d 40 35 30 25 20 15 10 5 0 2015 2016

2017

2018

Production

2019

2020

2021 2022

Production Forecast

2023 2024 2025 Feedgas Capacity

Source: S&P Global Platts Analytics

Permian Basin Dry Gas Production & Pipeline TakeAway Capacity Bcf/d

20 15 10

by 62% since 2015, and midstream growth has struggled to keep up with it. Persistently low gas prices have shifted attention to the Permian Basin in West Texas, where higher wet gas production has helped supplement development. At one time, higher gas prices and low drilling costs created tremendous growth in Marcellus and Utica basins gas production, which caused the Northeast region to flip into a net exporter of natural gas to surrounding markets since 2015. They required more than 14 Bcf/d of incremental midstream capacity. Zealous Northeast producers have shifted the balance to a persistently oversupplied situation, with stubbornly low gas prices reverberated through the US. By 2025, S&P Global Platts Analytics is tracking just 2.6 Bcf/d of future incremental pipeline takeaway capacity, and 3.2 Bcf/d of Northeast dry gas production. Oil-targeted drilling in the Permian Basin has created 6.5 Bcf/d (136%) of associated gas production growth since 2015. Despite low gas prices, resilient associated gas production in the Permian is forecast to grow by 7.2 Bcf/d (63%) over the next five

5 0 2015

2016

2017

2018

2019

2020

2021 2022

Permian Production (minus demand) Total Permian Takeway Capacity Source: S&P Global Platts Analytics

2023 2024 2025

Permian Flow Forecast

OVER THE NEXT FIVE YEARS, LNG EXPORT DEMAND WILL MORE THAN OFFSET AN ANTICIPATED FALL IN POWER SECTOR GAS CONSUMPTION. IT WILL LIKELY DRIVE FUTURE MIDSTREAM BUILDS. 53

Midstream

Total Additions of US Natural Gas Generating Capacity GW

% CCGT

100%

80%

60%

40%

10 5

20%

0% 2015

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Historic Under Construction Planned %CCGT

Source: S&P Global Platts Analytics

years, where dry natural gas takeaway capacity may increase by 4.2 Bcf/d (34%). Under the previous assumption, additional midstream capacity from the Permian will be required by 2024 for roughly 1.5 Bcf/d. Little federal oversight on Texas intrastate pipelines has aided a boom in long-haul midstream projects, from producing zones in the Permian, to LNG export demand growth on the Gulf Coast. LNG export demand has increased from zero in 2015 to a record monthly peak of 10.3 Bcf/d in November 2020. Up to four more greenfield LNG projects are expected over the next five years. Brownfield liquefaction train expansions will also provide additional midstream expansion opportunities â&#x20AC;&#x201C; both of which total nearly 6 Bcf/d of incremental

136% OF US ASSOCIATED GAS PRODUCTION GROWTH SINCE 2015 HAS BEEN CREATED THROUGH OIL-TARGETED DRILLING IN THE PERMIAN BASIN. 54

LNG EXPORT DEMAND HAS INCREASED FROM ZERO IN 2015 TO A RECORD MONTHLY PEAK OF 10.3 BCF/D.

SINCE 2015, US DRY GAS PRODUCTION HAS INCREASED BY 19.2 BILLION CUBIC FEET PER DAY, ACCORDING TO S&P GLOBAL PLATTS ANALYTICS DATA. HOWEVER, DURING THE FIRST HALF OF THIS DECADE, IT IS EXPECTED TO GROW BY AN INCREMENTAL 9.2 BCF/D.

midstream capacity for LNG feedgas demand. US LNG exports are forecast to increase by 6.2 Bcf/d (93%) over the next five years. The fall in natural gas prices has incentivized 58 gigawatts (GW) of gas power plant capacity development over the past five years. But gas plants currently under construction only total 12.3 GW, while 45.7 GW are in planning stages over the next five years â&#x20AC;&#x201C; implying a risk of delays or even outright project cancellation given the front-loaded magnitude of planned capacity. S&P Global Platts Analytics forecast total gas plant demand to decline by 1.1 Bcf/d over the next five years, bucking the historic trend when power burn grew by 4.5 Bcf/d, since 2015. The slowdown in US dry gas production, coupled with continued LNG growth, may increase US Henry Hub average gas prices from $1.87/MMBtu in 2020 so far to $2.90/MMBtu by 2025. While all signs point to a tightening US gas market, US gas prices will face increasing exposure to global supply and demand forces, potentially capping upward price pressure on the Henry Hub benchmark. 55

Midstream

Meeting RNG Demand with Power-to-Gas Technology The Renewable Natural Gas (RNG) business has seen significant growth in recent years throughout North America. RNG is a renewable drop-in substitute for pipeline natural gas. RNG has a much lower carbon intensity profile than geological natural gas. Buyers seeking low carbon solutions often find value in RNG based on its ease of use as a substitute for natural gas.

By Matthew Small Development Project Manager, StormFisher

Video Interview

he demand for RNG comes from a wide array of organizations such as large corporations, institutions (colleges/universities), and various government levels. For example, there is a need for RNG from transportation companies, as part of Low Carbon Fuel Standards in California and Oregon, to produce credits for sale to obligated parties. Natural gas utilities, such as FortisBC and NW Natural, and institutions such as the Port of Seattle and Brown University, have an interest in RNG to reduce their carbon intensities and provide low carbon fuels

for process and thermal loads. The Paris Agreement drives demand for low carbon solutions by setting out carbon emissions reduction goals. These widely accepted goals influence the groups mentioned in a variety of ways. Some organizations have set their own voluntary goals, while others are subject to standards or regulations requiring emissions reduction. Ultimately, these groups are taking action to reduce their carbon footprint and will continue to do so. In many cases, RNG is the most efficient, least disruptive path to a lower carbon footprint. 57

Midstream

RNG HAS A MUCH LOWER CARBON INTENSITY PROFILE THAN GEOLOGICAL NATURAL GAS. BUYERS SEEKING LOW CARBON SOLUTIONS OFTEN FIND VALUE IN RNG BASED ON ITS EASE OF USE AS A SUBSTITUTE FOR NATURAL GAS.

The growth in demand for RNG in North America is expected to outpace supply. As climate goals loom, more entities will require low carbon fuels. RNG supply from traditional sources, such as biogas from landfills and organic waste, has feedstock limitations. There is not enough landfill gas or organic waste to keep up with the need for RNG. So, the market faces a question: How can the growing demand for RNG be met? The answer is with Power-to-Gas facilities. Power-to-Gas offers a pathway to large-scale RNG production and the avoidance of feedstock limitations. It can meet the growing demand for low carbon RNG. Power-to-Gas refers to the conversion of electricity to a gaseous fuel using an electrolysis process. Electrolysis technology makes use of electricity to split water into hydrogen and oxygen. A second process step is used to produce

IN MANY CASES, RNG IS THE MOST EFFICIENT, LEAST DISRUPTIVE PATH TO A LOWER CARBON FOOTPRINT.

POWER-TO-GAS OFFERS A PATHWAY TO LARGE-SCALE RNG PRODUCTION AND THE AVOIDANCE OF FEEDSTOCK LIMITATIONS. IT CAN MEET THE GROWING DEMAND FOR LOW CARBON RNG. RNG, known as methanation, which converts the hydrogen to methane. Producers can market this methane as RNG for use within the traditional natural gas infrastructure. RNG from Power-to-Gas uses abundant renewable electricity and does not suffer from traditional production methods' feedstock limitations. The technology is ready to be deployed. Some examples of existing facilities are Audi's 6 MW e-gas power to methane plant in Wertle, and Germany Air Liquide's 20 MW power to hydrogen operation in Becancour, Quebec. A 100 MW Power-to-Gas project is the logical next step. Projects of this scale each represent a $200 million investment and RNG production of up to 1.4 trillion BTU per annum. Texas is an excellent location for Power-toGas due to the availability of low-cost renewable electricity, a capable workforce to support energy projects, and business-friendly conditions. It is possible to deliver RNG from Texas to many customers across the country. StormFisher is actively developing Power-to-Gas projects in the Houston and Corpus Christi areas. 59

Upstream

Offshore Units lifecycle management – safety and operational reliability review By Darren Wesneske, Offshore Key Account Manager – Roxtec, Inc. darren.wesneske@roxtec.com

Video Interview

Upstream

hen it comes to addressing both safety and operational reliability, the Offshore Assets are always on top of the mind of any major Oil Company. The overall asset life cycle of an Offshore Platform or Drilling Rig can easily reach several decades span to maximize ROI and sustain processes at until its final destination, decommissioning. As a acceptable levels, avoiding downtime and paving result, equipment once considered modern during the way for a more sustainable result. the original design would consequently become In the past, the practice under more challenging market conditions was to start cutting operating outdated or obsolete. This equipment will eventually require future budgets. Still, Operators worldwide are no longer upgrades, overhaul repairs, or even replacement able to use that silver bullet, and now they must to maintain its actual functionality. look for opportunities to save money by reducing Therefore, the maintenance of critical equipment overall lifecycle costs. over time is not only mandatory but also becomes To comply with the new normal, both Offshore a significant factor in keeping increased levels of operations and supply chain will have to restrucsafety for both assets and life onboard. ture their service level to utilize minimum resourcWith the increased level of uncertainty brought es better and maximize asset reliability without by the Covid-19 outbreak, oil companies worldwide compromising safety. were forced to redesign their businesses to comply From a supply chain perspective, vendors now with stricter market conditions, leading their ef- focus more on their value-added concepts, bringforts towards a more optimized use of resources. ing a complete new perspective to the table, and The availability of resources has a strong cor- disrupting the markets with "Asset Lifecycle relation with the level of operational reliability Management" (ALM). companies can achieve. That same dimension directly affects the quality Asset Lifecycle Management (ALM) of service companies can provide to their end customers. Capital Projects The challenge then becomes the need for maintaining safety levels even when Plan and Enterprise Asset Management resources are scarce, not only from an Design organizational point of view but mainly Comission Operate Maintain Decomission Procure and from a supply chain perspective. and Kickoff Build The trend is that both parts and equipment are used to their maximum life 62

Identifying opportunities for cost savings is crucial, and reducing the time allocated to repairs or upgrades can result in significant savings, adding value and increasing overall business performance. For a recent turnaround on a platform in the Gulf of Mexico (GoM), the maintenance of an existing cable penetration seal on the electrical building needed to be addressed. Over time, the existing penetration corroded due to the harsh environment at sea and needed to be replaced to maintain healthy safety levels. The operator requested help and asked for the cables not to be disconnected from the equipment. Besides, no welding could be performed in the area. The repair maintained the bulkhead's fire rating and provided a gas-tight, watertight seal to stop the propagation of hazardous gases and moisture into the electrical building. After completing the project, Doug Savoy (Senior Authorized Electrician at Shell Oil) stated, "The custom frame saved countless man-hours and downtime. We would not hesitate to call if we needed any more."

The high demand for safety and the technical challenges from these scenarios require a completely different approach. Providing solutions will no longer suffice, but creating solutions that encompass the entire asset lifecycle will provide innumerable benefits for the value chain and allow the industry to leverage its capabilities more competitively. The companies that will survive and thrive in such environments are the ones that can emulate the operational lifetime concept, presenting a higher initial investment for Owners, and bring an entirely new perspective for Operational costs that will eventually be close to zero.

Downstream

The golden age of information management for Advanced Work Packaging It is not always easy to see ourselves as pivotal players in a revolution, but that is where we are.

Video Interview By Geoff Ryan CEO of Insight-AWP. geoff.ryan@insight-awp.com

he Industrial construction industry has a cavalier history of construction behind us and the age of Advanced Work Packaging and predictable project execution is ahead of us. The spark for this revolution is the desperate need for change, and the gasoline in this firestorm is free-flowing information and the technology to do something with it. Welcome to the golden age of information management for construction. Advanced Work Packaging is an industry “Best Practice” researched and documented by the Construction Industry Institute.

THE AGE OF AWP AND PREDICTABLE PROJECT EXECUTION IS AHEAD OF US. WELCOME TO THE GOLDEN AGE OF INFORMATION MANAGEMENT FOR CONSTRUCTION.

Downstream

25% OF INCREASED PRODUCTIVITY HAS RESULTED FROM ADVANCED WORK PACKAGING (AWP) IN GLOBAL CONSTRUCTION PROJECTS, HAVING A FAVORABLE INFLUENCE ON COST, SCHEDULE, SAFETY, AND QUALITY. It guides the dissection of project scope into packages that cross Engineering, Procurement, and Construction so that the construction contractors can develop Installation Work Packages in the field. These IWPs are typically one week of work for one crew and are proven to be free of constraints before they are released.

Over the last ten years, results from global projects have shown that this simple condition can increase field productivity by up to 25% and have a significant favorable influence on cost, schedule, safety, and quality. It sounds pretty simple, but the reality is that it is challenging to figure out what material you have, which work fronts are open, the latest revision document, and what you are supposed to be working on every day for up to 5000 willing workers. The answer is data, formulated to be consumable. The dashboard is the 3D model, and the engine is a cloud-based Data Warehouse. There are currently two examples of this information management program operating in Texas on projects in the range of $3 Billion. Both projects are experiencing higher than average

productivity and are both on schedule (which is fantastic for big projects). The Data Warehouse hosts all project data, and the gatekeeper ensures that the information is presented and stored in the correct format. Amongst other things, this creates a “single version of project truth” that can be accessed through Power BI on any device by project stakeholders who have been granted permission. Supervisors to Project Managers, and everybody in between, have access to live data and reports that show them where every piece of material is, how to get the latest revision of each document, what has been installed, what we should be installing, which resources are available, what our internal customers need from us and how much time and effort we are using to get stuff done: on their phone.

Now I know that anybody who has ever used an app is yawning right now, saying, “so what.” Still, for construction guys, who are used to being treated like mushrooms, this is nirvana, and it is having a significant positive impact on how much we get done, how long it takes, how safe the work is and how many mistakes are made. It is quite a simple idea that only requires a database stored on a cloud platform, a set of rules around how data must be formulated and delivered, and an organization willing to break the mold. Geoff Ryan is a born-again Texan, an AWP practitioner, and CEO of Insight-AWP. geoff.ryan@insight-awp.com www.insight-awp.com

Infrastructure

Decisive Leadership in Trying Times

By Dr. Stephen Mulva Director, UTexas Construction Industry Institute (CII) jenny.bien@cii.utexas.edu

Based at The University of Texas at Austin, CII is the preeminent "think tank" for capital projects. CII Research Teams and Committees include leaders from academia, paired with project executives across various industry sectors in the capital projects industry. They ask tough questions, generate bold ideas, and produce real-world solutions.

fter nearly four decades, the purpose of CII is highly critical and extremely valuable: innovate and improve our members' viability and reach to make a difference around the world. CII is providing unique and decisive leadership during the trying times our industry faces. While CII has accomplished much, the size and scale of the financial and managerial challenges compel us to do even more. The opening rounds have already claimed several legendary firms. This is not a time for complacency. Nor is it the time to delude ourselves into thinking the things that have made us successful to date will continue to do so. As a scholar of this business and its finances for 25 years, I am absolutely certain of one thing: No individual or company will be immune to the extensive industry-wide transformation that must be made now, and in the years ahead. CII is prepared to lead this transformation with the innovative research, tools, and business/executive training these challenges demand. 69

Infrastructure

WHILE CII HAS ACCOMPLISHED MUCH, THE SIZE AND SCALE OF THE FINANCIAL AND MANAGERIAL CHALLENGES COMPEL US TO DO EVEN MORE.

We continue to explore the practices this industry uses to achieve more consistency and predictability in project outcomes. Over the past four years, CII has strived to improve capital projects' cost efficiency by leveraging the Institute's Best Practices in a different commercial environment. We call this effort Operating System 2.0 (OS2). The ultimate goal of reducing transactional waste (cost and time) is to improve the returns provided to the investors and owners and all the stakeholders involved. The reduction of waste will have multiple positive aspects, from lowering the initial and operating expense of a facility, increasing by up to 300 percent the margins for those involved in the creation of the asset, and returning the revitalized capital assets to the forefront of value creation, which would create an industry that is far healthier than it is today. CII has kicked off four research projects (Goal Congruence and Alignment; Supplier Engagement; Dynamic Risk Model; and Contracting via Smart Contracts and Blockchain), studying the different aspects of a new commercial model for the engineering and construction industry. The OS2 initiative is led by CII and a 'core team,' which includes faculty and staff from The University of Texas 70

NO INDIVIDUAL OR COMPANY WILL BE IMMUNE TO THE EXTENSIVE INDUSTRY-WIDE TRANSFORMATION THAT MUST BE MADE NOW, AND IN THE YEARS AHEAD.â&#x20AC;?

Civil, Architectural and Environmental Engineering Department, Continuum Advisory Group, ePM Consulting, and PrairieDog Venture Partners (PDVP). The initial R&D efforts of this core team and the UT research faculty and students will continue for the next few years. In the months ahead, CII will continue pushing the envelope as it relates to OS2. However, the industry's participation will be required as CII tests out its OS2 innovations on actual projects underway. The collaboration will also be required to ensure that the OS2 R&D efforts fully understand the constraints and barriers that confront the industry. Only through participation a brighter path forward will be discovered. Please be a part of the change! For more information about OS2 or CII, email: jenny.bien@cii.utexas.edu

Interview

Blake Moret CEO of Rockwell Automation

Automation strategies in the face of the industrial sectorâ&#x20AC;&#x2122;s reconstruction Interviewer: Aldo Santillan Interviewee: Blake Moret Transcription: Miroslava Fuentes

The outlook for the industries' future is being reassessed as a result of the pandemic. Therefore, companies have sought strategies to build a more sustainable world through efficient operations, lower costs, and risk reduction.

s part of the Automation Fair at Home 2020, Blake Moret, CEO of Rockwell Automation, highlighted that they have adopted new practices and technologies like remote operations for their staff well-being, while trying to remain completely resilient. "Rockwell Automation has also increased its resilience and sustainability by reducing the points of failure in its operations, increasing remote activities assisted by new software tools, automation capabilities, and augmented reality. We are doing this in our operations, and we are providing this value to our customers worldwide," he said. In critical industries, such as health sciences and food and beverage, Rockwell Automation has implemented tools to respond to the health emergency's demands. "Let's think of examples like being able to simulate an equipment's conditions using our 3D simulation software," pointed out Blake Moret. As a result of social distancing, the company has increased its investments to expand its manufacturing capacity and eliminate potential failures. These improvements have already been applied in several countries, always considering a global perspective to support its clients, as the industry's transformations require flexibility.

Interview

WE ARE OPTIMISTIC THAT THIS GRADUAL RECOVERY WILL CONTINUE IN 2021.

Interview

WE MUST ENSURE THAT DIVERSITY IS REPRESENTED THROUGHOUT THE ORGANIZATION TO MEET EVERYONE'S PERSPECTIVES. I BELIEVE WE ARE DOING THE BEST JOB EVER,

SAID BLAKE MORET, CEO OF ROCKWELL AUTOMATION.

“We must ensure that diversity is represented throughout the organization to meet everyone's perspectives. I believe we are doing the best job ever," said the CEO of Rockwell Automation. This diversity has allowed the company to maintain communication and proximity with its customers, while addressing their specific needs. Although sales have declined, Blake Moret stressed they have seen a considerable recovery and that the solutions will mark the growth. In this regard, he assured: "We are optimistic that this gradual recovery will continue in 2021." In terms of Rockwell’s annual financial results, the company expects a greater recovery in the second half of the next year. After March, it expects to return to a year-on-year growth with a 5% organic increase. According to Blake Moret, the workforce was a key element for the company, as its employees have been committed to overcoming challenges 74

Interview

in every area: in development organizations, sales teams, manufacturing facilities, among others. "We are proud of the way they have adapted to these conditions," he shared. This year, the company received more than 36,000 registrations for Automation Fair at Home. In this virtual event, attendees had the opportunity to learn about solutions, products, and services for industrial automation and digital transformation. After the success of this virtual modality, Rockwell Automation's CEO estimated that this dynamic would continue in the upcoming fairs, even when they return to a face-to-face format. 75

Interview Joel Moxley President and CEO, GPA Midstream Association

GPA Midstream Association's vision for 2021: adaptability to keep things going Interviewer: Energy Capital Interviewee: Joel Moxley

Representing more than 80 corporate members of all sizes, and with nearly a century of existence, the GPA Midstream Association is the largest industry organization for midstream activities in the US. At its core, the institution has the mission to serve and represent the national midstream sector through collaborative expertise.

ince 1921, GPA has set and adopted multiple standards for natural gas liquids; developed simple, reproducible, and compliant test methods for the industry; managed a worldwide cooperative research program; lobbied for the sector on Capitol Hill; positioned itself as an information "go-to" resource for several companies; and so much more. Throughout 2020, the association â&#x20AC;&#x201C; as many other organizations and industries elsewhere- faced the challenges of COVID-19. Joel Moxley, President and CEO of the GPA Midstream Association believes it certainly has been a disruptive year. For him, the most crucial and overarching aspect of the pandemic has been the adoption of new practices and the adaptation to them. "We've been used to working together, in person, so to cancel that was a huge hold in our organization for the year. To keep things going, we started to have virtual meetings. We started to

Video Interview

adapt to what we have here. We had to adapt just like companies had to adapt in a pandemic world." Regarding the natural gas market evolving scenario under the pandemic -in terms of demand and consumption patterns -, Joel Moxley recognized midstream activities are a vital part of the US supply chain. Moving energy from wellheads to markets is an essential activity to keep things going. In this regard, the CEO shared that even though "in some parts of the year, demand fell off (in the April-May period), companies had to adapt

WE STARTED TO ADAPT TO WHAT WE HAVE HERE. WE HAD TO ADAPT JUST LIKE COMPANIES HAD TO ADAPT IN A PANDEMIC WORLD

to that. They operated as efficiently as they could, they cut their costs as they could, and everybody had to pitch in. In the pandemic, nobody was immune from being impacted by this." Moxley noted that there had been important and equally disruptive historical changes throughout the organization's lifetime. World War II, 9/11, all kinds of political, economic, and cultural transformations; the pandemic is just one more challenge that will need to be addressed. 77

Interview

COMPANIES OPERATED AS EFFICIENTLY AS THEY COULD, THEY CUT THEIR COSTS AS THEY COULD, AND EVERYBODY HAD TO PITCH IN. IN THE PANDEMIC, NOBODY WAS IMMUNE FROM BEING IMPACTED BY THIS.

GPA Midstream works on behalf of its members in Washington, with regulators and legislators, always seeking to apply efficient and sustainable adjustments on how the industry currently does business. "We emphasize safety, environmental stewardship, but we also want to do it in a way that makes sense economically. Realizing that in these times there is a lot of emphasis on environmental stewardship, on ESG reporting, things like that that are new to us, and we want to get involved with." Also, GPA works shoulder-to-shoulder with technical committees, which provide the expertise that comes from their knowledge of doing their job every day. In this sense, the organization gives annual awards to the people who work in those committees, recognizing them since they help the association to be successful. Finally, the CEO hopes that vaccines will be much more available in the third quarter of 2021, letting GPA's members attend in person the association's 100th anniversary and annual convention. Traditionally, the event was held in April each year. However, this time is going to be celebrated in September, in San Antonio, Texas. "We hope by moving it in 2021 we will have more regular attendance. We are looking forward to seeing everybody, talk to people. It's nice to have Zoom calls and Zoom meetings, but it's not a real substitute for having in-person talks," Moxley concluded. 79

Opinion

Why do innovation and technology matter? By Aldo Santillan Managing Director & Editor in Chief Energy Capital

A MILESTONE FOR PRODUCTIVE GROWTH

ven though it may seem obvious, not everyone and not every company visualizes the importance of innovation, automation, digitalization, and connectivity to operate their assets. Technology delivers benefits and development in many ways: cost reduction, efficiency, time-saving, failure prediction, and a large etcetera. Nowadays, technology and innovation are essential for every asset; here are some examples of their benefits in some expertsâ&#x20AC;&#x2122; words: 80

Fred Wasden, Managing Member of OptilytiX, has said oil companies will face the challenge to move technology usage from invention to adaptability. Chetan Desai, Digital Technology Vice President of Schlumberger, has shared that digitalization and automation are booming. Still, the challenge is to connect the digital thread to maximize an assetâ&#x20AC;&#x2122;s lifecycle. To improve efficiency, technology must be included from design and planning to production from the very beginning. In that sense, solutions like the digital twin, augmented reality, and virtual reality offer superlative control over an asset, maximizing its safety and extending its lifecycle. Dave Hedge, IT Specialist and Computer Architect at ExxonMobil, has expressed these solutions protect the people in the process line, taking care of the environment simultaneously. Kurt Berg, Controls and Systems Business unit Chief Engineer at Ethos Energy, has talked about the renewal of six LM6000 gas turbines at a project in Illinois. Through new technology, his company reduced delivery times, eliminated hardware and software obsolescence,

moved operations online, enabled workers’ access to the processes, increased energy production, achieved a quick return of investment, and boosted their digital capabilities. DCO Energy increased the energy production capacity of the University of Montclair. The company eliminated steam leaks and unified the cooling systems at the university’s combined heat, cooling, and power (CHCP) plants. According to Frank DiCola, DCO Energy’s Executive Chairman and Partner, his company helped the university build an electric distribution micro-network by automating processes. This brought multiple economic benefits and sustainable power production for the institution. Business Development Manager of Emulate3D, Ian McGregor, has said predicting future failures and monitoring an asset’s whole operation in real-time is possible. Using state-of-the-art technology, augmented reality, virtual reality, and some other digital solutions like the digital twin, a company can increase its resilience, eliminate specific mistakes, allow traceability, and enable remote control of its processes and operations. In this way, firms can achieve energy

efficiency and get closer to a circular economy approach. Technology simplifies processes, reduces costs, generates savings. It is efficient and simple, has said Blake Moret, CEO, and Chairman of Rockwell Automation. With these solutions, the return of investment (ROI) accelerates each time; in 18 months or less, a plant can show the benefits of implementing these technologies. In recent years, the Industrial Internet of Things has been a reality. With connectivity and innovation, Industry 4.0 has succeeded. Suppose you have not implemented technology, automation, digital solutions, and connectivity in your assets. In that case, the question within your company should not be: should we do it? The question must be: what are we waiting for? 81