Midstream’s focus remains steady as it expands infrastructure to meet the needs of North American markets, and companies are taking on more responsibilities in the industry than many realize.

“There are a lot of pipelines being laid right now. Midstream is at the forefront of the industry,” Mahlon Gray, co-founder of Tulsa Valve, tells Midstream Business.

Operating conditions have expanded in the midstream over the years as processing and transportation technology continues to advance, and equipment quality and performance expectations are likely to match pace. One basic instrument, the valve, is often overlooked, but that is not reflected by its sales and revenues, nor by the role it plays.

“The industry has been on an upward trend since 2010, and we’ve seen an increase in valve sales,” William S. Sandler, president of the Valve Manufacturers Association of America (VMA), tells Midstream Business. “We see that there are projected increases in drilling activity in the U.S., and it’s been good for the valve business. They need more valves. More drilling, more need for valves in the U.S.”

According to the VMA, the North American valve industry supplies about 35% of worldwide valve demand. Its members account for 80% of total industrial valve shipments out of the continent. The association has seen valve shipments increase by about 2% so far this year and expects it to increase again by at least 1.5%, says Sandler.

“Our revenues totaled about $4 billion in 2008. In 10 years, it went from $3.2 billion to $4.2 billion,” he adds. Access Midstream Partners LP spent approximately $32 million in 2012 on valves, according a recent company presentation. Other midstream companies spend far more.

According to a recent Midstream Business questionnaire sent to valve manufacturers for this story, manufacturing companies are not suffering when it comes to their revenues. Kelso Technologies Inc., which was still considered a start-up manufacturer in the railing industry five years ago, already reports gross revenue of $4.8 million. Dover Corp., the parent company of Midland Manufacturing Corp., reported $8 billion in 2012 revenues.

These numbers are expected to grow from an increase in demand. “Anything related to oil and gas requires valving,” Sandler says. “The industry can’t really do without it.”

Two words: flow control.

“Midstream has miles of new and old pipelines,” Gray says, and every line has specific flow-control needs.

“A valve is utilized the same way whether it’s midstream, downstream, upstream or plumbing, and it’s used to control flow of whatever is going through pipes,” he adds. “It can shut off flow, open flow or moderate flow.”

For this purpose, Gray says that companies purchasing valves for pipeline applications need to order valves with their business’ specific needs in mind. “If you want to shut off the flow immediately, you’ll select a gate or ball valve. If you’re going to check the flow, check the valve,” he says.

Meeting on the tracks

In response to the latest U.S. market trends, industrial-valve businesses might be rerouting their focus from pipes to rail, which has become much more significant in recent years with the shipment of crude. Oil and natural gas liquids producers are weighing the pros and cons of making the switch.

“A major challenge to the industry is rail shipments versus pipeline shipments and how people decide to balance everything. They’re producing more oil than can be shipped. Somehow, that’s going to have to be balanced as production continues to ramp up,” Kelso Technologies’ President Neil Gambow tells Midstream Business.

“Certainly, there is more and more crude oil being shipped on rails in tank cars. That trend is certain to continue because it’s a known fact that tank cars can travel places that pipelines cannot,” he adds.

As a result, companies offering pressure-relief valves for tank cars are seeing huge increases in their sales, and at least one company is responding with substantial increases in hiring to ramp-up capacity in order to meet new demand.

“Demand for rail tank cars has increased in direct relation to increased shipments of crude by rail. We see continued growth probably through 2015,” Kevin Cook, global director of Midland Manufacturing’s rail business unit, tells Midstream Business. “We’re doing a lot of different things to ensure our revenue steadily increases.”

Many valve manufacturers have been successful in maintaining steady growth in the industry. “The lower demand of crude has not impacted our company as of yet. The bigger impact has been the price differential of crude between Bakken, West Texas and Brent,” Cook says.

The rail industry has always been cyclical, and tank car equipment manufacturers might see a crash in product sales sometime in the future. Companies look past that, however, with hopes that the down cycle won’t last too long.

“We certainly respond to the marketplace, and we are reasonably certain that valve sales will increase with the demand of [rail] car sales, which is quite high and is expected to remain high in the next two years,” Gambow says.

“Demand for crude oil, overall, is dropping, but in North America, Canadian and U.S. crude is displacing crude from places like Saudi Arabia and Africa. North America is replacing the crude oil that is coming from foreign sources.

“We’re not going to be energy-independent, but we’re going to be close. The industry is putting up new terminals and buying new pipelines as fast as we can,” he adds.

After Quebec

While officials are investigating the recent derailment in Lac-Mégantic, Quebec, and debating updates to rules and regulations, the industry is waiting to see what changes will occur in day-to-day business activities.

Surprisingly, valve manufacturers in the rail industry aren’t seeing much negative effects to their businesses— at least not yet. “The process is just beginning,” Gambow says. “In the short-term, there will not be any effect on our company—at least not in the next two months. The analysis [of the Quebec accident] is not complete yet.”

According to Gambow, there was a considerable emphasis put on the building of new tank cars about a year and-a-half ago, so there is no immediate threat to related equipment manufacturers. Valve companies serving tank car manufacturers look forward to assisting with the backlog of cars ordered. The valve, after all, is necessary.

“Safety valves are absolutely mandatory by regulation. They are the single greatest preventer of the catastrophic failure of a tank car in a fire,” Gambow says.

In response to the Quebec disaster, manufacturing companies “are starting to see the potential conversion of existing cars and their equipment as they meet new regulations in high-pressure relief valves,” says Cook. This just translates to more valve sales, and companies seem worried predominantly about meeting the influx of demand for these products.

“If there is a federally mandated requirement to replace existing pressure-relief valves on cars, depending on how that was implemented, that would be a huge increase in demand. Figuring out how we would manage that demand would be difficult,” Cook says.

Projects in the pipeline

“Technologies have evolved to meet the markets. We have existing technologies that meet regulations, but we are always looking for new products,” Cook says. Founded in 1990, Tulsa Valve is trying to market its pig valves, which can either send or receive a pig and educating the rest of the industry about the need for these valves.

“The pig valve is actually pretty new in the industry. It has not been used until the past 10 years, and there are still a lot of people in the industry who are not sure how it works, so it’s quite the educational process,” Gray says. The company offers pigging valves, specifically bypass and shut-off pig valves, ranging from 2 inches to 12 inches at pressures from 150 to 5,000 pounds per square inch, according to Gray.

Tulsa Valve’s ShutOff Pig Valve is a trunnionmounted ball valve that shuts off the flow of the piping and can be used as a single- or double-block-and-bleed valve. This specific valve can be used as either a launcher or receiver of most pigs, accepting bullet, scraper and spherical pigs in a single configuration.

When shutting the pipeline flow entirely is not an option, the company recommends the bypass pig valve. This valve has a one-piece body, or flange, design and, according to the company, is easily field repairable and serviceable.

“The more [the oil and gas] industry expands, the more there is a need for the manufacturing industry with the replacement of valves and products,” Sandler says. “As your industry grows, we grow."

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