14th Annual Horizontal Directional Drilling Survey: Telecom, Energy Drive Market, But Is It Sustainable?

Riding The Wave
By Robert Carpenter, Editor | June 2012, Vol. 67 No. 6

Drivers
As one might expect, much of that market growth is being generated by energy and telecom work. However, the survey revealed that an increasing number of water and sewer contractors are seeing the value of adding HDD services to their technology toolbox.

But that does raise an increasingly asked question: how long can the telecom and energy markets persevere at high levels? Telecom, a market seemingly made for HDD, has been driven by many factors the past few years, but foremost has been the oft-delayed stimulus program that finally kicked into high gear in late 2010. As that work wraps up in 2012, will the telecom market be strong enough to make up for the anticipated drop-off in stimulus fund? Most experts seem to believe that while there may be some decline in the volume of work in 2012-13, it will probably not be substantial enough to cause much disruption to the telecom construction market. The good news here is that demand for telecom and related products has seemingly taken on a life of its own and should keep helping to stimulate the HDD market even while other areas may suffer.

As for energy, oil and gas shale extraction and the subsequent need for new pipelines (i.e. crossing work) has driven demand for medium and large HDD services and equipment. Indeed, new offices for dealers and manufactures have been springing up all around the nation’s shale plays to accommodate the demand. At first it was the Marcellus Shale in Pennsylvania (now spreading into Ohio and West Virginia) and Barnett in Texas, followed by the Bakken work in the upper Midwest along with Eagle Ford in South Texas. Today, several more areas are in play and older, established oil and gas fields like the Permian and Anadarko Basins are back in play due to new technology making extraction once again practical. Through it all, new pipeline infrastructure has been needed.

Energy dynamics are incredibly complex. The price of domestic oil is now tied into foreign pressures and pricing. At press time, oil prices has dropped to a six-month low. Prognosticators expected that pricing to hold true throughout the summer if not slightly lower – but still in a profitable range. Meanwhile, the natural gas shale plays grew so fast and are generating so much product that the nation has literally become awash in gas – a bubble has formed. The price had fallen below $2 per btu. However, also as press time, gas prices had crept back up to $2.80. But again, forecasters expect it to be a two- five years process before gas will reach the desired $5 btu range again.