STATE OF THE INDUSTRY

G LO B A L O U T LO O K 2 016

The pump industry in 2015 saw rapid

developments in technology and calls

to provide whole-system solutions to

pump end users. For this State of the Industry

issue, the Pumps & Systems editorial team asked

leaders what they expect to see in 2016. Experts

discussed new governmental regulations, the rise

of water reuse and the effects of the euro crisis.

They reported that the Internet of Things will

continue to revolutionize industry across the

globe. They also provided some insight into the

world’s volatile oil and gas market. While many

topics are discussed in these pages, we realize

that there is a world of stories to cover in 2016.

Throughout the coming year, Pumps & Systems

will expand our global coverage, further earning

our tagline, “The Leading Magazine for Pump

Users Worldwide.” We will provide in-depth

analysis of topics ranging from cybersecurity

and desalination to power generation and market

trends. As new technology is created and new

approaches to solve end user challenges arise,

Pumps & Systems will bring that information to you.

1 | State of the Industry

GLOBAL PUMP INDUSTRY

OUTLOOK 2016

Article and information for map provided by Frost & Sullivan

NORTH AMERICA

$1 TRILLIONThe biggest growth driver will be aging water infrastructure in the region. New investments of about USD 1 trillion are being planned to address the issues that are plaguing the segment and are expected to propel the pumps market until 2020. However, the projected year-on-year growth rate of pumps in the North American region stands at 4.4 percent in 2016, brought down primarily by the oil and gas and power generation industries.

LATIN AMERICA

0.3% Fast-growing sectors like power generation, mining, and oil and gas helped some Latin American countries like Brazil, Argentina and Venezuela beat recession and drove up the region’s demand for centrifugal pumps in 2014 and 2015. In 2016, the pump industry is projected to decline by -1.2 percent as a result of declining investments in water/wastewater and power generation. The chemical industry has been forecast to grow at 0.1 percent in 2016. The pump industry is forecast to display a compound annual growth rate of 0.3 percent between 2016 and 2018 in the region as a result of anticipated investments in mining, power generation, and oil and gas in the coming years.

EUROPE

-5.8% Factors like high electricity prices and the growing number of fracking operations are resulting in a rise in demand for pumps in the region. However, the pump industry in 2016 is expected to record a negative growth of -5.8 percent. Every industry is expected to display negative performances as a result of damp economic conditions in the region. Europe is said to have narrowly evaded a third recession, thanks to recent increases in sovereign bond yields in some of the European economies.

2 | State of the Industry

The overall outlook for the 2016 pump market is cautiously optimistic, with continued lows expected in the oil and gas industry. The world positive displacement

(PD) and centrifugal pumps market witnessed a 2.9 percent year-on-year growth in 2015, chiefly driven by the food and beverage and water/wastewater industries. However, the rate of growth was subdued as a result of slowdown in key end-user industries such as chemical, oil and gas, and power generation as a result of the dramatic drop in oil prices that the world witnessed in the first half of 2015.

In 2016, however, pump industry performance is expected to decline by nearly -2.4 percent, primarily pulled down by the oil and gas (-3.8 percent), power generation (-1.9 percent) and pharmaceuticals (-2.1 percent) industries.

Growth propellers include factors such as increased focus on infrastructural development and refurbishment of existing plants in key end-user industries. Water/wastewater and food and beverage are likely to prevent a catastrophic dip in revenues for the global pump industry.

Revenues from food and beverage and water/wastewater are likely to decline by -1.5 percent each in comparison to a decline of -3.4 percent in the oil and gas industry.

The industry may face some roadblocks to growth. Prices of raw materials are expected to continue to rise in 2016. This constant rise in prices of raw materials will drive up prices of pumps and act as a major dampener of growth for the industry.

Other major reasons for slowing growth in the global pumps industry include an aging workforce in major developed regions such as Europe and North America and the constant turbulence in China’s stock markets. These global forces are dampening investor confidence across the globe and are making economic recovery seem impractical.

On a global scale, pump companies are cutting costs and personnel. Other major strategies include investment in capital expenditure (CAPEX) and business expansions.

In addition, a growing need for sanitary equipment and pumps in the food and beverage and pharmaceutical industries and key growth regions in fiscal year 2015-2016 such as North America and Asia Pacific are bound to be major contributors to growth for diaphragm and peristaltic pumps.

Key contributors to this growth include increased private and public sector investments in expanding industrial processing and manufacturing sectors.

Rising urbanization and spending power of people in emerging countries in the forecast period are expected to boost growth of key end-user industries of single-use pumps. Average inflation rate is taken as 3 percent for forecasting the market.

MIDDLE EAST

0.9% Pump growth rates in the region fall by a mere -0.1 percent. Most end-user industries of pumps in the region present a positive growth rate in the range of 0.3 to 0.9 percent except for oil and gas, which is expected to fall by -0.5 percent. Food and beverage will be the primary propeller of growth in the region with a projected growth rate of 0.9 percent closely followed by the chemical and water/wastewater industries, which are expected to record 0.3 percent growth rates each.

ASIA-PACIFIC

$1.94 BILLIONMost Asian countries are currently shifting focus toward improving manufacturing competitiveness, which is driving the replacements market in the region. Demand from China is one of the biggest reasons for any optimism in the pump market. China is expected to replace the U.S. as one of the world’s largest crude oil importers, which is spurring growth opportunities for PD pump manufacturers. The market is expected to be valued at around USD 1.94 billion at the end of 2018.

3 | State of the Industry

1 Clean Power PlanAug. 3, 2015, marked a historic day for the power generation industry. In an effort to reduce

greenhouse gas emissions and slow the effects of climate change, the Obama Administration revealed the Clean Power Plan, the final version of the Environmental Protection Agency’s (EPA) regulations on coal-burning power plants.

Called “Obama’s biggest global warming move yet” by The Washington Post, the Clean Power Plan is intended to reduce carbon dioxide emissions from U.S. power plants 32 percent by 2030, compared with 2005 levels.

The plan provides each state with a goal for emissions reductions as well as several options for meeting those goals. To comply with the new regulations, many states are making significant efforts to increase the percentage of electricity supplied by renewable energy sources and to improve the efficiency of existing power plants.

On its website, the EPA reports that this plan will prevent “thousands of premature deaths,” provide “public health and climate benefits worth an estimated $34 billion to $54 billion per year in 2030,” and only cost $8.4 billion. Supporters of the plan herald these benefits and cite that, Clean Power Plan aside, the U.S. grid is already making the shift to renewable power.

Others anticipate positive economic impact. An August 2015 Forbes article titled “3 Ways The Clean Power Plan Will Strengthen Our Economy” predicts that the law will usher in “hundreds of thousands of clean energy jobs,” that it will reduce the cost of electricity and that it will encourage innovation.

“The Clean Power Plan is an incredible economic opportunity that states can’t afford to miss,” Forbes contributor Jim Marston said in the article.

Others assert that the pressure these regulations place on power plants will harm state economies that heavily rely on coal production. According to BBC, many utility companies argue that the consumer will receive the biggest blow in the form of increased power bills.

For those who work in the heart of the power generation industry, however, the concerns go beyond

economic impact. “We need base-load power,” says William Livoti, power

generation business development manager at WEG Electric Corporation and Pumps & Systems Editorial Advisory Board (EAB) member. “Fifty-five percent of the power plants in the U.S. were coal-fired. Fast-forward to today: It’s (about) 35 percent.”

Power industry professionals like Livoti worry that a continued decline in base-load power—namely coal-fired plants—will contribute to a less reliable grid.

“Coal-fired power plants were never designed to run at reduced load. They were designed to run at full load all the time,” Livoti says. “So now, because of this influx of renewable energy on the grid, coal-fired power plants are swinging the load, and this is killing the reliability of these plants. At a recent conference I was at, that was the No. 1 topic of discussion: how to maintain reliability under these operating conditions.”

The majority of these reliability problems and failures are associated with the plants’ pumping systems, Livoti says. These load swings are placing added pressure on pumps, mainly circulating water pumps, boiler feed pumps, condensate pumps and heater drain pumps.

“A majority of these coal-fired power plants are over 40 years old,” Livoti says. “So now you’re pushing them back on load and stressing 40-year-old equipment. That’s like taking your 40-year-old car on a drag strip. … The power industry doesn’t know what to do.”

Compounding the problem, Livoti adds, is the lack of a national energy policy that gives the power industry guidelines for how to comply with these new regulations. In the face of these challenges, original equipment manufacturers (OEMs) must continue to develop innovative solutions that allow power suppliers to optimize their pumping systems, and power suppliers should consider using variable frequency drives (VFDs) to help control the speed of their pumps.

“New technology is going to drive the power industry, and pump technology needs to be a part of it,” Livoti says. “The generators and the boilers are the heart of the power plant. The pump systems are the arteries. … (Pump OEMs) must step up to the plate and come up with creative

3 Regulations You Need to Know About in 2016Pump system professionals must be aware of new rules

to adapt to an evolving marketplace.

By Amelia Messamore | Pumps & Systems

4 | State of the Industry

technologies that can handle the cycling required by power plants.”

At press time, the Senate had voted to block the Clean Power Plan, a move that Obama plans to veto, according to a Nov. 17, 2015, article by The Washington Post.

2 The DOE Energy Conservation Standard for PumpsIn June 2011, the Department of Energy (DOE)

issued a Request for Information that began the process of regulating pump efficiency in the U.S. for the first time. Since then, the Hydraulic Institute (HI) has been at the forefront of the development, coordinating responses from industry stakeholders, gathering data and implementing related initiatives.

The result of these efforts, the Energy Conservation Standard for Pumps, is slated to be released in its final version in the first quarter of 2016. Once the standard is made law, pump OEMs will have four years—by 2020, if the final version is not delayed—to comply.

The regulation will set efficiency standards for five main types of clean water pumps: end suction close-coupled, end suction frame-mounted, in-line, radially split multi-stage vertical in-line diffuser casing, and vertical turbine submersible pumps. The scope of the rule includes pumps from 1 to 200 horsepower (HP), pumps that have a minimum best efficiency flow rate of 25 gallons per minute (gpm), and pumps with a high head limit of 459 feet at the best efficiency flow rate.

Through negotiations, certain clean water pumps—such as circulator pumps and dedicated-purpose pool pumps—have been excluded or set aside for future consideration. An Appliance Standards and Rulemaking Federal Advisory Committee working group is developing a term sheet for the regulation of dedicated-purpose pool pumps, and the HI Circulator Committee is informally negotiating with energy advocates to develop a term sheet that can be recommended to the DOE for circulator pumps.

Michael Michaud, executive director of HI and Pumps & Systems EAB member, says that the DOE rule will likely remove 25 percent of pumps from the market by 2020.

“(OEMs) are going to have to look at how they can improve their pump efficiencies through redesign or other improvements to meet these tougher standards,” Michaud says. “I know that many HI members are already there.”

Parallel to the Energy Conservation Standard, the DOE is also implementing the Test Procedure for Commercial & Industrial Pumps, which establishes a standardized method for measuring pump efficiency. HI, with the support of the DOE, developed a test standard, which the DOE incorporated by reference in the parallel test procedure, HI 40.6, Methods for Rotodynamic Pump Efficiency Testing. This standard will establish benchmark test procedures that will be used to verify that pump efficiencies conform to DOE requirements. HI’s new Pump Test Lab Approval Program (HI 40.7) will further ensure compliance by providing third-party validation that test

Image 1. American Electric Power’s coal-fired Amos Plant in West Virginia (Image courtesy of American Electric Power)

5 | State of the Industry

lab procedures comply with standard requirements. “This is an additional guarantee that the performance

numbers are correct,” Michaud says. Pete Gaydon, HI’s director of technical affairs, says

that by law the DOE must consider the impact these regulations will have on manufacturers. They conducted studies and analysis to evaluate how the standard would affect small manufacturers and competition in the marketplace. In the end, they determined that proposed Energy Conservation Standard and Test Procedure for Pumps “is not overly burdensome, and there is significant time to comply,” Gaydon says.

While the industry may have adequate time to prepare, redesigning or completely replacing product lines can incur significant cost. Plus, OEMs know that the DOE can revise the rule to require even more stringent compliance.

“It’s not known how far the DOE is going to go 10 years from now, so there’s uncertainty,” Gaydon says. “The manufacturers are going to try to redesign equipment to be as efficient as possible or come up with other methods of meeting the DOE regulations such as offering more products with variable speed drives.”

Despite the costs, several benefits are clear, Gaydon says: an increased emphasis on a systems approach to evaluating efficiencies, a better industry-wide understanding of the importance of optimizing pumping systems, and a long-term reduction in energy use.

“Over the 30-year life of the standard, as the DOE looked at it, they estimated that 0.27 quadrillion BTUs (British thermal units) will be saved from 2019 through 2049,” Gaydon says. “That’s obviously a benefit to all and a main reason they’re embarking on this standard.”

For more information about the standard and these additional initiatives, please visit pumps.org/doerulemaking.

3 The Integral Horsepower Motor RuleA major amendment to previous motor

regulations in the U.S.—10 CFR Part 431—will take effect June 1, 2016. Known as the Integral Horsepower Rule, this DOE regulation will amend the Energy Independence and Security Act, which took effect in December 2010.

The regulation will affect 1- to 500-HP, low-voltage, three-phase electric motors—as well as 56-frame enclosed motors—sold for use in the U.S., including imports. These motors will be required to meet Premium Efficiency standards according to the National Electrical

Manufacturers Association (NEMA) MG 1-2014, Tables 12-2 and 20B.

According to a report from Baldor Electric Company, motors that fall under the scope of this rule must have the following characteristics:

• single-speed • rated for continuous duty (MG 1) operation or for duty

type S1 (IEC)• contain a squirrel-cage (MG 1) or cage (IEC) rotor• operate on polyphase alternating current (AC)

60-hertz sinusoidal line power• have two-, four-, six- or eight-pole configuration• rated 600 volts or less• have a three- or four-digit NEMA frame size, including

those designs between two consecutive NEMA frame sizes or an enclosed 56 NEMA frame size

• 1 to 500 HP (or kilowatt equivalent)• meet all the performance requirements of a NEMA

design A, B or C electric motor or an IEC design N or H electric motor

Patrick Hogg, vertical and variable speed product manager at Nidec, says manufacturers have already been preparing for these changes, and many already sell motors that meet these requirements. Once the rule takes effect, however, manufacturers will only be able to build higher efficiency motors.

Hogg says this rule is largely modeled after a system already in use in the European Union. “It is a global push for efficiency,” he says. “After the U.S. rule goes into effect, Canada and Mexico are likely to follow.”

In the face of these fast-approaching changes, many in the industry are counting the cost, both in terms of price and engineering.

“Fifty-six-frame enclosed motors never have been covered before, so they’re going to really jump up in size and cost,” says John Malinowski, Baldor’s senior manager of industry affairs and Pumps & Systems EAB member.

The pumps that are powered by these motors will also be affected by the rule, Malinowski says. Because Premium Efficiency motors will be operating at higher speed, the centrifugal loads of the pumps could lead to motor overload and other system problems.

“Pump manufacturers will be redesigning pumps to accommodate these higher speed motors,” Malinowski says, emphasizing that pump OEMs will also need to innovate to ensure reliable and efficient performance for entire systems.

For more information, visit nema.org.

6 | State of the Industry

A s the utilities operations manager for the City of Wichita Falls in north-central Texas, Daniel Nix knows that water is a precious and scarce

commodity for the municipality located in an area that averages about 30 inches of rainfall annually. The drought cycle hits the region every 10 to 15 years, and the impact from the latest dry spell was especially tough on the community’s water resources.

“All of that came to a head in this most recent drought when we had two years of back-to-back precipitation below 20 inches annually and one year of record-breaking temperatures where we had 100-degree temperatures for 100 days,” Nix said. “We typically only have 26 days over 100 degrees” in a year, he added.

The severe weather pattern that hit in 2011 and continued the following year—when “it was a little bit better” because “we only had 50 days over 100,” Nix said—contributed to ongoing challenges for supplying water in the city that has just north of 100,000 residents. “We realized that if we are going to be a viable municipal area for industry and everything, we need to make our resources more sustainable, so we began in the late ’90s looking at reuse options,” Nix said.

Wichita Falls in July 2014 implemented a direct potable reuse program, which utilized water treated at the local wastewater plant. Instead of releasing the treated liquid back into the environment through reservoirs or rivers, the system returned the treated water back to the city’s system for further filtration and treatment using multiple steps, including reverse osmosis and others, to meet strict drinking-water standards.

“We realized the wastewater effluent was basically a nonstop source of water we were just throwing into the Big Wichita River,” Nix said. “We realized that resource is one we could capture and keep in our resource loop.”

Wichita Falls is not alone as many communities in the U.S. and around the globe are taking extensive steps to conserve water for their cities to use—and reuse.

Saving WaterIn the U.S., ongoing drought conditions and other environmental impacts are expected to contribute to a 61 percent increase in wastewater reuse by 2025, according to a report released in July 2015 by Bluefield Research, a firm based in Boston, Massachusetts, that focuses on strategic water analysis. The 61 percent increase is expected to require $11 billion of capital expenditures, with 94 percent of the dollars spent focusing on nine states—mainly Florida and California, the organization stated.

“Potable reuse—treating wastewater to drinking water quality—currently makes up 15 percent of the total capacity but is expected to increase to 19 percent of total water reuse by 2025,” according to a statement from Bluefield Research about the study. “The expected jump in potable reuse stems largely from heightening pressure on policymakers and utilities to stay ahead of scaling urban populations, anticipated future droughts and limited water supply alternatives.”

Bluefield Research noted that more than 247 reuse projects are in the works in the U.S. Erin Bonney Casey, a research analyst with Bluefield Research, said that more than $1.9 billion of reuse applications have been submitted for approval just in California. “We’re seeing a lot of communities addressing this in response to drought. California has really been pushing for reuse because of the current situation they’re in. Texas is also supporting reuse,” Bonney Casey said.

She pointed to major projects involving water reuse in Texas including the one in Wichita Falls, as well as another program in Big Spring that started a couple years earlier.

Water Reuse Systems Provide Solutions for Scarcity

Concerns Around GlobeAround the U.S. and the world, governments are embracing systems that help

conserve water without relying on new aquifer and reservoir sources.

By Martin J. Reed | Pumps & Systems

7 | State of the Industry

“Elsewhere in the country, we’re definitely seeing an increase in reuse systems,” she said, pointing to Texas, Florida and California as the largest areas of activity in the U.S.

Around the world, prime examples of countries leading the charge are outside of North America. “The global leaders of reuse systems would be Singapore and Israel,” Bonney Casey said. “Singapore historically has imported a lot of its water from Malaysia. That has some international-relations risks to it, so they’re looking for a more localized water supply, and being an island, they’re looking at it more aggressively.”

Reuse in SingaporeSingapore is a small but crowded island that spans about 278 square miles (roughly 720 square kilometers) and boasts a population of more than 5.5 million people. “In the ’60s and ’70s, our country was polluted. We had no sewer, and we faced droughts and floods,” Maurice Neo, director of the Industry Development Department for Singapore’s PUB, or Public Utilities Board, which oversees the country’s water infrastructure, said at the 2015 International Desalination Association World Congress

gathering. “Now we collect every drop of used water and rainwater.”

Singapore’s water system utilizes a multipronged approach that includes water catchment covering two-thirds of the country’s land area through the use of 17 reservoirs, according to the organization’s annual report for 2014-2015. Plans call for increasing the catchment area by using up to 90 percent of Singapore’s land area. “This makes us one of the few countries that harvests urban stormwater on a large scale for water supply,” according to the report.

The country also uses a system called NEWater, which purifies “treated used water with advanced membrane technologies—namely, microfiltration, reverse osmosis and ultraviolet disinfection,” the report stated. “NEWater allows every drop of water to be used and re-used, creating a multiplier effect. … NEWater is also used to top up our reservoirs and is blended with raw water before undergoing treatment at the waterworks, after which it is supplied to customers for potable use.”

Water from the NEWater system “has passed more than 130,000 scientific tests and exceeds the drinking water standards” of the U.S. Environmental Protection Agency

Image 1. Reverse osmosis is a critical part of the direct potable reuse water program that served the City of Wichita Falls, Texas. (Courtesy of City of Wichita Falls, Texas)

8 | State of the Industry

After conducting a national needs assessment, the U.S. Environmental Protection Agency in a 2009 report estimated that nearly $335 billion is required to address deteriorating infrastructure for drinking water utilities over the next two decades.

“However, it is becoming more difficult for water utilities to finance these investments,” the Water Research Foundation, citing the figure in the EPA report, states in a document about infrastructure challenges in the country.

Noting information from the U.S. General Accounting Office (GAO), the Denver-based nonprofit that works to address water needs around the globe said “there is mounting evidence that the integrity of the U.S. drinking and wastewater infrastructure is at risk and needs a concerted effort to improve the management of key assets—pipelines, treatment plants and other facilities—and a significant effort to maintain, rehabilitate and replace these assets.”

Based on GAO information from 2004, the Water Research Foundation notes that “one-third of water utilities have deferred maintenance because of insufficient funding, had 20 percent or more of their pipelines nearing the end of their life, and lacked plans for managing their capital assets.”

As technology advances to improve water reuse and overall system efficiency, problems are continuing with improving and maintaining the basic infrastructure in many water utilities around the globe.

“I think the aging infrastructure is probably more of a problem,” said Erin Bonney Casey, a research analyst with Bluefield Research in Boston, Massachusetts. “Reuse is more exciting to me because it is new projects and a new way of thinking about water systems. … But we haven’t done a great job of maintaining the systems that we have, and that is, in my mind, a bigger priority.”

Installing new water filtration equipment and other related system infrastructure can benefit communities the facilities serve, but leaking pipes and other potentially failing components may remain in the utility, Bonney Casey said. “All of these new projects, they’re still feeding into the existing infrastructure, so you’re losing efficiencies. You build a fancy new plant and you’re still leaking water when it goes to be transmitted.

I don’t think it’s a particularly effective way to manage the water supply,” she said.

The Water Research Foundation identified the problems associated with aging infrastructure as a tremendous concern. The organization is funding projects that work on repair, rehabilitation and replacement; extending the service life of installed water system components; detecting leaks in systems; and ultimately reducing high-risk water main breaks. “WRF has been funding numerous projects to help communities address these issues through the above actions,” according to a statement from the organization.

Technology to pinpoint pipe leaks can help to reduce costs of addressing problems with aging infrastructure at water utilities. “There are some companies that sell smart water systems … that are intended to identify leaks more accurately and proactively,” Bonney Casey said. “There has been limited adoption of that in the U.S., but companies are definitely pushing that as a means of bringing the water supply system into the 21st century.”

Technology that can find leaks without costly construction projects is another way to help utilities. “The other interesting technology development is looking at how to replace and rehabilitate pipes without digging them up—tunneling or pipe-relining technology that doesn’t require you to open up the ground,” Bonney Casey said. Many repair projects can be “a disruption to streets and traffic and people, so if you can avoid that, the projects become so much more feasible.”

AGING INFRASTRUCTURE COULD COST $300 BILLION OVER NEXT TWO DECADES

9 | State of the Industry

and the World Health Organization, Singapore’s PUB states in a March 2013 report. NEWater can meet about 30 percent of Singapore’s total water demand, but PUB plans to increase it to 55 percent by 2060. Additionally, the country relies heavily on desalination, with two plants that meet up to 25 percent of the country’s demand and a third scheduled to start operation in 2017.

“PUB cherishes every drop,” Peter Joo Hee Ng, the PUB’s chief executive, said at the IDA gathering in San Diego, California. “The future relies on reuse and desalination,” he added. “We are always looking for innovations that make things cheaper and cleaner. We put a larger investment into (research and development).”

Toilet to TapPart of the challenge with wastewater reuse for potable systems is not just the technology but public buy-in. “A lot of people think of it as toilet water, but really toilet water is only a small portion of the overall sewer usage,” said Nix, the utilities operations manager for the City of

Wichita Falls. “Toilet facilities are less than 20 percent of that flow,” with the vast majority of wastewater coming from showers, sinks, laundry equipment and other household uses, he said.

When the city’s direct potable reuse system came online in July 2014, residents recognized the importance. “We had huge support from the public,” Nix said. “They made the reuse happen. … It was the citizens pulling together that got them through the drought.”

In Texas, many government leaders and residents recognize the importance of reuse. “We’re very fortunate in Texas that the voters, through the guidance of the Legislature, have provided to our agency $2 billion to help finance water projects in our state water plan,” said Dr. Robert Mace, the deputy executive administrator for the Texas Water Development Board. “That $2 billion is a lot of money, but it doesn’t go that far in water infrastructure. That money is going to be leveraged into $27 billion of financing power of building water projects and water infrastructure. (Of that amount) 20 percent

Image 2. Gayland Bragg with the City of Wichita Falls, Texas, performed work in the municipality’s reverse-osmosis plant for the direct potable reuse water program. (Courtesy of City of Wichita Falls, Texas)

10 | State of the Industry

will go to water conservation and reuse projects.”Texas benefits from about 316,000 acre feet of water

from reuse, but the state’s water plan is anticipating an extra 1 million acre feet from reuse by 2060, Mace said. The total will represent about 16 percent of municipal use in 2060. “This four- or five-year drought we went through in Texas really expanded communities’ awareness of reuse as a potential source of water, so there’s been far more interest we’ve seen in the last few years of reuse than we have ever seen before,” he said.

The state’s first direct potable reuse system came online in May 2013 in Big Spring. “I like to joke with people that it’s a local spring of water, so it’s a potential resource that can be used to meet current water supplies without the cost of building big pipelines somewhere to get water,” Mace said. “And a lot of times, at least in Texas, generally the community owns that water already so they’re not having to buy from somewhere else.”

Business PotentialCompanies from a variety of industries spanning pump-related businesses, filtration systems and others could benefit from the increase in water reuse projects in the

coming years. When asked about observations concerning the importance of water reuse in communities, Dieter Sauer, president of Grundfos Water Utility Inc. based in the Chicago area, said, “It’s a topic of conversation that is increasing in frequency every month.”

Calling the reuse of water for municipal purposes “critical,” Sauer said the idea of “the complete closed loop, toilet to tap, is maybe a little farther away. … But reuse, when it comes to using it for irrigation and using it for non-potable applications, we are hearing about it more and more.” He added, “It seems that more and more in the visits that I make, the wastewater operators are absolutely collaborating with local entities, public and private, to tap into that effluent stream, that water stream, to make good use of it.”

Grundfos has invested more than $50 million in municipal water-related activities in the U.S. since 2008, according to the company. “This is a market that we see is viable in the mid to long range. It’s going to be a market that is going to invest in infrastructure improvement, and we want to be there to support it when it does,” Sauer said. As an example, he pointed to improvements made to the overall efficiency of the water system in Cottonwood, Arizona, which averages about 12 inches of rain annually.

Table 1. The capacity for potable and non-potable water reuse is expected to more than double in the U.S. by 2025. (Courtesy of Bluefield Research)

Table 2. Florida and California were leaders in the country in the amount of reused wastewater flows in 2014. (Courtesy of Bluefield Research)

11 | State of the Industry

“You have a location that is already in a water-challenged area … so water conservation is absolutely critical,” he said about the improvements to Cottonwood’s utility, which “reduces the impact to that aging infrastructure.”

Philip Rolchigo, vice president of technology for Pentair, said water reuse represents an important area of growth for the pumps-related industry. “If you look at our business, our flow and filtration business focuses not only on pumping technology but treatment technology. The trends in water reuse are exciting and growing and are an important component to solving water scarcity issues. We see tremendous growth opportunities in industrial reuse,” Rolchigo said.

“These are big trends and really important, I think if not the most important one, one of the most important components to addressing the water scarcity issue,” he added. “We think about addressing these global challenges and creating solutions to address these global challenges.”

The City of Wichita Falls deactivated its direct

potable reuse system in July 2015 after plenty of rain refilled lakes, but the municipality is repurposing the infrastructure for an indirect potable reuse system that will transfer treated water to lakes, Nix said. The new system should be online in 2017 and result in 10 to 16 million gallons of water placed into Lake Arrowhead daily.

Nix recalled a saying by someone involved in what’s believed to be the world’s first major direct potable reuse system developed in Namibia, Africa. “The Ph.D. that put all of that together has a very famous saying that water should not be judged by its history but by its quality,” he said. “You couldn’t do something like this 40 or 50 years ago. … We proved that it can be done safely.”

Image 3. The Big Spring Raw Water Production Plant in Big Spring, Texas, operated by Colorado River Municipal Water District, utilizes reverse-osmosis racks as well as clean-in-place and micro-filters skids, which are seen in the background. (Courtesy of Colorado River Municipal Water District)

Martin J. Reed is managing editor of Pumps & Systems. He may be reached at mreed@cahabamedia.com or 205-212-9402.

12 | State of the Industry

Oil may not pass $60 a barrel in 2016. “Some of the world’s largest energy companies and investment banks are becoming more pessimistic about the ability of crude oil pricing to reach even $60 a barrel next year, reporting steep losses as they take hits on projects that no longer make financial sense. … Continued oversupply means that next year, Brent crude prices will average $58 a barrel and West Texas Intermediate, the U.S. oil benchmark, will average $54 a barrel, according to 13 investment banks polled by The Wall Street Journal. Many of the same banks were predicting $70 a barrel in 2016 just a few months ago.”

“Oil Will Struggle to Break Past $60 a Barrel in 2016,” The Wall Street Journal, October 2015

Major companies are cutting spending significantly. “With oil having shed more than half of its value since June 2014, companies such as Royal Dutch Shell, ExxonMobil and Total have lowered spending by up to 20 percent, cutting thousands of jobs and reducing costs. Further reductions will be needed next year, which will hurt companies’ long-term production growth, Moody’s said in a report. … Moody’s expects companies to sell $40-$60 billion of assets in 2015-2016 to improve cash flow after divesting $70 billion in 2013 and 2014.”

“UPDATE1-Moody’s lowers outlook for oil & gas sector,” Reuters, September 2015

Innovation is increasing oil supply. “Innovation in the oil industry, particularly the North American revolution in the hydraulic

fracturing of tight oil reservoirs, has changed oil supply dramatically. With smaller, more flexible capital-light projects and shorter lead times, fracking has enabled greater

adaptability to volatile market conditions. The outlook for shale oil and gas could be just as strong in many places in the world. Even if the shale boom proves tough to

replicate (due to factors such as regional differences in geology, regulation and incentives to land owners), in many cases bringing new technologies to mature fields will help keep supply up and dampen the increase in oil prices.”

“This Oil Bust Will Change The Energy Industry Forever,” Forbes, August 2015

Russia hopes to keep output stable for the next 20 years. “Russia plans to squeeze all the oil it can from Soviet-era discoveries to

hold crude output stable for the next two decades as new finds are delayed by sanctions and slumping prices, according to the Energy Ministry. … Russia, which

relies on oil and gas for almost half of its budget revenue, has repeatedly broken post-Soviet production records this year as drillers benefit from a weakening ruble.

What People Are Saying About the Oil & Gas Industry in 2016

As the oil and gas sector struggles to rebound from an unstable market, companies are doing what they can to adapt and adjust to a shifting landscape.

Visit pumpsandsystems.com to see the full articles featured on these pages.

In many cases, bringing new

technologies to mature fields will help keep

supply up...

- Forbes, August 2015

13 | State of the Industry

Image courtesy of U.S. Well Services

Nevertheless future barrels may be at risk as exploration campaigns, mostly in undeveloped areas offshore, tail off following investment cuts.”

“Russia Resolves to Make Most of Soviet Oil as New Finds Wane,” Bloomberg Business, November 2015

European companies will also face spending cuts and debt. “Although European oil companies have reduced break-even points significantly through cost efficiencies and spending cuts, they will, on average, require an oil price of around $78 a barrel in 2016 to cover spending and dividend payments, according to Jefferies estimates before the latest results. … The downturn has forced Europe’s majors to reduce 2015 spending programs by about 15 percent to near $107 billion, and the cuts are set to become even deeper next year.”

“As Oil Outlook Dims, Industry Slips into the Red,” Fox Business, October 2015

Companies will continue to consolidate in 2016. “A lot of pump companies were servicing (the oil and gas) industry in one way or another, and globally that market is going to continue to be soft. There’s still opportunity, but there are fewer opportunities. What we’re going to see is consolidation of small players, so smaller operating oil and gas companies are going to get eaten up by larger, more fiscally sound companies.”

Paul Schlumpberger, President, Pioneer Pump, November 2015

Canadian worries persist. “PSAC (Petroleum Services Association of Canada) expects a total of 5,150 wells (rig releases) to be drilled in Canada in 2016. PSAC’s forecast suggests that next year will see the same slumped activity that hit the sector hard in 2015, but indicates the bottom has leveled off as 2015 finishes out with a total forecast of 5,340 wells drilled, in comparison. …”

Petroleum Services Association of Canada statement, November 2015

The Keystone XL decision may pose some challenges. “‘The Keystone XL decision does not mean less oil sands overall, but it may complicate oil sands access to the U.S. Gulf Coast, where there is substantial refining capacity for heavy types of crude,’ (said) Jim Burkhard, vice president at IHS Energy. Burkhard sees Venezuela and other countries that ship heavy oil to the U.S. as benefiting from the Keystone XL rejection. Venezuela heavy crude ‘will continue to be consumed by U.S. refineries in the absence of access to Canadian crude oil,’ he said.”

“After Keystone rejection, oil industry to rely on trains, other pipelines to move oil,” Associated Press story in U.S. News & World Report, November 2015

Global instability is causing concern among traders. “Oil prices had nudged up immediately after the (November 2015)weekend attacks in Paris and retaliatory French airstrikes on Islamic State strongholds in Syria, causing some concern about potential disruption of oil output from the region. Since then, prices have been trading in a narrow range with small moves up and down as traders weighed the geopolitical risk of output halts with the oversupply situation.”

“Oil futures end higher after dip below $40 a barrel,” MarketWatch, November 2015

14 | State of the Industry