Warren Buffett Watch: Keystone XL Pipeline could mean business for new Berkshire addition

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Posted: Sunday, January 5, 2014 12:00 am | Updated: 1:52 am, Tue May 20, 2014.

Warren Buffett may gain some business if the controversial Keystone XL pipeline crosses his home state.

That’s because Berkshire Hathaway Inc., the Omaha-based conglomerate Buffett heads, plans to buy a company that specializes in helping energy companies ship fluid products through pipelines faster.

TransCanada Corp.’s proposed pipeline would carry oil-bearing tar sands from Canada to petroleum refineries in the U.S. Gulf Coast. The route through Nebraska has drawn opposition from groups that say it could result in spills or cause other problems.

TransCanada is testing a “flow improver” made by Phillips Specialty Products Inc., a division of Phillips 66 Corp. that Berkshire plans to buy for $1.4 billion by mid-2014. TransCanada spokesman Davis Sheremata said Phillips Specialty products could be used in the Keystone, Keystone XL and other proposed oil pipelines.

Dean Acosta, a spokesman for Phillips 66, said flow improvers and other additives improve efficiency and move fluid products faster.

“Heavier crude, lighter crude, medium crude, there are different types of additives based on the type of product that’s being moved,” Acosta said, including raw materials and refined products such as gasoline, diesel or jet fuel.

In a recent presentation, Phillips Specialty said it is the market leader in flow improvers, which are long-molecule hydrocarbon polymers carrying trade names including ExtremePower and LiquidPower.

Inside a pipeline, the main flow of fluid moves freely, but friction causes fluid close to the walls of the pipe to try to stay still. The resulting turbulence creates eddies and “bursts” of disruptive motion that add drag to the flow, requiring more pressure and energy to move the fluid ahead.

Flow improvers, also known as drag reducers, are injected into the pipeline and inhibit the random, turbulent motion of the fluid’s molecules so that it flows smoothly. The improvers then dissolve.

Besides saving energy by requiring less pressure to move the fluid, improvers can reduce corrosion and other maintenance problems, said Phillips Specialty, which has offices in Houston and in Moscow and Brussels.

Conoco, now a part of Phillips 66, invented flow improvers more than 30 years ago, first using them in the Trans-Alaska pipeline. Scientists also are studying whether similar materials can improve blood flow in animals.

Surging markets in 2013 sent Berkshire’s stock holdings past $100 billion for the first time, a 21.9 percent share price gain for the 15 companies that make up the bulk of the Omaha conglomerate’s stock holdings.

Three of the 15 posted price declines for the year, but the other dozen had increases as high as American Express’ 57.8 percent. The biggest dollar gain was $5.1 billion by Wells Fargo & Co.

Berkshire’s annual report lists $76.3 billion as the year-end 2012 market value of the 15 large (more than $1 billion each) holdings, plus $11 billion more for other stocks.

Add in 2013’s $16.7 billion net stock price gain for the big investments, and the total is about $104 billion, which doesn’t count dividends or share price increases by the smaller investments.

Buffett and his investment lieutenants, Todd Combs and Ted Weschler, bought and sold some shares during 2013, so the exact year-end total could be higher.

Over the years, the stock holdings have increased not only from rising share prices but also from investing cash raised by Berkshire-owned businesses. At the end of 2002, Berkshire owned $35.5 billion worth of other companies’ stock.

Nebraska Life magazine, edited and published by Christopher Amundson of Norfolk, lists 17 “groundbreaker” Nebraskans who have “contributed profoundly to Nebraska and the world” though “creativity, courage, intellect and hard work.”

Headed by Frank Zybach, inventor of mechanized irrigation, and reservoir backer C.W. McConaughy, the list includes author Willa Cather, Social Security Act drafter Grace Abbott, legal scholar Roscoe Pound, coach Bob Devaney, greeting card magnate Joyce Clyde Hall, Twitter co-founder Evan Williams, arborist J. Sterling Morton, rural electrifier George Norris and scientists Charles Bessey, Harold Edgerton and George Beadle.

No. 14 is Warren Buffett, whose decision to live and work in Omaha created “a siren’s call for travelers to investigate this good life,” the magazine’s January-February issue said.

Buffett’s investing philosophy and charitable contributions impact millions, the article said, and the “intangible effects are priceless for Nebraska.”

Completing the “legendary Nebraskans” list are sugar beet king Heyward G. Leavitt, former Gov. Kay Orr (the nation’s first Republican woman governor) and dancer/actor Fred Astaire.

The Omaha World-Herald Co. is owned by Berkshire Hathaway Inc.

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