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Pipeline & Gas Journal's 2005: International Pipeline Construction Report

Posted on: Thursday, 1 September 2005, 03:01 CDT

Pipeline & Gas Journal's 2005 International Pipeline Construction Survey indicates 54,068 miles of oil and gas pipelines are under construction and planned. Of these, 42,574 miles account for projects in the planned stage Ml and 11,494 miles represent pipelines under construction. This year's figures show a 6,310-mile increase over those reported a year ago when the international sector accounted for 47,758 miles of new and planned projects.

Stolt Offshore's LB220 is one of several pipelay vessels credited with installing the 745-mile Langled pipeline.

While international pipeline activity has shown relatively slow growth over 2003-2005, proposed additions in 2006-2008 could result in a record number of new pipeline miles. Much of the interest in completing languishing planned projects will be rekindled by higher oil and gas prices, increased demand in developing nations and the outlook for LNG's role in the U.S., Europe and other developing gas markets.

Supporting this is the recently released BP 2005 Statistical Review of World Energy. The Review indicates much of the recent demand for oil and gas was fueled by Asia, where Chinese consumption rose by 900,000 bpd, almost all of which was accounted for by imports.

On natural gas, the Review notes that international trade rose 9% in 2004. Pipeline shipments rose by more than 10%. Russia accounted for the largest increment, but growth was widely distributed across the world. Shipments of LNG rose by 5.4% last year, slightly below 2003.

A strong energy consumption showing by not only China, but all developing nations, is reported in ExxonMobil's 2004 Corporate Citizenship Report. As the data show, by 2030, energy demand will grow by 50%. Close to 80% of the energy demand increase will occur in developing nations. Europe is also an emerging gas market. Indigenous supply cannot keep up with demand and future gas supplies will be piped in from much greater distances.

P&GJ's Construction Overview

Following is a discussion of some, but not all, of the major projects planned and under construction in the six basic nation groupings used in this article, (see map below). More information is provided in P&GJ's sister publication Pipeline News.

Total pipeline miles planned and under construction: 54,068

Asia/Pacific Region

Again, a number of nations in this region with fast-growing energy demands account for a significant number of planned developments, while actual construction lags. Of the 22,129 miles of new and planned pipelines, only 2,181 miles account for actual construction.

One of the region's significant projects is a 588-mile gas pipeline being built for China National Petroleum Corp. by Beijing Urban Construction. Work started earlier this year on the Shaanxi- Beijing No. 2 transmission line with a throughput of 12 Bcm/y. The line will supply gas to Beijing, Tianjin, Shanxi, Hebei and Shandong, allowing PetroChina to service gas markets in five provinces and municipalities in north China.

Future plans call for connection of both the Shaanxi-Beijing Line 1, completed in 1997, and the Shaanxi-Beijing Line 2, planned for completion in September 2005, to be connected to the West East Gas Transmission Pipeline in the future.

Offshore gas fields are becoming a significant part of China's gas supply. The Chunxiao gas field in the East China Sea, being developed by China National Star Petroleum, is expected to become a significant producer in the next decade. The company estimates reserves at more than 1.6 Tcf.

Imported LNG will likely be used in China's southeastern coastal region, with possible expansion in the north, in the event Russian supplies fail to materialize.

In India, New Delhi-based Engineers India Ltd. was awarded two contracts involving pipeline projects from Hindustan Petroleum Corporation Ltd., (HPCL). The first is for consultancy services for the 650-mile cross-country Mundra-Delhi multi-products pipeline to connect Mundra Port Guijarat state to New Delhi. The line is routed through four states in the northern part of the country with tap- off locations at Palanpur, Ajmer, Jaipur, Rewari and Bahadurgarh, along with all associated station facilities including intermediate pumping stations at six locations. Construction will require 30 months, pushing completion to 2007.

The second is for engineering and project management consultancy services for HPCL's (Pune)-Sholapur multi-products pipeline. The project involves de-rating sections of the existing Mumbai-Pune multi-products line and its extension to Sholapurvia Miraj. This involves several hundred miles of 12- and 14-inch diameter cross- country pipeline. No completion date for the second project has been set.

Also under way is a $422 million project being executed by Global Industries, in consortium with Larsen & Toubro Ltd., to replace approximately 115 miles of oil and gas pipelines for ONGC off Bombay. In the 2005 work season, 14 lines, totaling 48.93 miles will be replaced, while 26 pipelines, with lengths totaling just over 70 miles will be replaced in the 2006-07 season.

In the Gulf of Thailand, Hyundai Heavy Industries is constructing a 376-mile pipeline to transport gas from offshore fields to Malaysia. The contract, valued at $280 million, is scheduled for completion next July.

Planned Projects

The high level of planned projects in the Asia/Pacific region is not surprising when energy use in China, India and other developing Asian nations is likely to increase more rapidly than in other regions over the next decade.

Also in this region, Thailand, Malaysia, Indonesia, Vietnam and Java have pipelines under construction or planned at this time.

Australia

In Australia, despite a decade of strong economic growth and being one of the world's fastest growing industrial countries, on- going tensions between pipeline companies and regulators has dampened construction activity and may well discourage the entry of new investors. Regardless, forecasters think Australia will see a significant amount of future pipeline activity.

Construction activity is now limited to a single project offshore where Allseas is constructing a 70-mile pipeline for Woodside Energy's Otway Gas Project. The project includes an offshore platform in the Thylacine Field and a gas plant to be built by Technip near Port Campbell. Production is slated in mid-2006.

A recently commissioned feasibility study that is drawing interest is from the Australian government for an 1,800-mile Transcontinental pipeline to ship gas from the Carnarvon and Browse offshore basins to southeastern domestic markets.

Although no date for construction has been set, in May, the AGL- Petronas consortium (Australian Gas Light Company and Petronas Australia Pty Ltd.) awarded a $25 million Front End Engineering and Design (FEED) contract to GHD Pty Ltd. for the 1,255-mile Australian leg of the multibillion-dollar Papua New Guinea (PNG) Pipeline. Contract terms call for GHD to design the pipeline segment from Cape York to Gladstone and southeastern gas markets. Also in this phase, regulatory, financial assessment, environmental and native title clearance processes will be undertaken.

The likely route will be down the east coast of Queensland with a branch to Mt Isa. Upon completion of the FEED contract, the next step will include finalizing the pipeline configuration, completing commercial arrangements with producers and selecting a pipeline contractor. Project participants are targeting initial gas deliveries to customers in 2009.

Growing World Energy Demand

Former Soviet Union/Eastern Europe

Once again, the considerable number of cross-border projects waiting to be implemented account for a much greater number of planned pipeline miles than actual construction in nations making up the Former Soviet Union and Eastern Europe. Of the 16,564 miles of new and planned projects, only 3,830 miles represent work now in progress.

Despite numerous challenges, the region did see completion of the Baku-Tbilisi Ceyhan (BTC) pipeline to export Azeri, and possibly up to 600,000 bpd of Kazakhstani oil, along a 1,040-mile route from Baku, Azerbaijan via Georgia to the Turkish Mediterranean port of Ceyhan, allowing oil to bypass the Bosporus Strait. A BP-led consortium began operating the 1-million bpd pipeline in May with first tanker deliveries scheduled later this year.

The South Caucasus Pipeline (SCP), aka. Baku-Tbilisi-Ezrurum, or BTE, planned for development by an eight-company consortium led by BP, will parallel the BTC oil line for most of its route before connecting to the Turkish infrastructure near the town of Erzurum. Completion of the $1 billion, 550-mile line is to be undertaken in stages. The project is expected to add 110 million tons of oil equivalent between 2006-20. The total capital cost of the first stage development of the Shah Deniz field and SCP is estimated at about $3.2 billion. Completion is scheduled to coincide with the Shah Deniz project's first contracted exports to Turkey in 2006.

Pipeline oil exports are scheduled to begin in 2008 from Atasu in northern Kazakhstan to Alataw Pass in China's northwestern Xinjian region. Construction of the $815 million, 613-mile pipeline began this year as part of a $3 billion project that will eventually stretch 1,860 miles from Atasu to Dushanzi, China.

One of the planned pipelines in this region i\s the 2,142-mile cross-border Nabucco Gas Pipeline. Five companies - Austria's OMV Gas, Botas of Turkey, Bulgargaz of Bulgaria, Transgaz of Romania and MOL of Hungary have formed a company to build the new pipeline to transport gas from the Caspian and Middle East to central and western Europe. The new venture group - Nabucco Gas Pipeline International Ltd. - will be responsible for preparing the financial documents and coordinating the subsequent project phases. The proposal carries a $5.5 billion price tag and is not expected to begin operation until 2011.

Also in recent weeks, ENI announced that the Trans Austria Gasleitung (TAG) pipeline which transports Russian gas to Italy through Austria will be expanded. By 2008, the transport capacity will be increased not less than 3.2 billion cubic meters per year. Work will begin in September.

Investment for the expansion amounts to some 130 million euro and the work will be carried out by TAG GmbH, a company jointly owned by ENI and the Austrian company OMV.

In other news, the TNK-BP-led venture that plans to link the Russian natural gas grid in Siberia to China and possibly South Korea via a pipeline from the Kovykta gas condensate field in Russia's Irkutsk region says the project has been delayed because of a late construction start. Field production is now slated in 2007. Kovykta, which lies 279 miles northwest of Irkutsk city, contains an estimated 1.9 trillion cubic meters of gas.

Russia's Gazprom is the world's largest gas producer, holding approximately 20% of the global gas reserves. Currently, Europe is Gazprom's only export market. For this reason, Gazprom is still interested in constructing a pipeline from Russia directly to Germany, with an extension to Great Britain and other countries. More than $50 million has been invested in feasibility studies to build the North-European Gas (NEG) Pipeline Project. One of its most important features is that it will directly connect Russian producers with customers in western Europe, bypassing transit countries. The total cost of the planned project is $6 billion. In order to implement the project, some 460 miles of additional pipeline would be needed in the Vologda and Leningrad regions to reach the seashore near the town of Vyborg.

In looking at Russia's lackluster pipeline construction, some cite funding difficulties and advances by Kremlin policymakers toward increased state influence in the energy sector.

Possibly for these reasons, the most significant construction activity is in the Russian Far East where the Shell-led consortium Sakhalin Energy Development Ltd. is moving ahead with the Sakhalin II development - the world's largest single integrated oil and gas project.

Slated to begin operations in early 2007, almost 1,242 miles of pipeline construction - 1,139 miles onshore and 103-miles offshore - is being undertaken in this phase. Construction of the onshore oil and gas pipeline that will run from Piltun in the north of Sakhalin Island via the Onshore Processing Facility, to Prigorodnoye in the south, is well under way. The two pipeline systems are each 487 miles in length. (See P&GJ, April 2005, for details).

As to other plans, the Khabarovsk Krai government is considering building the 1,429-mile KoRus Pipeline to transport 25 Bcm/y of natural gas from Sakhalin through North Korea and on to South Korea. Further extensions could service Japan and other nations.

Also being discussed by Japan Petroleum Exploration Co. (JAPEX) is a gas pipeline from Sakhalin Island to Japan by late 2008. The Sakhalin-Japan Project would involve construction of a 700-mile subsea line linking Cape Soya, Russia, with Niigata Prefecture, Japan. Engineering, procurement and construction is expected to take five years.

Western Europe & EU

Countries in western Europe and those making up the European Union are currently the world's second-largest energy consumer behind the U.S. Although planned and new pipeline construction lags in the region, growing demand could increase additions in the next three to four years.

The most significant pipelines scheduled for near-term completion are part of two world-class developments in Norway to develop the Ormen Lange and Snhvit fields. Ormen Lange, in the Norwegian Sea, is Norway's second-largest natural gas discovery with estimated recoverable reserves of 12.2 Tcf. Norsk Hydro is the acting operator in the development phase, and Norsk Shell is scheduled as operator in the production phase. As part of the development of the world's longest submarine pipeline - the 746-mile Langled Pipeline - is being constructed here.

Work associated with the development is well under way and a number of vessels are involved in laying the Langled Pipeline. Pipelaying began in April and is due to finish next year. The job of readying the Langled pipeline has been awarded to Halliburton. The system is due to carry Ormen Lange gas from its processing facility to the UK beginning in October 2007.

Norway's other major project, Snhvit in the Barents Sea, represents Statoil's first and Europe's only export facility for LNG. The 33,000-ton barge-mounted production plant for Snhvit left the Dragados yard in Spain on June 27 aboard the Blue Marlin heavy- lift vessel for its voyage to the Melkya site in northern Norway. The plant is due to export 5.7 billion cubic meters of LNG annually to the U.S. and Europe beginning in 2006.

Laying of the 89-mile main pipeline to carry the unprocessed wellstream from Snhvit to land was recently completed. Conclusion of the pipelay work marks the completion of the world's longest multiphase-flow pipeline. When the pipeline becomes operational in 2006, it will provide valuable information on multiphase flow transport over long distances.

Africa

While crime, corruption and ethnic unrest make security an issue in a number of African nations, it is also a region where new and planned pipeline construction increased over the past year, going from 5,066 miles to 6,795 miles. Of the new and planned pipelines, only 1,804 miles represent work now in progress.

One of the most significant projects is the $600 million, 620- mile West African Gas Pipeline (WAGP) Project that will traverse both on and offshore from Nigeria's Niger Delta region to its final planned terminus at Ghana. Willbros West Africa was awarded a contract by West African Gas Pipeline Co. Ltd. to install custody transfer metering in Nigeria and a 30-inch natural gas pipeline from the existing Escravos Lagos gas pipeline system to the initial compressor station at Lagos Beach, and the point of departure for the offshore section.

Additional pipelines and regulating and metering facilities for the onshore portions of the project in Benin, Togo, and Ghana are included in the project scope, as well as the engineering, procurement, construction and tie-in of the initial compressor station and land pipeline section. Groundbreaking ceremonies were held at Takoradi, Ghana, on Dec. 3, 2004. Project completion is expected late next year.

Willbros is also working on Phase II of the Amenan Kpono Gas Pipeline project. Willbros (Nigeria) Limited was contracted by Stolt Offshore West Africa to install and precommission the onshore portion of the 24-inch gas pipeline to provide additional feed to the NLNG Plant on Bonny Island. Completion is slated later this year.

In Egypt, Apache Corp. is developing a pipeline to link its Qasr fields with a gas supply hub at Apache's Shams gas field. Plans call for a 22-mile, 24-inch diameter pipeline from Qasr to Shams; a 37- mile, 18-inch diameter pipeline from Shams to Tarek; and a 26-mile, 20-inch pipeline from Shams to Obaiyed. The project cost is estimated at $75 million and should be operational later this year.

In other news, Nigeria and Algeria are seeking the World Bank's assistance to construct the $7 billion, 3,700-mile Trans-Saharan Gas Pipeline to deliver natural gas from those two countries to European markets. The pipeline route will extend from North Africa to Beni Saf before crossing the Mediterranean and making landfall in Almeria, Spain. Medgaz will be responsible for the 124-mile subsea portion of the project. The pipeline will transport up to 7 Bern of gas per year.

According to reports, Kenya and Uganda may extend an existing multi-product pipeline. Construction was scheduled to begin in 2007 but has been delayed. Plans call for the 198-mile, 8-inch diameter pipeline to run from either Eldoret or Kisumu, Kenya to Kampala, Uganda.

Middle East

Despite oil and gas activity being sidelined in some areas by violence and conflicts, the Middle East holds two-thirds of the world's proved oil reserves and one-third of the world's gas reserves. And those are just the known reserves. For this reason, there remains a huge potential for significant energy activity well into the future.

Once again, the region's most significant project is Dolphin Energy Ltd.'s natural gas project in Qatar's North Field, the largest non-associated gas field in the world. The project, which began in 2003, requires construction of several pipelines, including two 48-inch diameter subsea lines to transport North Field gas to a processing facility in Ras Laffan. One of these, a 230-mile pipeline that runs from the processing facility to Abu Dhabi, UAE, is being constructed by Saipem. Completion of the $350 million project is slated for next year.

In another development off Qatar, J Ray McDermott is set to begin work later this year on a 60-mile, 38-inch diameter pipeline that will extend from the field to an onshore terminal in Qatar. The project is in support of ExxonMobil Middle East's Al Khaleej gas project. It is anticipated to start up with pipeline gas sales to domestic users in Qatar later this year.

Pipeline proposals include the Iran-Pakistan-India gas pipeline (on the drawing boards since 1994) that may get off the ground next year.

Also under consideration is the $2.7billion Gulf South Asia (GUSA) pipeline from Qatar to Pakistan that was first announced almost 13 years ago. The gas pipeline will require 1,007 miles of construction offshore and 75 miles onshore. As proposed, it will transport 2 Bcf/d with additional throughput planned later. The expected time for construction is three years.

Still awaiting a construction start is Egyptian Natural Gas Holding Company's 244-mile south-north gas pipeline across Jordan (Aqaba to Rehab) to bring LNG to major power plants, industries and consumers in Jordan, Syria and Lebanon. The pipeline is known as the Arab Gas Pipeline or Jordanian Gas Transmission Pipeline.

South/Central America, Caribbean

The nations that make up Central America have limited energy resources and consume no natural gas. In the foreseeable future the region will likely remain important to world energy markets as a transit center for oil (via the Panama Canal) and as a potential energy transit center between North and South America. At this time the region accounts for no major pipeline activity.

In the Caribbean, only three countries have oil and natural gas reserves - Barbados, Cuba, and Trinidad and Tobago. Of these, Trinidad and Tobago are important to the U.S. as a supplier of LNG. As shown in Fossil Energy's Natural Gas Imports and Exports Fourth Quarter Report 2004, last year, more than 70% of U.S. LNG imports were supplied by Trinidad and Tobago.

Trinidad and Tobago officials are also working to bring the Eastern Caribbean National Gas Pipeline to fruition. Earlier this year details were released on a feasibility study financed by the project's current shareholders - Guardian-Holdings, AIC Financial Group and the IntraCaribbean Pipeline Co. The study reportedly substantiated the technical and commercial viability of the project. The planned route of the line has been altered to extend from Tobago to Barbados, then on to Martinique and Guadeloupe with connecting spurs to St. Lucia and Dominica.

Since the new route eliminates earlier plans for links to both St.Vincent and Grenada, some opposition seems likely.

Once the project proceeds, construction is planned in two phases, the first from Tobago to Barbados in the 2006-07 timeframe and from Guadeloupe to its termination point in the 2008-09 timeframe. When completed, the $550 million pipeline will transport 150 MMcf/d of natural gas.

Pipelines Planned & Under Construction

While several South America nations seem poised for significant energy developments, the region currently accounts for only 379 miles of pipeline construction. Conversely, they account for 3,171 miles of planned pipelines, of which 1,093 miles represent projects in Brazil.

As to construction under way, one of the few significant projects that has progressed is the $81.5 million, 379-mile Patagonia Pipeline. The Argentine government contracted Emgasud, a local contractor, to construct the pipeline that will supply gas to the provinces of Chubut, Rio Negro and Neuqun in Argentina's Patagonia region. The 10- to 12-inch diameter line will transport 1 MMcf/d of gas.

What could bode well for near-term construction is a decision by the Washington-based InterAmerican Development Bank to support a project for a South American natural gas pipeline to link Peru, Chile, Argentina, Uruguay, Brazil, Bolivia and Paraguay. The project would require the construction or expansion of pipelines in Argentina as well as new infrastructure in Peru and Brazil. A preliminary estimate of the needs that could be covered with Peruvian natural gas would be around 30 MMcm/d. No timeline has been announced for a construction start.

Equally promising is an ambitious proposal by Brazil's national energy company Petrobras to add 3,110 miles of new gas pipeline by 2007. Central to the project is the 807-mile Southeast-Northeast gas pipeline, Gasene, to link the Campos and Santos Basins to northeast markets.

Petrobras' transportation subsidiary Transpetro estimates that 1,555 miles of oil pipelines will be added to its network by 2010 that will require investments totaling $2 billion.

Petrobras also has eight offshore field discoveries under study and forecasts that 34 additional offshore fields will be brought onstreamby 2010.

Fearing that local suppliers will not be able to meet the demand for planned Petrobras/Transpetro oil and gas pipeline projects, Transpetro has expressed interest in attracting U.S. companies to render pipeline engineering, construction and assembly services to the on and offshore sectors.

The region also accounts for a number of other projects under study and in the planning phase that are discussed in detail in P&GJ's sister publication, Pipeline News.

Literature Cited:

World Energy Outlook, Energy Information Administration, Washington, D.C. ; BP Statistical Review of World Energy, June 2005; ExxonMobil's 2004 Corporate Citizenship Report. Pipeline News, July 2005.

By Rita Tubb, Managing Editor

Copyright Oildom Publishing Company of Texas, Inc. Aug 2005

Source: Pipeline & Gas Journal

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