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P&GJ's Worldwide Pipeline Construction Preview

Posted on: Tuesday, 31 January 2006, 06:00 CST

By Tubb, Rita

Stolt Offshore is responsible for the installation of 540 km of 44-inch diameter Langeled pipeline that will transport gas from the Orm'en Lange field via the North Sea Sleipner gas export hub to Easington in the UK. The pipelay vessel in the photo is the LB 200.

The pipeline industry, a truly international business, is gaining more importance as the natural gas markets expand globally. These trends are strongly reflected in P&GJ's 2006 Worldwide Pipeline Construction Survey which shows 81,593 miles of new and planned oil and gas pipelines are under construction and planned. North America accounts for 28,314 miles while the remaining 53,279 miles represent international pipeline projects.

This year's North American pipeline construction figures show a dramatic rise from just a year ago, increasing from 14,296 miles to 28,314 miles.

No matter where you look, natural gas dominates future activity. Supporting this is the 10,704 miles of future gas projects in the U.S. alone. Of these, 7,360 miles represent new planned gas infrastructure; 939 miles are to accommodate future LNG projects; 2,137 miles are planned expansions; and 268 miles represent replacement pipelines.

The nation's strong gas focus is no surprise. The Energy Information Administration projects increases in gas production to come mainly from the lower 48 states. Increased use of cost-saving technologies is expected to result in continuing large natural gas finds, including in the deep waters of the Gulf of Mexico, but also in onshore fields.

In the longer term, Alaska's North Slope represents a large potential natural gas source but getting it to market is the challenge. One possibility is the proposed $20-24 billion gas pipeline from the North Slope along the Alaska Highway into Alberta and possibly to markets in the U.S. Midwest.

North America

While accounting for 1,672 miles of new construction, work on major long-distance projects continues to lag. The nation's most significant construction projects include:

* Kinder Morgan's 160-mile oil pipeline from Texas to Arizona. The $220 million project includes six miles of 16-inch diameter pipeline construction in El Paso; 160 miles of 16-inch diameter pipeline construction through New Mexico to Tucson; and 65 miles of 12inch diameter line from Tucson to Phoenix. The project is scheduled for completion shortly, and

* Crosstex Energy's $98 million North Texas Pipeline to bring gas from the Barnett Shale to markets in the Midwest and East. Quanta is constructing a 47mile spread for the project while Pumpco Inc. is charged with constructing a 50-mile spread. Crosstex says the pipeline will have an initial capacity of 250 MMcf/d when it is placed into service in a few months.

Planned route of the Rockies Express Pipeline

The US. has several significant projects still in the planning or pre-construction phase, including 2,500 miles of pipelines out of the Rockies.

One of these is a Kinder Morgan Energy Partners and Sempra Pipelines & Storage venture to build the $3 billion Rockies Express Pipeline. The 1,350-mile, 42-inch diameter pipeline will handle 2 Bcf/d of natural gas. The planned route originates at the Cheyenne Hub in Weld County, CO and extends to the Clarington Hub in eastern Ohio. Plans call for the proposed pipeline to be staged into service between 2007 and 2009.

El Paso's plans call for constructing the Continental Connector Pipeline. Although originally slated to involve 1,000 miles of new 42-inch diameter pipeline construction, revised plans call for using existing or expanded El Paso pipeline systems to transport capacity from the Rocky Mountains and Mid-Continent supply regions to Custer, OK. At Custer, this gas and local Mid-Continent production will be transported on existing and expanded Enogex Inc. systems for re- delivery in the vicinity of Bennington, OK. The in-service target date is 2007-2008.

Engineering work is under way on Pacific Texas Pipeline's planned 825-mile, 35-inch diameter Picacho Pipeline to transport 1 Bcf/d of gas from west Texas to Ehrenberg, AZ.

On the natural gas liquids (NGL) side, Williams has launched a $500 million proposal to construct the 750-mile Overland Pass Pipeline. As proposed, the pipeline will originate in Opal, WY and terminate at the Conway fractionation and storage facility in Conway KS. The planned route passes through six counties in Wyoming, six in Colorado and 12 in Kansas, following an existing pipeline right-of- way as much as possible. If constructed, the pipeline could be placed into service in late 2007 or early 2008.

Canadian Activity 1

Future activity in Canada is expected to sharply increase overall North American construction pipeline mileage. By 2008, contractors expect to see a workload that has not been present seen in Canada for nearly three decades.

Much of the activity will be generated by the massive oil production that will come from the oil sands in northern Alberta which contain the largest deposits of hydrocarbons on earth. Terasen and Enbridge plan to move oil sands by pipeline.

Terasen plans to twin its Corridor Pipeline system by building a 475-km, 1,067-mm diameter pipeline to exclusively ship Shell's oil sand production to its refinery near Edmonton. Construction could start later this year.

Enbridge recently awarded contracts for construction of its Waupisoo Pipeline from the oil sand to Edmonton. Construction of this 475-km, 760-mm diameter pipeline could begin in August 2007 or earlier if government approvals can be secured before then.

Devon Energy is also in the process of calling for tenders to construct a dual pipeline over a distance of more than 300 km. The Access Pipeline would run from the Jackfish oil sands plant to Edmonton. Project completion is scheduled by year-end.

The following are also proposed to transport oil from the oil sands: Pembina's Alberta oil Sand Project; TransCanada's Keystone Pipeline; and Terasen's Bison Pipeline.

Additional projects anticipated in Canada over the next three to five years include:

* Terasen Gas' 140-mile Island Connectors gas pipeline;

* TransCanada's 125-mile gas pipeline for its proposed LNG terminal near Quebec City; and

* UltraMar Canada's 217-mile products pipeline from Montreal to Quebec City.

(For full details on these and other Canadian projects, see P&GJ, November 2005.

In addition, there are hundreds of miles of oil pipelines with diameters of 203 to 305 mm that will be built over the next few years.

One challenging plan is the Enbridge Gateway Pipeline to ship oil from its Edmonton terminal to the coastal port of Kitimat or possibly Prince Rupert. If constructed, it will require 1,200 miles of new right-of-way through rugged Canadian wilderness in northern British Columbia. It would require 12 or more construction spreads over four construction seasons. This line is expected to be 760 mm with a parallel 406 mm condensate line. Construction start is slated in 2008.

Canada's most high profile planned project is the long awaited Mackenzie Gas Pipeline, a 1,220-km natural gas pipeline system along the Mackenzie Valley of Canada's Northwest Territories to connect northern onshore gas fields with North American markets. The project is proposed by Imperial oil, ConocoPhillips Canada, Shell Canada, ExxonMobil Canada and the Aboriginal Pipeline Group. Hearings are now being held.

International Activity

The international sectors accounts for 5,852 miles of new on and offshore pipeline construction projects to be placed into service over the next several years. Planned projects total 47,427 miles.

Here are the construction and planned mileage totals by area: South and Central America 8,957 miles; Western Europe and European Union countries 1,160 miles; Middle East 3,941 miles; Africa 10,848 miles; FSU and Eastern Europe 15,161 miles; and Asia Pacific 13,212 miles.

While overall mileage seems high, actual construction activity has declined 50% since last year's report when international accounted for 37 projects that represented 11,579 miles of pipelines in various stages of construction.

Nevertheless, like North America, natural gas is becoming increasingly popular in international sectors as a less expensive and environmentally friendly fuel. Market analyses indicate growing demand for natural gas in key markets throughout Europe, Southeast Asia and several others.

Prominent Projects

Russia's Far East accounts for the most prominent projects under construction. ExxonMobil and a Shell-led consortium are developing the Sakhalin I and Sakhalin II projects, respectively.

Last October, ExxonMobil announced that its subsidiary, Exxon Neftegas Limited, began production from the multiphase Sakhalin-1 Project offshore eastern Russia. The initial phase of the project produced 50,000 bpd at year-end and is projected to produce 250,000 bpd by year-end 2006 from the Chayvo field. Associated domestic gas sales will start at about 60 MMcf/d and rise to 250 MMcf/d by the end of the decade.

The Sakhalin-1 project, representing one of the largest single foreign direct investments in Russia, involves construction of both offshore and onshore facilities as part of its initial development phase. These inclu\de the world's largest land-based drilling rig using extendedreach drilling to access reserves six miles from shore, an offshore platform that provides drilling capacity for up to 20 wells, an onshore oil and gas processing facility and an associated 140-mile crude oil pipeline, and a marine export terminal providing year-round storage and tanker-loading facilities on the Russian mainland at DeKastri.

Initial natural gas production is being sold to two domestic customers. The potential exists for export of additional gas volumes by pipeline to buyers in Asia. Initial oil production will be sold into the Russian domestic market. Upon completion of the DeKastri oil terminal and pipeline, oil will be sold to international markets beginning in mid-2006.

Sakhalin II

At Sakhalin II, the Shell-led group is involved in the world's largest single integrated oil land gas project. Scheduled for operation in 2007, Russian, Norwegian, British, Italian and French contractors are completing fabrication for the $9.6 billion development of two fields in the sea of Okhotsk off Sakhalin Island:

* Piltun-Astokhskoye, primarily an oil field with some associated gas; and

* Lunskoye, which has large reserves of natural gas and some oil.

Pipeline construction associated with the current phase of the project includes 995 miles onshore and 103 offshore.

Saipem and its partners LUKoilNeftegazstroy and Amec Spie Capag are building the onshore pipeline infrastructure. The company is also constructing the offshore pipelines to transfer oil and gas from the offshore Piltun and Lunskoye fields to Sakhalin Island, for transport through the 995-mile onshore oil and gas pipeline network to the south of the island.

Completion of both the on and offshore pipelines is scheduled by year-end. (For additional Sakhalin Project details, see P&GJ, April 2005).

In the Baltic region, German Chancellor Gerhard Schroeder and Russian President Vladimir Putin signed an agreement that will increase Russian gas sales to Europe while securing uninterrupted energy supplies for Germany. The 750-mile pipeline will be commissioned in 2010 and eventually carry 72 Bcm/yr of gas from northeast Russia to northern Germany, bypassing current routes through Poland, Belarus and Ukraine. Gazprom will retain a majority 51% of the $5 billion project with BASF and E.On each taking 24.5%.

Elsewhere in Russia, Saipem won a contract valued at more than $520 million to construct a pipeline that is part of a development being undertaken by the North Caspian Production Sharing Agreement Consortium (PSA) to develop the Kashagan field. Saipem hopes to begin installing the pipeline in 2006-2007.

In southeastern Europe, Bulgaria's Bulgarez is seeking international bids for a principal technical designer and a contractor to carry out an environmental impact assessment of the planned Nabucco gas pipeline project. Those participating in the project Turkey, Bulgaria, Romania, Hungary and Austria - plan to meet on project financing with the European Bank for Reconstruction and Development (ERDB), the European Investment Bank and International Finance Corporation. Construction of the $4.5 billion euro project is expected to begin in 2008 at the latest in order to begin piping 8-10 billion Bcm/yr of gas from 2012.

Bulgaria, Macedonia and Albania are studying the feasibility of constructing the $1.3 billion Burgas-Vlore Pipeline to link Bulgaria's port of Burgas and Albania's port of Vlore through Macedonia. Plans call for the 575-mile pipeline to transport up to 35 million tons of oil per year.

Also in recent months, Russian President Putin confirmed that the $2.5 billion Daqing Pipeline will be built first to China and later to the Pacific Coast. Construction of the 1,500-mile pipeline is slated to begin this year to carry crude from Siberia to Skovorodino near the Chinese border. Completion is expected in 2008.

Russia also approved Transneft's proposed oil pipeline from Siberia to the Asia Pacific region. The project will transport 1.6 million bpd via a 2,566-mile pipeline from Taishet in east Siberia to Pervoznaya in the Pacific region. Costs are estimated at $10 billion.

Russia's state-owned Rosneft is working on plans to develop its Vankor oil field in Siberia. Two pipelines are proposed: a 465-mile line from the field going north to a proposed terminal at Dikson and a second, 248-mile pipeline going south to connect with a Transneft pipeline system.

In the Xinjiang Uygur Automous Region, the China National Petroleum Corporation has started construction on a 149-mile section of the Kazakhstan-China Oil Pipeline. This section forms part of a 1,860-mile pipeline to bring Caspian Sea oil to Chinese markets. Construction on the $3 billion pipeline began in 2004. The systern is scheduled for completion in 2011.

Work is also under way in Uzbekistan where Russian oil producer Lukoil launched the Kandym-Kuauzak-Shady gas project. The development includes a gas chemical complex with capacity for 6 Bcm/ yr of gas. It will require the drilling of 240 production wells, a 932-mile pipeline, two compressor stations and other facilities. First commercial production is slated in 2007.

Pakistan is working on plans to build a pipeline from Iran to Indian markets across Pakistani territory. Russia's biggest gas producer, Gazprom, has shown interest in the $7.4 billion pipeline project. While Iran and Pakistan have made agreements to move forward, India remains reluctant as long as political and military tensions with Pakistan over Kashmir persist. Iran has offered to cover 60% of the construction costs.

Another natural gas import possibility that has been considered is an eventual link to the Dolphin Project. This plan would supply gas from Qatar's North Dome gas field to the UAE and Oman via a subsea pipeline from Oman.

The final natural gas pipeline option being discussed is a line from Turkmenistan to Pakistan via Afghanistan. Pakistan would face serious obstacles with this option unless Afghanistan becomes more secure. In addition, completed feasibility studies on the project indicate that the Turkmenistan field of Dauletabad will only be able to supply a portion of the gas needed by Pakistan.

Dredging work is shown being carried out by the Jan de Nul Group at Easington where the world's longest subesa pipeline will make landfall.

European Union

The European Union is a net importer of energy and by 2020 it is projected that two-thirds of its total energy requirements will be imported, including 75% of its natural gas. For these reasons, there remains a strong potential for significant pipeline activity in the next three to five years.

Once again, two of the most prominent EU projects at this time are in Norway: the Ormen Lange field development in the Norwegian Sea and Sn0hvit in the Barents Sea.

At Ormen Lange, where Norsk Hydro is the acting operator in the development phase, and Norsk Shell in the production phase, work is progressing. Norsk Hydro began construction of the Langeled Gas Pipeline linking Norway's Ormen Lange natural gas field to a new receiving terminal at Nyhamna and a 750-mile pipeline link from Nyhamna in northwest Norway to Easlington in the UK. Work on the southern section of the world's longest subsea pipeline for the project reached its halfway mark last year and the larger section, from Nyhamna to Easlington, is already complete.

In addition to the pipeline work being well advanced, crews have surpassed the half-way mark for the entire Ormen Lange development. The system is due to carry Ormen Lange gas from its processing facility to the UK beginning in October 2007.

Norway's second project, Snehvit in the Barents Sea, is Statoil's first and Europe's only export facility for LNG. The heart of the LNG facility, the liquefaction plant, will be borne and operated on a gas liquefaction barge. Completion work for the barge is due to be completed by August.

Other work associated with the project included laying an 89- mile pipeline to carry the gas from the Snohvit fields to the LNG plant. When the entire project is ready to begin operation, the plant will export 5.7 Bcm/yr of LNG annually to the U.S. and Europe.

In July 2005, construction began on the Turkey-Greece natural gas pipeline. The 186mile pipeline will run between Karacabey, Turkey and Komotini, Greece, with a possible future connection to the Greece-Italy pipeline.

Asia Pacific Region

Unquestionably, the Asia Pacific region holds promise for a significant upturn in nearterm construction activity.

In Indonesia alone the state-owned transmission and distribution company, PGN, said $150 billion is needed to finance infrastructure projects over the next five years. The following gas transmission projects are planned by PNG over the next five years:

* Duri-Dumai-Medan Phase 1 - 541 km, $393 million;

* Duri-Dumai-Medan Phase 2 - 254 km, $267 million;

* East Kalimantan-Central Java - 1,220 km, $1,475 million;

* East Java-West Java - 700 km, $538 million;

* Kepodang-Tambak Lorok - 207 km, $105 million; and

* Sengkang-Makassar - 274 km, $110 million.

Reliance Industries Ltd. has released plans for several products lines. Projects under consideration include the: 995-mile Jamnagar- Patiala Pipeline; 1,600-mile Jamnagar-Kanpur Pipeline; 416-mile GoaHyderbad Pipeline; 340-mile ChennaiBangalore Pipeline; 126-mile KakindaVijaywada Pipeline; and 236-mile HaldiaRanchi Pipeline.

Bharat Petroleum Corp. of India has shown interest in a Reliance proposal for a $2.2 billion products line to transport reserves from the Bay of Bengal to India. Gas Authority of India has also been in discussions with Reliance on the project, which would include an 895- mile pipeline 1 and a 1,550-mile pipeline.

Indonesia's state-owned transmission and distribution company, PT Perusahaan Gas Negara (PGN), began construction last year on its Sumatra-Java gas pipeline. PGN awarded Penspen Limited from Britain a contract to buildthree onshore sections that include a 185-km, 36- inch diameter line; a 270-km, 32-inch diameter section in South Sumatra, and a 44-mile section of 32-inch diameter line in West Java, along with a control center for pipeline operations. Completion is scheduled in 2008.

There is also the West Australian government's proposal to construct the 1,827-mile Transcontinental Pipeline to transport gas from the Northwest Shelf to Sydney, Melbourne, Adelaide and Hobart, Australia. P&GJ

Editor's Note: Space limits the amount of information available for this article. Complete details on projects planned and under construction can be found in P&GJ's sister publication, Pipeline News.

LITERATURE CITED

Presentation, Future for Canada's Pipeline Industry, by Barry Brown, executive director of the Pipe Line Contractors Association of Canada (PLCA).

Energy Information Administration, 2005 Near to Medium Term Outlook.

Pipeline News, December 2006.

By Rita Tubb, Managing Editor

Copyright Oildom Publishing Company of Texas, Inc. Jan 2006

Source: Pipeline & Gas Journal

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