World-Wide Pipeline Construction Plans Remain Strong

The latest available figures indicate a global pipeline construction market of more than 89,000 miles. Of these 49,488 miles account for projects in the planning and engineering phase and 39,745 miles are in various stages of construction.

Based on BP’s recently released Statistical Review of World Energy 2011, many more miles of new pipelines will be needed to meet global energy consumption demand which grew 5.6 percent last year, the highest increase since 1973. The report credits the increase to rebounding economies after the recession and strong growth among developing nations.

The report shows oil consumption grew 3.1 percent last year, the highest since 2004. It shows a strong rise in natural gas consumption which rose 7.4 percent, the largest gain by volume on record. Coal use rose by 5.2 percent, its highest single-year jump in 31 years. Chinese energy consumption grew by 11.2 percent, as China surpassed the U.S. as the world’s largest energy consumer for the first time in 2010.

As several countries in the Asia Pacific region lead the way in the global economic recovery, it is not surprising this region accounts for the highest number of new and planned pipeline miles in the six basic country groupings (see accompanying map) used in this report. Here is a breakdown of the pipeline miles planned and under construction in each respective area: Asia Pacific Region – 36,596; South-Central America, Caribbean – 12,079; and Western Europe and European Union countries –2,330; Middle East – 8,455; former Soviet Union and Eastern European countries – 22,029; Africa – 7,744.

Asia Pacific region
Fast-growing Asian economies are driving global energy demand growth and taking an increasingly larger share of oil and gas markets from developed economies. China, India and Australia remain the most active in the region in terms of pipelines planned and under construction. Much of the activity in China is centered around China National Petroleum Corp. (CNPC), the country’s largest oil and gas producer and supplier, that remains focused on coordinating domestic and international resources and markets to safeguard China’s energy security.

CNPC plans to double the length of pipelines laid during its 12th Five Year plan – 2011-2015 – vs. the 2006-2011 Five Year plan when 167,775 miles of pipeline were constructed. This would indicate construction of some 335,550 miles, or 67,100 miles per year, by the end of 2015.
CNPC’s most significant construction project is the second West-to-East Gas Pipeline Project (WEPP), one of the largest infrastructure projects in China. The first part of the WEPP is a 2,485 miles long and capable of transporting 17 Bcm/a from Xinjiang to Shanghai.

Construction of the second part of the WEPP will have a total length of 5,656 miles and capacity of 30 Bcm/a of gas. The entire pipeline is scheduled to be completed by the end of 2012.
With its high economic growth rates and 15 percent of global population, analysts expect India’s oil and gas import demands to increase. Several import schemes, including LNG and pipeline projects, have been implemented or considered.

GAIL (India) Limited is constructing the 870-mile Dabhol-Bangalore pipeline. Punj Lloyd is charged with laying seven of the 10 spreads totaling 510 miles. Two spreads were won by the KSS-KSSIIPL Consortium and the remaining spread by Advance Stimul Consortium.

Also in Thailand, Punj Lloyd is building a 185-mile, 42-inch pipeline for PTT LNG to transport gas from an LNG terminal being built near Rayong. The project requires 45 horizontal directionally drilled crossings and is set for completion by year-end 2013.

Australia was the world’s largest coal exporter and the fourth-largest exporter of LNG in 2009. Its prospects for expanding these exports are promising as Asian demand for coal and LNG is rising along with Australia’s proven natural gas reserves. Because the distances between Australia and its key natural gas export markets in Asia discourage pipeline trade, all exports are in the form of LNG.

Australian LNG exports have risen 48 percent over the past decade and are expected to continue to increase over the short to medium term. Japan is the main destination, but other customers include China, South Korea, India, and Taiwan.

For this reason, much of the activity in Australia is closely tied to numerous LNG terminals planned or under development. One is the Australia Pacific LNG (APLNG), a 50/50 joint venture between Origin Energy and ConocoPhillips to deliver coal seam gas to a plant in Gladstone. The APLNG project is designed to span from gas fields in the Surat and Bowen Basins in Queensland along a 280-mile pipeline to an LNG facility near Laird Point on Curtis Island off Gladstone.

While the potential energy resource base appears ample, there remain challenges and important considerations that may continue to deter oil and gas development, including but not limited to political, economic, operational, and geopolitical risks

Despite these challenges, pipeline are being planned and constructed. One of the most ambitious is the Trans-Saharan Gas Pipeline (TSGP) planned by the Nigerian National Petroleum Company and Algeria’s Sonatrach. The 2,565-mile project will take gas from fields in the Niger Delta north through Nigeria to Algeria and then to the coast. It could be on line in 2015. Estimated cost is in the $10 billion range with $3 billion for upstream gas development. EU officials say the pipeline could supply 20 Bcm/y of gas to Europe by 2016.

Western Europe, EU countries
Western Europe and the EU countries hold promise for future activity with a decision by the European Commission to provide US$1.9 billion in grants to ensure that some 30 gas projects are not delayed. Those to receive grants include the 500-mile Interconnector Turkey-Greece-Italy (ITGI) project, 130-mile Poseidon Pipeline, 281-mile Skanled Pipeline, 2,050-mile Nabucco Pipeline, 235-mile Odessa-Brody project and the 130-mile Slovakia- Hungary Interconnector.

South America, Central America, Caribbean

Brazil, Venezuela, Colombia and Argentina have major pipeline projects under construction and planned.

A 530-mile ethanol pipeline is planned by Petrobras to link main ethanol-producing regions to consuming centers in Sao Paulo and Rio de Janeiro. The pipeline will have a transport capacity of 21 MMcm/a.

Work is scheduled to start on the 2,575-mile Noreste Argentino Gas Pipeline (GNEA), to bring gas from Bolivia to Argentina. Argentina announced the first phase of construction will begin later this year to increase shipments of natural gas from Bolivia to 27.7 MMcf/d. The pipeline will cost an estimated $5 billion and will provide 3.4 million people in six provinces access to natural gas.

Colombia has seen a dramatic increase in oil production following a period of steady decline. Much of the increase is credited to regulatory reforms designed to make the sector more attractive to foreign investors. Colombia has implemented a partial privatization of state oil company Ecopetrol in an attempt to revive its upstream oil industry.

Expanded oil production will require further investment in transport infrastructure and refining capacity which China has expressed interest in financing.

Ecopetrol, one of the four principal petroleum companies in Latin America, is partnering with an international consortium to develop the Oleoducto Bicentenario pipeline. The $4.2 billion project will have a capacity of 450,000 bpd and is scheduled for completion late next year.

Sociedad Oleoducto Bicentenario de Colombia A.S. plans to build and operate a private-use oil pipeline between Casanare and Covenas that will be 596 miles long and have a final capacity of 450,000 bpd. The pipeline will be the largest of its kind in Colombia and developed in phases. The entire project is estimated to cost $US4.2 billion. Completion is scheduled in December 2012.

Venezuela remains a significant supplier of crude oil to the world market although no significant pipeline construction is reported. Still awaiting a construction is the $2.1 billion, 293-mile natural gas pipeline linking Venezuela’s Sucre and Anzoategui states and a second gas pipeline linking Venezuela to Argentina that will go through Brazil, Uruguay, Chile and Bolivia. On the oil side, construction is expected to start in 2012-13 on the pipeline planned by state-owned PdVSA and Russian oil transporter Transneft for development of the Orinoco oil belt.

FSU, Eastern European countries
The slowest projected energy growth among non-OECD regions is for non-OECD Europe and Eurasia, which includes Russia and the other former Soviet republics. Growth in energy use for the region totals 17 percent from 2007-2035 as its population declines and substantial gains in energy efficiency are achieved by replacing inefficient Soviet-era capital equipment.

Nevertheless, Russia and nations in the FSU and Eastern Europe hold promise for future oil and gas activity and several are constructing and planning extensive pipeline networks to reach Europe and the Asia Pacific region.

Kazakhstan is expected to see increased oil and gas activity. Full development of major oilfields could make it one of the world’s top five oil producers within the next decade. With production of 1.54 MMbpd in 2009, Kazakhstan is expected to at least double its production by 2019. Steadily rising natural gas production is also transforming Kazakhstan from a net gas importer to a net exporter. Natural gas development has lagged behind oil due to the lack of pipeline infrastructure linking the western-producing region with the eastern industrial region as well as insufficiency in export pipelines. But the Kazakhstan-China gas pipeline will enable the transport of gas to Kazakhstan’s industrial region along with increased gas exports when it comes online in 2014.

While Kazakhstan is hampered by the lack of access to a seaport, which makes the country dependent mainly on pipelines to transport its hydrocarbons to world markets, it is also a transit state for pipeline exports from Turkmenistan and Uzbekistan. Neighbors China and Russia are key economic partners, providing sources of export demand and government project financing. For this reason, Kazakhstan could see considerable pipeline construction in coming years.

Kazakhstan accounts for several projects, including the $5.4 billion expansion of the Caspian Pipeline Consortium’s Caspian Pipeline. The capacity of the 932-mile pipeline, which carries crude from western Kazakhstan to a dedicated terminal in the Black Sea, will increase to 1.4 MMbpd from 730,000 bpd.

In Turkmenistan, construction continues on the $2 billion East-West pipeline that will connect all major gas fields there to one network. Two state corporations – Turkmengaz and Turkmen Oil and Gas Construction – are developing the project. The 620-mile, 56-inch pipeline will have a capacity of 30 Bcm/a.

Awaiting a construction start is the US$21.5 billion South Stream pipeline which will transport up to 63 Bcm/a of gas to 10 consumer countries in the EU that is being developed by Italy’s Eni and Gazprom. French EdF and Germany’s Wintershall will also participate in the project. Russia now plans to launch the pipeline in 2015.

Middle East
Several major projects are slated in the Middle East where 3,201 miles of pipelines are in various stages of construction and 5,254 pipeline miles are in the planning and engineering phase.

The Iranian Gas Engineering and Development Company is planning to invest $US6 billion for 1,677 miles of high-pressure gas pipelines and 19 compression facilities in the next two years. Plans call for construction of the 335-mile Tran-Iranian gas pipeline from Iranshahr to Zahedan and another to the Pakistan border; a 373-mile pipeline from the Dehgolan region to Ahmaz; and a 56-mile line to Chabahar in the southeast.

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