2012 Pipeline Construction Report

Underground Construction and Pipeline & Gas Journal’s worldwide pipeline survey figures indicate that 118,623 miles of pipelines are planned and under construction. Of these, 88,976 represent projects in the planning and design phase; 29,647 miles reflect pipelines in various stages of construction. Almost 32,000 miles of pipeline are currently being planned for North America.

Natural gas pipelines again account for the majority of projects under construction and planned.

Supporting this is a GlobalData report that indicates approximately 75 percent of the total global planned pipeline additions during 2011-15 will be gas. The report says the Asia Pacific region should be responsible for 41.8 percent of total planned pipeline additions with China and India being the frontrunners.

New and planned construction projects for the world’s seven basic country groups include: North America – 31,951; South/Central America and Caribbean – 11,571; Africa – 7,617; Asia Pacific 34,295; Former Soviet Union and Eastern Europe – 19,537; Middle East – 11,480; and Western Europe and European Union – 2,172. (For more detailed information on these and other pipeline projects, see Underground Construction’s sister publication, Pipeline News.

North America
Nothing has changed the outlook for the North American energy industry quite like the discoveries in the shale regions in the U.S. and Canada. North America – which accounts for 26,300 miles in the planning stages and 5,651 miles under construction – should remain strong.
Those building pipelines in shale regions can expect higher costs. Ziff Energy Group reports pipeline owners are seeing higher construction costs in the shale regions of Marcellus, Eagle Ford, Haynesville, Barnett, Woodford, Fayetteville and Horn River.

After analyzing costs of 120 pipelines from the past decade, Ziff Energy Group’s results show the average estimated shale gas pipeline rose in 2011 to almost $200,000/inch-mile (the cost per pipeline diameter inch per mile), three times higher than 2004.

“All North America geographical regions appear to experience consistently higher pipeline costs than prior years,” commented Julia Sagidova, gas analyst and lead author of the report. “The Marcellus shale gas region (Pennsylvania) is the most expensive with an average cost of under $300,000/inch-mile. These large-diameter (24 to 36 inches) projects are typically 120 miles in length and cost $500 million.”

The report noted that the 30 percent rise in steel costs over the past year along with new industry regulations and practices to reduce right-of-way and minimize environmental effects are driving up construction costs.

In North America, work is progressing on DCP Midstream’s 700-mile Sandhills Pipeline. DCP is using new construction combined with existing pipeline to build a 100,000 to120,000 bpd NGL pipeline that will run from West Texas to Mont Belvieu in East Texas. The pipeline will be phased into service, with the first completed in the third quarter to accommodate DCP’s growing Eagle Ford liquids volumes. Service to the Permian Basin will be available as soon as the second quarter of 2013.

Greencore Pipeline Company LLC, a fully owned subsidiary of Denbury Resources Inc., is building the 231-mile, 20-inch Greencore CO-2 Pipeline from the ConocoPhillips Lost Cabin Gas Plant in Fremont County, WY, to a point in the Bell Creek oil field in Powder River County, MT. The CO-2 transported by the Greencore Pipeline will be used for enhanced oil recovery at the existing Bell Creek oil field. Completion is scheduled in late 2012.

Still awaiting a construction start is TransCanada’s $7 billion Keystone XL Pipeline. The route of the 1,661-mile, 36-inch crude oil pipeline begins at Hardisty, Alberta and extends southeast through Saskatchewan, Montana, South Dakota and Nebraska.

Late last year, the U.S. State Department announced it would delay a final verdict on whether the pipeline is in the national interest until early 2013 in order to conduct an environmental analysis of an alternative route that would navigate the pipeline away from environmentally sensitive areas in Nebraska.

North America also accounts for several pipelines in the planning and engineering phase, including Kinder Morgan’s 240-mile Cochin Marcellus Lateral Pipeline that will originate in Marshall County, WV, and terminate at an interconnect with the KM Cochin Pipeline in Fulton County, OH. Once completed, the pipeline will transport NGLs from the Marcellus producing region of Pennsylvania, West Virginia and Ohio to fractionation plants and petrochemical facilities in Illinois and Canada. The target in-service date for the pipeline is mid-2012.

Enterprise Products Partners L.P. plans to build a 1,230-mile pipeline to transport ethane from the Marcellus and Utica shale regions in Pennsylvania, West Virginia and Ohio to the company’s natural gas liquids storage complex at Mont Belvieu, The pipeline would have an initial capacity of 125,000 bpd and can be expanded to meet increased shipper demand. Commercial operations are slated in Q1 2014.

Oneok Partners will invest $910 million to $1.2 billion by late 2013 to:

• Construct the new 570-mile, 16-inch Sterling III NGL Pipeline to transport either unfractionated NGLs or NGL purity products from the Midcontinent to the Texas Gulf Coast;
• Reconfigure its existing Sterling I and Sterling II NGL distribution pipelines to transport either unfractionated NGLs or NGL purity products; and
• Build a 75,000 bpd NG fractionators, MB2, at Mont Belvieu.

The Sterling III Pipeline will cost between $610 and $810 million and have an initial transport capacity of 193,000 bpd with possible expansion to 250,000 bpd. The pipeline will traverse the Woodford shale and provide transport capacity for NGL production from the growing Cana-Woodford Shale and Granite Wash play. Completion is scheduled in 2013.

Getting Alaska’s North Slope (ANS) natural gas to market has been an elusive goal since oil production started in the late 1970s. Plans to build a major natural gas pipeline to deliver ANS natural gas to markets have come and gone over the years. One project still being evaluated to deliver North Slope natural gas is the 1,717-mile TransCanada-ExxonMobil Alaska Pipeline that would extend from Prudhoe Bay to points near Fairbanks, and Delta Junction, AK and then to the Alaska-Canada border where it would connect to a new pipeline that will link up with the pipeline system near Boundary Lake, AB.

TransCanada plans to file permitting applications in both the U.S. and Canada in the fourth quarter of 2012 with approvals anticipated in fourth quarter of 2014. Construction of the $32 to $41 billion project is scheduled to start in 2015 with first gas being available in mid-2020.

Still awaiting a development decision is Canada’s Mackenzie Valley natural gas pipeline project that received the stamp of approval from an independent panel charged with considering the environmental, social and economic impacts of the proposed $16 billion, 743-mile line on the Northwest Territories. However, last May Shell announced plans to dump its 11.3 percent stake and, while not killing the project, the development was a very crippling blow.

In Mexico, a McDermott International subsidiary completed a project to install three oil and gas pipelines for PEMEX Exploración y Producción in the Bay of Campeche.

Asia Pacific
Countries in the Asia Pacific region are undertaking massive construction projects to meet growing energy demand. The region accounts for the highest number of new and planned pipeline miles. Some 20,234 miles represent projects in the engineering and design phase; 14,061 miles reflect projects in various stages of construction with China, India and Australia the most remaining the most active areas.

Australia/Papua New Guinea

LNG continues to be the big newsmaker in Australia which accounts for seven sites under construction and eight more in the planning or engineering phase.

Marking the start of one of the country’s latest mega-projects is the $16 billion Santos GLNG LNG plant on Curtis Island. The plant includes the development of coal seam gas (CSG) resources in the Bowen and Surat Basins in southeast Queensland, construction of a 261-mile gas transmission pipeline from the gas fields to Gladstone, and two LNG trains with a combined nameplate capacity of 7.8 mtpa on Curtis Island.

Once completed, GLNG alone will supply 11 percent of Korea’s domestic gas needs and 9 percent of Malaysia’s gas consumption. First LNG exports should start in 2015.

FSU- Eastern Europe
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 Europe and the Asia Pacific region.

Transneft is contractor and operator on the Zapolyarye-Purpe oil pipeline project. The 310-mile Zapolyarye-Purpe pipeline, with capacity to ship up to 45 MMt/a of crude, will transport oil from the Yamal-Nenets Autonomous District and northern Krasnoyarsk territory. Some 750 miles of supply lines will need to be built. Zapolyarye-Purpe will connect fields on the Yamal Peninsula to the Eastern Siberia-Pacific Ocean pipeline (ESPO). The pipeline will be constructed in three phases with the final phase scheduled for completion in 2016.

Two other pipelines – Nabucco and Russian-backed South Stream – are proposed to tap Azeri gas for export to Europe. A final investment decision on the $20 billion Azeri development is expected in 2013.

Gazprom and China National Petroleum Corporation (CNPC) plan to partner to build the 1,616-mile Altai Pipeline to deliver natural gas from western Siberia to northwestern China. The contract period is 30 years and the supply volume, upon reaching design capacity, will be 30 Bcm/yr. First supplies are planned for 2015.

Limited energy development in Africa is due to political, economic, operational and geopolitical risks. The region accounts for 6,683 miles of planned pipelines and 934 miles under construction.

One area that may hold promise for near-term activity is Nigeria. At the World Petroleum Congress in Qatar, Minister of Petroleum Resources Diezani Alison-Madueke outlined $130 billion in investment plans for oil and gas sectors over the next five years, calling for construction of 1,245 miles of oil and gas pipelines to boost domestic gas supply, a petrochemical plant, new fertilizer and manufacturing plants and three greenfield refineries.

Awaiting a construction start is the 2,565-mile Trans-Saharan Gas Pipeline (TSGP) planned by the Nigerian National Petroleum Company and Sonatrach. Total, Gazprom and the European Union have all displayed an interest in assisting construction. EU officials say the pipeline could supply 20 Bcm/y of gas to Europe by 2016.

Western Europe/EU
While pipeline activity in Western Europe and EU Countries was expected to increase following a decision by the European Commission to provide US$1.9 billion in grants to ensure that some 30 gas project would not be delayed, the growing financial crisis among many EU countries could derail near-term activity.

Those projects scheduled 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.

Middle East
In the Middle East 8,805 miles of pipelines are planned and 2,675 miles are in various stages of completion.

South & Central America/Caribbean

Several South, Central American and Caribbean countries are implementing plans for new pipeline infrastructure.

In Brazil, Petrobras is constructing a 530-mile ethanol pipeline to link the main ethanol- producing regions in Minas Gerais and São Paulo to the large consuming centers of São Paulo and Rio de Janeiro. The pipeline will have capacity to transport 21 MMcm/a. The first section will extend 125 miles from Ribeirão Preto to Paulinia. Phase two involves construction northward through states in the mid-west. The system will be extended to Barueri and Guarulhos in greater São Paulo and Duque de Caxias in Rio Di Janeiro. The pipeline should be brought online in 2014.

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