WORLD PIPELINE CONSTRUCTION PATTERNS SHIFTING AWAY FROM BIG NORTH AMERICAN GAS LINES

A.D. Koen
Gulf Coast News Editor

Warren R. True
Pipeline/Gas Processing Editor

The pattern of world pipeline construction has begun to shift away from large diameter gas lines in North America.

Total miles of gas pipelines planned this year and beyond have registered big increases in Europe and Asia-Pacific regions, more than offsetting decreased mileage of planned U.S. and Canadian gas projects.

World products pipeline construction planned in 1992 and beyond shows the largest year to year gain, paced by projects in Latin America.

Those are among highlights of the Oil & Gas Journal's annual pipeline construction survey. Many projects only under study or unlikely to be built are excluded from final mileage tallies.

A compilation of OGJ survey responses, industry sources, and published data indicates companies plan to lay more than 45,500 miles of pipeline this year and later, up about 4.7% from year ago levels (OGJ, Feb. 11, 1991, p. 23). Companies expect to lay more than 14,000 miles of pipeline worldwide in 1992, about the same total compiled last year.

Spending for worldwide pipeline construction this year is expected to total about $7.8 billion. For 1992 and beyond, total pipeline construction costs are expected to approach $26 billion. Both estimates are based on Oil & Gas Journal's annual pipeline economics report (OGJ, Nov. 25, 1991, p. 41).

Last year, the cost of pipeline construction was estimated at $11.5 billion. For 1991 and beyond, estimated construction costs last year totaled more than $36 billion.

CHANGING PATTERNS

Reported mileage of European gas lines to be completed this year jumped almost 1,500 miles from a year ago.

Gathering and large diameter transmission pipelines in the North Sea and expansions of distribution infrastructure in continental Europe accounted for most of that increase.

Europe's gas industry is entering an era of expansion, with major pipeline projects in the North Sea and continental Europe expected to add significant capacity by 1995. The International Energy Agency predicts that gas demand by 2010 will increase as much as 60-70% in western Europe and 130% in eastern Europe from current levels.

Two huge development projects in the Norwegian North Sea-Troll and Sleipner fields-are on schedule to begin delivering gas under contracts starting in 1993. And work has begun on a pipeline linking Heidrun field to an onshore Central Norway terminal.

Significant new Asia-Pacific gas pipeline mileage is expected to come on stream after 1992, notably involving projects of more than 30 in. diameter.

Total U.S. gas lines to be completed in 1992 dropped by more than 1,100 miles from 1991's level. After 1992, Canadian gas pipeline construction is likely to experience a similar reversal.

Several large diameter U.S. gas projects will start up in first half 1992, notably the Kern River pipeline from Wyoming to California, two large expansions in the San Juan basin, and the Iroquois pipeline to the U.S. Northeast.

NORTH SEA PIPELINES

Work began last year in the North Sea on Phase 1 of the $4 billion Zeepipe system, which by late 1993 is to begin transporting gas from Sleipner and Troll fields to a terminal at Zeebrugge, Belgium.

Phase 1 includes laying a 495 mile, 40 in. subsea line from Sleipner to Zeebrugge, a 25 mile, 30 in. subsea line from Sleipner to Statpipe's riser platform on Block 16/11, and a 140 mile, 20 in. condensate line from Sleipner to Karsto, Norway.

Norway's state oil company Den norske stats oljeselskap AS (Statoil) has ordered pipe for an intensive North Sea pipelaying program planned in the first half of the 1990s (OGJ, Jan. 6, p. 94).

At yearend 1991, Statoil placed a $342 million order for 400,000 tons of pipe to be delivered in 1992-93 for the 403 mile, 40 in. Europipe system from the Block 16/11-E riser platform to Emden in northern Germany. Europipe could be operating as early as 1995.

Statoil also ordered pipe for:

Phase 2 of Zeepipe, including a 117 mile line from Heimdal terminal to Kollsnes, Norway, and a 188 mile line from Kollsnes to Sleipner.
Troll 1 system, twin 40 mile, 36 in. lines from troll field to Kollsnes.
Haltenpipe, a 152 mile, 20 in. line linking Heidrun field to Tjeldbergodden onshore terminal in Central Norway.

When it starts up in 1996, Zeepipe Phase 2 allow movement of Troll gas from Kollsnes to Zeepipe Phase 1, Statpipe, and Norpipe.

Gas exports from the U.K. North Sea to continental Europe are to start this fall when Ultramar Exploration begins deliveries from its Markham field through a new 24 in. pipeline.

Gas from Markham field-which straddles the boundary between U.K. and Dutch sectors of the North Sea-will be split between Netherlands' Gasunie and Germany's Wintershall AG Exports to Gasunie alone will build to 37.3 bcf/year. Deliveries to Wintershall are to start in 1993 and reach 15 bcf/year.

GERMAN GAS LINES

In Germany, gas transportation giants Wintershall and Ruhrgas AG are competing to secure gas supplies and lay lines into the eastern part of the country and across eastern Europe.

Ruhrgas early this year will start up a 37 mile spur from Lauterback, Hesse, to Vitzeroda, Thuringia.

Wintershall expects to have completed by yearend 1993 a 370 mile gas line from Emden to Ludwigshaven. This year the company also will complete a 190 mile gas pipeline on its Stegal system into Czechoslovakia.

Also in Germany, a group led by Deutsche Shell AG plans to lay a 280 mile products line between the Hamburg refining center and Dresden in eastern Germany. The line is scheduled for start-up in 1994-95.

OTHER EUROPEAN LINES

Last month, the U.K. government said it was discussing with several companies the idea of laying a gas pipeline linking Britain to continental Europe (OGJ, Jan. 27, p. 27). The line likely would cross the English Channel to France, but source of the supplies is uncertain.

A combine of British Petroleum Co. plc, Statoil, and Norsk Hydro AS has submitted plans to British and European Community agencies proposing to sell Norwegian gas to Britain's growing industrial gas market.

In late 1991, the Irish government ordered state owned Bord Gais Eireann (BGE) to proceed with a 170 mile pipeline across the Irish Sea linking Scottish and Irish gas grids (OGJ, Dec. 30, 1991, p. 38).

The offshore line, which could be laid in 1993, will begin at Loch Shinney north of Dublin, skirt the western edge of the Isle of Man, and make landfall on Scotland southwest of Solway Firth. A 70 mile land segment from the Scottish coast to Moffat will tie the system into the Scottish grid.

The $247 million project will provide Ireland with gas supply flexibility and security. The new line ultimately could be connected with continental Europe's gas grid.

BGE expects to begin letting contracts for pipelaying and pipe manufacturing in 1992, but won't say which way gas will flow when the new line is to be commissioned in October 1993.

Elsewhere, plans have advanced for a second trans-Mediterranean pipeline to move Algerian gas to Europe. A group of six companies has undertaken a feasibility study for a 1,250 mile line from Algeria through Morocco and across the Mediterranean Sea to Spain. The line could be operational by 2000.

FORMER SOVIET TERRITORY

Because of the poor condition of the massive pipelines in the former Soviet Union, notably the Russian federation, considerable work is needed on gas and oil lines there. But Russia first must find the cash to pay for the extensive rehabilitation work needed.

Sources say deterioration of the system poses not only a safety and environmental headache but also forces reductions of line pressures and thus throughputs. Reduced deliveries would mean still further reductions of cash flow, further curbing one of Russia's few reliable sources of much needed hard currency.

Meantime, Ukraine late last month offered to replace the Soviet Union in an agreement with Greece to build a joint venture pipeline from Ukraine's border with Bulgaria to near Athens.

KERN RIVER

One of the largest recent U.S. projects, Kern River Gas Transmission Co.'s 837 mile line from Opal, Wyo., to near Barstow, Calif., will be ready by mid-February to start moving Canadian and Rocky Mountain gas.

At Barstow, Kern River and Mojave Pipeline Co.'s proposed 385 mile, 20 in. line from Topock, Ariz., will merge into a 42 in. line running 121 miles northwest to a point near Bakersfield, Calif. At Bakersfield the system will split into two 30 in. laterals, 55 and 48 miles long.

Initial capacity on Kern River will be 700 MMcfd. But the company in November 1991 applied for permission to add another 452 MMcfd of capacity. The $308 million expansion would provide downstream transportation for shippers selling Canadian gas into California markets on Altamont Gas Transmission Co.'s proposed pipeline (OGJ, Nov. 25, 1991, p. 36).

Kern River has proposed rolling the cost of the expansion into its existing rate. The increased throughput will reduce the pipeline's transportation rate by 12.5cts/Mcf.

Completion of Kern River's proposed expansion is planned to coincide with Altamont's expected November 1993 start-up. Nine firm shippers have fully subscribed the expanded capacity.

Also this month, Mojave expects to begin transporting gas to Kern County from the California-Arizona border.

Mojave on Jan. 24 closed the first period for requests of firm and interruptible transportation. In December 1991, Mojave had contracts from six shippers for 392.5 MMcfd of firm transportation service and 295 MMcfd of interruptible volumes.

Gas delivered by Kern River and Mojave will fuel thermal enhanced oil recovery and cogeneration projects in Kern County, Calif., among other customers.

ALTAMONT PIPELINE

Altamont could begin detailed engineering in March or April, release bid packages next fall, and begin construction in spring 1993 of its 620 mile, 30 in. line, pending findings of an inquiry by Alberta's Energy Resources Conservation Board.

Altamont would have capacity to deliver as much as 719 MMcfd of Canadian gas from Wild Horse, Mont., on the Canadian border to Kern River near Opal.

Altamont Jan. 9 submitted firm financial commitments to Nova Corp., Calgary, to cover initial expenses of upgrading Nova's Alberta pipeline system in time to meet Altamont's expected start-up.

The other contender vying to deliver new supplies of Canadian gas into California, Pacific Gas Transmission Co. (PGT), also has signed an irrevocable letter of credit committing it to defray Nova's cost of upgrading facilities to support PGT's expansion.

Nova agreed to provide Altamont with 735 MMcfd of gas and PGT with 903 MMcfd beginning Nov. 1, 1993 (OGJ, Nov. 18, 1991, p. 36).

Nova will allow Altamont and PGT until May 1, 1992, to clear the next financial hurdle, a payment of $192 million each.

Nova estimates it will need installments totaling $800 million to pay for the additions to its system required to serve demand from the Altamont and PGT projects. Nova contends it is unlikely both lines will be completed by November 1993.

PGT CONSTRUCTION

PGT last month began work on river crossings required in its $1.5 billion expansion project (OGJ, Jan. 13, p. 19).

Pipelay operations are expected to begin in March.

PGT will expand its pipeline facilities in Idaho, Washington, Oregon, and California. Plans call for laying about 660 miles of 36 in. pipe and 185 miles of 42 in., upgrading four metering stations, and building one new metering station.

PGT is the interstate pipeline subsidiary of Pacific Gas & Electric Co. Last fall, TransCanada PipeLines, Calgary, tentatively agreed to buy 49% interest held by PGT in Alberta Natural Gas Co. Ltd. The purchase price, estimated at $300-400 million (Canadian), depends on factors including progress on PGT's expansion.

A major concern for PGT is the controversy sparked by California regulatory officials in requiring open access to all shippers on the expansion capacity, which Alberta producers contend abrogates existing contracts. The parties in the dispute last week took a key initial step toward resolving their differences. FERC approved the 900 MMcfd project last October (OGJ, Oct. 21, 1991, p. 37).

IROQUOIS COMPLETION

Iroquois Gas Transmission System last month began moving gas from Canada to customers in the U.S. Northeast along the entire 370 mile system. Initial volumes were 320 MMcfd.

In December 1991, Iroquois began transporting about 210 MMcfd of gas on 192 miles of line between the Canadian border and Wright, Schoharie County, N.Y.

Through most of 1992, Iroquois will phase in transportation of gas volumes contracted by firm shippers, reaching system capacity by November. Capacity by then is expected to be 641.1 MMcfd, pending FERC approval of an application Iroquois filed in December 1991 to increase from 575.9 MMcfd.

To boost compression, Iroquois officials will install two 5,500 hp gas turbine compressors at Wright compressor station, lifting line pressure to 1,182 psi from 1,017 psi. Iroquois is a partnership of 12 U.S. and Canadian energy companies.

TETCO ITP

Texas Eastern Transmission Corp. (Tetco) has asked FERC for permission to increase its pipeline system by 260 MMcfd in three phases in 1993-95.

The $251 million plan would add compression and:

In 1993, 46 miles of 36 in. loop line in Ohio, Pennsylvania, and West Virginia.
In 1994, 59 miles of 8 in., 30 in., 36 in., and 42 in. loop line in Ohio, Pennsylvania, and New Jersey.
In 1995, 15 1/2 miles of 36 in. loop in Ohio and Pennsylvania.

Tetco wants to expand its pipeline system in the four state area to serve six customers with 20 year, firm transportation agreements with Tetco or Algonquin Gas Transmission Co. Tetco and Algonquin are units of Panhandle Eastern Corp., Houston.

Tetco's expansions would be the last key links needed to move gas from the Gulf Coast and Arkoma basin through interconnected Panhandle interstate pipelines to the six end users.

Tetco would set up an integrated transportation project to ensure firm capacity would be available when needed on Tetco, Algonquin, and other Panhandle interstate subsidiaries.

SARNIA PIPELINE

Interprovincial Pipe Line Inc. (IPL) by April 1992 expects to decide the fate of its 30 in. Line 9 crude oil pipeline.

Line 9 extends 517 miles to Montreal from Sarnia, Ont., below Lake Huron at the U.S. border. IPL ceased crude shipments to Montreal on Line 9 last summer for lack of demand by refiners in eastern Canada.

IPL's options include joining Coastal Corp.'s ANR Pipeline Co. to create InterCoastal Pipeline or reversing the flow and reactivating Line 9 as an oil carrier.

Intercoastal would transport as much as 400 MMcfd of U.S. and Canadian gas to customers in Ontario, Quebec, and the U.S. Northeast.

IPL would convert Line 9 for the Canadian segment of InterCoastal's system. ANR and IPL also would lay 47 miles of 30 in. line in two spreads to connect ANR underground gas storage in St. Clair County, Mich., to IPL's Line 9 at Sarnia.

In toll applications submitted to Canada's National Energy Board, IPL proposes to spend $27 million (Canadian) to begin moving 60,000 b/d of crude oil into southern Ontario by 1993, increasing to 100,000 b/d by 1997.

IPL expects this month to finish studying feasibility of spending $110 million to lay a 145 mile spur from Ultramar Canada Inc.'s refinery near Quebec City to Montreal. Construction could begin in 1993, pending regulatory approvals.

SAN JUAN BASIN

Early this year, gas pipeline capacity out of San Juan basin will jump by more than 1.3 bcfd when projects by El Paso Natural Gas Co. and Transwestern Pipeline Co. are complete.

Transwestern expects to begin service this month on a 520 MMcfd lateral out of San Juan and a 340 MMcfd expansion of its mainline. El Paso is on schedule to place 833 MMcfd of new capacity out of San Juan in service in April 1992.

FERC on Jan. 17, 1991, granted Transwestern a preliminary determination on nonenvironmental issues, allowing the company to begin logistical preparations. The phased approval process enabled Transwestern to start construction immediately upon receiving final approval. Transwestern applied for FERC approval of the expansion in September 1990.

The San Juan lateral consists of a 30 in. pipeline extending 100 miles from a new compressor station near Blanco, N.M., to connect with Transwestern's mainline near Thoreau, N.M. To expand its mainline, Transwestern laid 200 miles of 30 in. loop and made minor changes at compressor stations.

The project is expected to cost about $258 million, $165 million for the mainline expansion and $93 million for the lateral.

El Paso's $241.5 million expansion will increase its system capacity to 2.5 bcfd for gas leaving San Juan. When the project is complete, about 400 MMcfd of new capacity will be available on the company's westbound mainline. Installation of bidirectional transportation will allow El Paso to move 435 MMcfd of gas east on its Permian basin-San Juan basin crossover.

MOBILE BAY

A relatively low cost, simple project by spring will be ready to provide an important outlet for moving gas from Mobile Bay off Alabama.

United Gas Pipe Line Co. (UGPL) expects by early March to begin moving gas through Gateway Pipeline. The $22 million, 30 in. pipeline will move as much as 600 MMcfd of gas 25 miles from treatment plants in southern Mobile County, Ala., to UGPL's 30 in. Lirette pipeline. Gateway capacity can be increased to 1.2 bcfd by adding compression.

Last October, five of six sponsors bowed out of a $230 million joint venture project that would have provided another 1.2 bcfd of capacity for gas leaving Mobile Bay. ANR Pipeline Co., Florida Gas Transmission Co., Southern Natural Gas Co., Tennessee Gas Pipeline Co., and Tetco said unreasonable at-risk conditions FERC imposed killed the deal.

FERC said it would allow the partners to roll the cost of the Mobile Bay project into their rate bases only if the line was supported by firm 10 year contracts for 90% of capacity. Lower use would have prevented the companies from passing the expansion's cost on to their customers.

Estimates of Mobil Bay gas reserves range to as much as 25 tcf. But given the short average productive life of natural gas wells in the Gulf of Mexico, partners believed they could not maintain throughput at 90% of capacity, leading to the pullout.

That decision left Transcontinental Gas Pipe Line Corp. (TGPL) the lone owner-operator of an intrastate pipeline that would have been the core of the shelved project. By yearend 1991, TGPL expected to increase throughput to about 395 MMcfd on its 30 in. pipeline running 123 miles from Mobil Exploration & Producing U.S. Inc.'s gas processing plant in Mobile County to TGPL's main line near Butler, Ala.

Together, Gateway and TGPL's intrastate line appear capable of providing adequate transportation capacity for Mobile Bay gas production, expected to surpass 500 MMcfd early this year.

FLORIDA GAS SERVICE

Two large pipeline projects will increase gas supplies to Florida after 1993.

FGTC is awaiting FERC approval of a Phase III expansion that will increase capacity to about 1.4 bcfd on its 4,450 mile interstate pipeline system extending from South Texas to south of Miami.

The company expects the new capacity to be ready to serve Florida customers in late 1994 or early 1995.

Preliminary plans called for laying about 800 miles of mainline, including 4,40 miles of 36 in. and 160 miles of 30 in. But those early designs would have nearly doubled system capacity to 1.8 bcfd at a cost of $750 million.

In December 1991, FGTC announced it had firm contracts to move a combined 550 MMcfd of gas in the winter and 530 MMcfd in summer on Phase III facilities.

FGTC plans to file amended Phase III capacity, configuration, and cost estimate. It filed the original Phase III application in mid-November 1991.

UGPL and ANR expect to file in July 1992 an application to construct SunCoast Pipeline.

SunCoast, a 560 mile intrastate line, at first will add about 400 MMcfd of gas to Florida markets. Capacity on the $800 million system could be expanded to 1.2 bcfd with additional compression.

SunCoast will transport gas from UGPL's system terminus near Pensacola in the Florida Panhandle to markets in northern and central parts of the state. UGPL and ANR expect to begin construction of the new line in July 1993 and to begin transporting gas in November 1994.

SOUTH AMERICAN ACTIVITY

The last 44 miles of a 300 mile oil pipeline in Colombia linking the highly touted Cusiana oil and gas discoveries in the Llanos basin to export facilities at Covenas on the Caribbean Sea is expected to be complete in April.

Last month, International Finance Corp. (IFC) and a group of nine banks agreed to loan Colombia $130 million to complete the pipeline, which begins in Huila province before connecting with Cusiana.

Cusiana, being delineated by a group led by British Petroleum Co. plc, has been described as a world class discovery (OGJ, Jan. 20, p. 68).

Infraestrutura de Gas a Regiao Sul SA (Infragas)-a group of 107 companies based in the Brazilian states of Parana and Catarina-is studying the possibility of a yearend 1994 start-up of a 140 MMcfd gas pipeline system in southern Brazil (OGJ, Jan. 6, p. 32).

Phase one of the proposal includes building a liquefied natural gas terminal in Parana or Catarina and laying a 236 mile gas pipeline grid in the two states at a cost of $430 million.

Infragas says importing LNG, including total installed costs of import facilities, could be the most economic way to supply the grid and likely would be more reliable than importing gas from Argentina or Bolivia. If the LNG option is chosen, Algeria, Nigeria, or Venezuela would be the most likely sources of supply.

In 1992, Petroleos Brasileiro SA (Petrobras) expects to complete the 95 mile, 18 in. Osplan II products line from Guararema tank farm to Replan refinery in Sao Paulo.

In late 1991, Petrobras signed a letter of intent to import as much as 2.8 bcfd from Bolivia beginning in late 1994, with supplies doubling in 2000. Brazilian and Bolivian oil officials are determining the cost and diameter of the 900-1,050 mile pipeline needed to supply the desired volumes.

Meantime, Argentine state company Yacimientos Petroleos Fiscales (YPF) is studying a plan to build a 125 mile oil pipeline to connect Palmar Largo oil fields to Campo Duran refinery in Salta province near Bolivia. The line would pass near Tonono and Santa Victoria areas, where Global Natural Resources Inc., Houston, and Cia. General de Combustibles are mulling two 44 mile pipelines to transport oil to Campo Duran refinery.

Also late last year, the five company Chilean group Gasnatural made plans for a $600 million, 175 MMcfd pipeline to transport gas from Argentina to Chile.

AFRICA-ASIA ACTIVITY

In Africa, Nigerian National Petroleum Corp. late last year let contracts worth about $583 million for a project that includes 1,250 miles of oil pipeline and about 3.1 million bbl of storage (OGJ, Dec. 2, 1991, p. 34).

Work is to expected to be complete by yearend 1993.

France's Spie-Capag and Argentina's Spibat will lay a line from Port Harcourt to Benin, Argentina's Techint a line from Enugu to Yola, and Japan's Zakhem-Kawasaki lines from Auchi to Kaduna, Suleja to Minna, and Jos to Gombe.

In Zimbabwe, IFC loaned $32 million to Petrozim Line (PVT) Ltd. to complete the $66.7 million, 125 mile products pipeline from Feruka to Harare (OGJ, Oct. 21, 1991, p. 36). The line will extend an existing system from the Port of Beira, Mozambique, to Feruka. Petrozim is a joint venture of Zimbabwe National Oil Co. and Lonhro plc.

In Japan, 32 gas, power, and trading companies have signed an agreement to build a $23.6 billion, 2,000 mile pipeline system linking gas from Sakhalin Island in the Russian Far East to the southern tip of Japan's Kyushu Island (OGJ, Dec. 30, 1991, p. 35).

Onshore sections of the big pipeline project would follow public rights-of-way.

The system could be operational by 2005.

According to preliminary plans, the pipeline would cross La Perouse Strait from Sakhalin to the Island of Hokkaido, run down the Pacific side of the main Japanese island of Honshu, cross the Inland Sea to Kyushu, and terminate in the southern city of Kagoshima.

At yearend 1991, Thai Petroleum Pipeline Co. Ltd. (TPPC) let a contract worth about $12 million to John Brown Engineers & Constructors Ltd. to engineer and procure components for a 145 mile products pipeline from Sri Racha to Saraburi (OGJ, Jan. 6, p. 29).

TPPC is a joint venture of Petroleum Authority of Thailand, Bangkok Aviation Fuel Service, and units of BP, Caltex, Exxon Corp., Kuwait National Petroleum Corp., Mobil Oil Corp., and Royal Dutch/Shell Group.

TPPC also plans by 1993 to lay a 145 mile pipeline to move refined products from Sri Racha to Bangkok terminals and storage sites.