Surging US, steady Asia-Pacific lead construction plans

Feb. 13, 2006
Burgeoning activity in the worldwide construction of oil and natural gas pipelines looked set to continue this year and beyond as 2006 began, based on reports from the world’s pipeline operating companies and data collected by Oil & Gas Journal.

Burgeoning activity in the worldwide construction of oil and natural gas pipelines looked set to continue this year and beyond as 2006 began, based on reports from the world’s pipeline operating companies and data collected by Oil & Gas Journal.

Sustained strength in US natural gas prices coupled with expectations of continued growth in demand has prompted a surge in planned pipeline activity there, as ways to get supplies efficiently to market became a more urgent priority. A surge in activity was also seen in the Middle East, with similar market forces revitalizing export pipeline plans to move gas produced in the region to consuming centers in South Asia and Europe.

By contrast, plans in Europe tailed off, with a good deal of European work completed in 2005 and therefore no longer on the books.

The amount of planned work in Canada, Latin America, and Asia-Pacific (the region with the most planned construction) was relatively unchanged from the high levels seen in 2005, reflecting the newfound US urgency in meeting its demand, the push toward increased regional integration in South America, and continued demand from China and India, respectively.

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As 2006 began, operators had announced plans to build nearly 62,000 miles of crude oil, product, and natural gas pipelines beginning this year and extending into the next decade (Fig. 1). This represents a moderate increase over data reported last year (OGJ, Feb. 7, 2005, p. 57) in this report. The vast majority (nearly 74%) of these plans is for natural gas pipelines, an even higher proportion than was the case last year.

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In the short term, operators plan to complete installation of more than 11,500 miles in 2006 alone (Table 1), with natural gas construction making up 56% (nearly 6,500 miles) of the plans.


The continued uptick in worldwide pipeline construction trends follows US Energy Information Administration’s energy consumption forecasts, which also show continued growth.

EIA has forecast world marketed energy consumption to increase by 64% through 2025, a period that encompasses the long-term pipeline construction projections stated here. The forecast increase is a full 10 percentage points higher than the same projection made in 2004.

Energy demand growth will be strongest, according to the midyear 2005 analysis, among emerging economies, with the most rapid growth seen in Asia.

Fuelling this energy demand growth is a projected gross domestic product growth in Asia of 5.5%/year through 2025-led by China and India-compared with 3% worldwide.

Last month, EIA reduced projected US energy consumption in 2025 to 127 quadrillion btu, 6.2 quadrillion btu lower than the previous year’s projection. Even with this 4.7% drop, however, energy consumption is still expected to increase more rapidly than energy production, with net imports therefore playing an increasingly important role in meeting demand.

Of particular note in this regard is the gap between domestic natural gas demand and production. EIA projects domestic natural gas production in 2025 of 21.2 tcf/year, compared with the 21.8 tcf/year projected a year earlier. EIA attributes the lower level of gas production entirely to lower levels of offshore production, citing the long-term effects of slow recovery from hurricanes Katrina and Rita and an insufficient supply of drilling rigs.

EIA, however, made an even larger downward revision in its projections of natural gas consumption in 2025, now pegged at 27 tcf/year vs. the 30.7 tcf/year projected a year earlier. Higher natural gas prices will result over time in a larger market share for coal in the electric power sector, according to EIA.

Even so, EIA expects net imports of natural gas to increase at 1.9%/year between now and 2030 in order to meet the forecast 0.7%/year increase in natural gas consumption while production increases 0.5%/year.

EIA’s projection for net US pipeline imports of natural gas from Canada and Mexico (predominantly Canada) in 2025 is 1.3 tcf/year lower than was projected in 2005. EIA projects a continued decline in net pipeline imports as a result of depletion and growing domestic demand in Canada.

LNG imports will, therefore, meet much of the increased demand for natural gas, but EIA’s baseline projection sees the increase in LNG imports as also less than was projected a year ago. Reduced consumption projections will moderate demand, while higher foreign demand for gas-to-liquids production will limit natural gas available for LNG trade and potential import to the US, according to EIA.

Some of the administration’s alternative projections, however, particularly those featuring relatively higher natural gas prices, see additional LNG imports as well as the construction of new terminals.

Regardless of how future natural gas imports enter the country, however, they will have to be brought to the end-user market via pipeline, as will future unconventional domestic production and any new supplies from Alaska.

OGJ has for more than 50 years tracked applications for gas pipeline construction to what is now called the Federal Energy Regulatory Commission. Applications filed in the 12 months ending June 30, 2005 (the most recent 1-year period surveyed) suggest a reversal of recent downward trends in terms of US interstate pipeline construction.

• Roughly 1,726 miles of pipeline were proposed for land construction, with another 92 miles proposed for offshore work. For the earlier 12-month period ending June 30, 2004, only 213 miles of pipeline were proposed for land construction, with no miles proposed for offshore work.

For the previous 12-month period ending June 30, 2003, more than 900 miles were proposed for land construction and more than 40 miles for offshore expansions.

• FERC applications for new or additional compression at the end of June 2005 also surged, reaching nearly 175,000 hp, all onshore, compared with slightly more than 76,000 hp of new or additional compression applied for a year earlier. Even so, it falls short of the 245,000 hp of new or additional compression applied for by June 30, 2003.

Prospects for oil and natural gas pipeline construction appear healthy (Tables 1 and 2), led by a surge in expected work in the US.

Bases, costs

For 2006 only (Table 1), operators plan to build more than 11,500 miles of oil and gas pipelines worldwide at a cost of $27.6 billion. For 2005 only, companies had planned more than 13,000 miles at a cost of more than $18 billion.

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For projects completed after 2006 (Table 2), companies plan to lay more than 50,000 miles of line and spend more than $116 billion. When these companies looked beyond 2005 last year, they anticipated spending almost $69 billion to lay nearly 45,000 mile of line.

• Projections for 2006 pipeline mileage reflect only projects likely to be completed by yearend 2006, including construction in progress at the start of the year or set to begin during it.

• Projections for mileage in 2006 and beyond include construction that might begin in 2006 and be completed in 2006 or later.

Also included are some long-term projects judged as probable (such as at least two pipelines competing to bring Arctic gas to the continental US), even if they will not break ground until after 2006.

US average cost-per-mile for onshore and offshore pipeline construction (Table 4, OGJ, Sept. 12, 2005, p. 60) on FERC applications submitted by June 30, 2005, was $2.2 million and $6.1 million, respectively.

Based on historical analysis, and a few exceptions and variations notwithstanding, these projections assume that 90% of all construction will be onshore and 10% offshore and that pipelines 32 in. OD or larger are onshore projects.

Following is a breakdown of projected costs, using these assumptions and OGJ pipeline-cost data:

• Total onshore construction (11,010 miles) for 2006 only will cost more than $24 billion:

-$686 million for 4-10 in.
-$6.7 billion for 12-20 in.
-$3.7 billion for 22-30 in.
-$13.1 billion for 32 in. and larger.

• Total offshore construction (560 miles) for 2006 only will cost more than $3.4 billion:

-$210 million for 4-10 in.
-$2 billion for 12-20 in.
-$1.1 billion for 22-30 in.

• Total onshore construction (50,160 miles) for beyond 2006 will cost more than $107 billion:

-$2.4 billion for 4-10 in.
-$12 billion for 12-20 in.
-$15.1 billion for 22-30 in.
-$77.8 billion for 32 in. and larger.

• Total offshore construction (1,485 miles) for beyond 2006 will cost more than $9 billion:

-$726 million for 4-10 in.
-$3.7 billion for 12-20 in.
-$4.6 billion for 22-30 in.


What follows, given space constraints, is a rundown of major projects in each of the world’s regions.

Pipeline construction projects mirror end users’ energy demands, and today much of that demand centers on natural gas, with much of the industry’s focus being on how to get that gas to market as quickly and efficiently as possible. The following sections look at both natural gas and liquids pipelines.

North America activity

Several competing plans in the Bahamas to import LNG and then pipeline the gas to Florida have seen two leaders emerge, the Calypso pipeline and the Ocean Express pipeline.

The Calypso pipeline, proposed by Calypso US Pipeline LLC, a subsidiary of SUEZ Energy North America Inc., is premised on the construction of an LNG terminal at Freeport Harbor on Grand Bahama Island. It would involve installation of 42.8 miles of 24-in. pipe in US territory from the boundary of the Exclusive Economic Zone between Florida and the Bahamas to Broward County, Fla.

The 832-MMcfd project’s estimated cost is $144 million, with start-up anticipated in 2007.

The Ocean Express pipeline, proposed by AES Corp., is premised on the construction of an LNG terminal at Ocean Cay, an industrial site in the Bahamas. It would entail installation of 54.3 miles of 26 in. mostly subsea pipeline from the EEZ boundary to Broward County.

AES plans to begin construction on this 842-MMcfd project in third-quarter 2006, with start-up currently anticipated in mid-to-late 2008. Ocean Express’ estimated cost is more than $264 million.

Elsewhere in North America last year, the race was on to bring Arctic gas south to major US consuming centers.

In late October 2005 Alaska signed an agreement with ConocoPhillips regarding the proposed Trans-Alaska Gas Pipeline. The pipeline would run more than 3,000 miles across Alaska, through western Canada, and into the US Midwest and carry 4.5 bcfd of an estimated 35 tcf of North Slope gas reserves. The project is expected to cost $20 billion and take at least 10 years to build.

The state remains in contract negotiations with the other two North Slope producers-BP PLC and ExxonMobil Corp.- and details of the terms of its agreement with ConocoPhillips have not been disclosed pending conclusion of negotiation with the other producers.

Earlier in the month, Alaska Gov. Frank H. Murkowski delivered a contract term sheet to the producers and indicated that the state was “closer now than ever before” to reaching an agreement on the pipeline. Included in the state’s proposal were a 30-year term, state ownership in the pipeline, and access to the gas for instate use. Alaska has said it will invest $4 billion in the project, $1 billion in cash and $3 billion in financing.

The $4-billion figure is based on 20% state ownership, and the state could end up paying more if cost overruns occur. The governor’s office has estimated that the pipeline could generate $2-3 billion/year in revenues for the state once it is operational.

Challenger Capital Group Ltd. of Dallas, along with Credit Suisse First Boston and UBS, were selected to serve as financial advisors for the state of Alaska’s participation in construction of the gas line.

The US Congress passed the Alaska Natural Gas Pipeline Act in October 2004, providing $18 billion in federal loan guarantees for the project. In 2005, however, legislation was passed placing a sunset provision on these guarantees if an agreement is not reached within 2 years. Toward this end, Congress also mandated that FERC must submit reports to it every 180 days detailing progress in licensing and constructing the Trans-Alaska gas pipeline, as well as any issues impeding progress.

Last month, Gov. Murkowski’s office said that if agreement were not reached by April, the US Department of Energy would be obliged to re-examine other proposals for moving North Slope gas south. Such proposals could include the $16.1-billion All-Alaska Pipeline, designed to carry gas from the North Slope to a liquefaction plant in Valdez for subsequent shipment to the US West Coast, and a TransCanada PipeLines Ltd.proposal for a Canadian line.

Work on the proposed 1,200-km Mackenzie Valley pipeline ground to a halt in April 2005 amid regulatory, fiscal, and aboriginal rights issues. In November, however, project manager Imperial Oil Ltd. announced that the $7-billion (Can.) project would move to public hearings, citing progress made in negotiations with several first-nations groups and a government promise of $2.8 billion (Can.) in direct aid and favorable royalty terms.

Under the Canadian government’s proposal, Imperial and its partners-Shell Canada Ltd., ConocoPhillips, and ExxonMobil- would pay reduced royalties until the costs of the pipeline had been paid. The $2.8 billion (Can.) in aid included $1.2 billion (Can.) for the industry participants and $1.6 billion (Can.) for their partners in the Aboriginal Pipeline Group, covering the estimated construction costs associated with its one-third ownership of the line.

The pipeline would move gas from the Northwest Territories south to Alberta and then through existing pipelines into the US. Some of the gas would also likely be used in Alberta’s oil sands production.

Imperial is still negotiating with the Deh Cho first nations, whose land covers about 40% of the pipeline’s proposed route.

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A final decision on whether to move forward is currently anticipated by early 2007, with construction starting later that year and gas moving south by 2011. Supporters of the project want to beat the Trans-Alaskan line to fruition due to both the significantly larger scale of the North Slope development and potential competition for raw materials and labor between the two projects fearing that failure to do so could delay the project indefinitely.

Elsewhere in the US, the Rockies Express pipeline, running 1,500 miles of 42-in. pipe from Cheyenne, Wyo., to Clarington, Ohio, is the largest new US pipeline project undertaken in 20 years. The 2 bcfd, $3-billion line has firm commitments in place for 900 MMcfd, including a binding 500 MMcfd by EnCana Corp. and a conditional 400 MMcfd from the Wyoming Natural Gas Pipeline Authority. Kinder Morgan Energy Partners LP, Sempra Pipelines & Storage, and Questar Corp. are also proponents of the project, preliminary FERC NEPA evaluation of which has begun.

The pipeline would open in stages, with the first leg from Wyoming to Missouri operational in 2007, Leg 2 from Missouri to Lebanon, Ohio, opening in 2008, and the final leg from Lebanon to Clarington in service during 2009.

An agreement reached in November 2005 with Questar subsidiary Overthrust Pipeline Co. would create a link between the Opal natural gas hub in western Wyoming and the Wamsutter hub in the center of the state. Under terms of the agreement with Questar, Kinder Morgan and Sempra would lease up to 1.5 bcfd of space on Questar’s lines for the 140-mile link between Opal and Wamsutter.

An earlier agreement reached with EnCana will allow for transmission from Wamsutter to the start of the Rockies Express, effectively extending the system’s reach to include western Wyoming.

EnCana’s KMP-operated subsidiary, Entrega Gas Pipeline Inc. is also in the process of constructing a 330 mile, 36 to 42 in. link from the Meeker Hub in Rio Blanco County, Colo., to Wamsutter. Kinder Morgan-Sempra Pipelines & Storage is responsible for the leg from Wamsutter to Cheyenne. This leg is expected to be in service by yearend.

Under terms of this agreement, subject to final approval, the Entrega Gas Pipeline would be sold to the Kinder Morgan-Sempra Energy project group.

El Paso Corp. in early October proposed a connection between its natural gas pipelines in the US West and its systems in the South and East.

The project, called Continental Connector, would involve more than 1,000 miles of new pipeline of up to 42 in. OD. It would link El Paso’s Colorado Interstate, Wyoming Interstate Co., and Cheyenne Plains pipelines to points on the company’s ANR Pipeline, Tennessee Gas Pipeline, and Southern Natural Gas systems.

The new pipeline will have a capacity of 1-2 bcfd. Participants in a non-binding open season for the project, however, submitted requests for more than 3 bcfd of capacity. El Paso refined the scope of the project based on these results and has begun discussion with potential customers toward binding commitments.

In early November, El Paso and Enogex Inc., the natural gas pipeline subsidiary of OGE Energy Corp. announced the signing of an LOI providing for a lease of up to 750,000 dekatherms/day (dth/d) on the Enogex pipeline system, with an option to expand to up to 1.5 million dth/d to become an integral part of the Continental Connector. The companies stated that these arrangements would significantly reduce the amount of new mainline construction required, resulting in less environmental disturbance and a potential in-service date as early as winter 2007-08.

The Enogex pipelines to be used run between Custer and Bennington, Okla., eliminating up to 180 miles of new construction.

TransCanada’s proposed 1,840-mile Keystone pipeline project is designed to transport 435,000 b/d of crude oil from Hardisty, Alta., to Patoka, Ill. In early November 2005, ConocoPhillips signed a memorandum of understanding committing to ship oil on the line, saying that the pipeline would further integrate its upstream assets in Canada with its Wood River, Ill., refinery. The MOU also gave ConocoPhillips Pipe Line Co. the right to acquire as much as 50% ownership in the $2.1 billion pipeline.

The Keystone system will include about 1,100 miles of new pipeline in the US, 220 miles of new pipeline in Canada, and conversion of 540 miles of existing TransCanada natural gas pipeline to crude oil transmission. Depending on additional shipper interest and support, there could be for extensions on each end of the pipeline.

TransCanada plans to have the pipeline in service in 2009.

The Keystone project is one of two competing major systems planned to deliver crude oil from Hardisty to the US Midwest. Enbridge Energy Partners LP, also of Calgary, announced plans earlier in the year for an $895-million pipeline extension to deliver 400,000 b/d of crude oil from Hardisty to Chicago.

Enbridge Inc. also announced in October 2005 that Kitimat, BC, would be the end-site location for the proposed Gateway project. This project is estimated to cost $4 billion and will consist of a petroleum export line and a condensate import line along the same right-of-way, as well as a marine terminal. The pipeline will run from Strathcona County, near Edmonton, to Kitimat.

The petroleum export line will have a 30-in. OD and a capacity of roughly 400,000 b/d. PetroChina International Co. Ltd. has committed to using half of this capacity. The 20-in. condensate line will have a capacity of about 150,000 b/d.

Enbridge anticipates starting construction in 2008, pending regulatory approval, with the pipeline becoming operational in 2010.

Kinder Morgan Canada plans to expand its existing Edmonton-to-Vancouver line to 300,000 b/d from 225,000 b/d and will assess potential demand for an additional 500,000-b/d line through northern British Columbia in first-half 2006.

Altex Energy Ltd. of Calgary announced in October 2005 that it intends to design, construct, own, and operate the Altex Pipeline System, a new, direct-route, standalone oil pipeline from northern Alberta to the US Gulf Coast. Altex believes it could economically proceed with a threshold throughput volume of 250,000 b/d.

The Independence Trail Natural Gas Pipeline, wholly owned by an affiliate of Enterprise Products Partners LP, is a 134 mile, 24-in. pipe that will transfer production from the offshore Independence Hub in the US Gulf of Mexico (Mississippi Canyon Block 920) to an interconnect with Tennessee Gas Pipeline in West Delta Block 68. Construction of the pipeline will be completed in fourth-quarter 2006.

Last month, Enterprise announced that capacity of the pipeline would be increased to 1 bcfd from an initial plan of 850 MMcfd to accommodate production from three discoveries which had occurred since the project was initially announced. Enterprise pegged the cost of the expansion at $28 million, bringing the total estimated cost of the project to $308 million.

Latin America

Venezuela, Argentina, and Brazil in early December 2005 signed an accord for the construction of an 8,000-10,000 km pipeline to transport natural gas from Venezuela to Argentina through Brazil and Uruguay. The line would cost $10-17 billion and could take 5 years to construct.

A preliminary study by the three governments is to be updated this year with additional technical and financial data. According to initial estimates, 100-150 million cu m/day of gas would arrive in Brazil.

The first 2,950-km section, from Puerto Ordaz, Venezuela, to Maraba, Brazil, calls for 66-in. OD pipeline with 13 compressor stations of 25,000 hp each and 11 city gates. The diameter of the line would gradually decrease to 32 in. as it crosses Brazil from Maraba to Fortaleza to the existing pipeline system that extends along the coast to Salvador, Bahia state. From Salvador, Petróleo Brasileiro SA is building the Gasene line to Brazil’s north and south systems. Petrobras is investing $3.9 billion in 3 years to build 4,191 km of pipelines.

A second branch, the main transmission line, would continue south from Maraba in a 1,977 km stretch of 54-in. OD pipe to Sao Paulo state. It would include eight 20,000-hp compression stations and 20 city gates and distribute 42 million cu m/day in Sao Paulo.

From Sao Paulo the pipeline would be routed to the border between Rio Grande do Sul state and Uruguay and cross Uruguay to Argentina in an 1,875-km section of 38-in. pipe. This section, including eight 15,000-hp compressor stations and 20 city gates, would transport 50 million cu m/day, according to study estimates.

Concrete plans to tie this line into any future South American Energy Ring-running from Peru, through Chile, to Argentina, Brazil and Uruquay-do not exist, and the status of the Energy Ring concept itself is unclear. Meetings were held in Lima mid-2005 and again in Montevideo, and the Inter-American Development Bank and World Bank have said they would back the project, but further advancement has yet to occur. The $2.5-billion line would run from Peru’s Camisea fields to Porto Allegre in southern Brazil, with an interconnection to access Bolivian gas also discussed.

In early December 2005, Petrobras received an $357 million bridge loan from Brazil’s National Bank for Economic and Social Development to fund the activities of subsidiary Transportada Urucu Manaus SA, the special-purpose company responsible for the Urucu-Coari-Manaus gas pipeline and the Urucu-Coari LPG pipeline projects through the Amazon region. The 8 million cu m/day gas line would fuel electricity generation and space heating needs in Manaus and seven other cities along the route.

Total length of the line is 650 km. Transmission to Coari will take place through an existing 18-in. line, with the new-build line from there to Manaus expanding to 20 in. The 18-in. line is currently used to transport LPG and will enter gas service when a new parallel 10-in. LPG line is completed.

Total cost of the project-which will be buried entirely-is estimated at $1.2 billion, with a projected start date of fourth-quarter 2007.

Petrobras awarded Technip a $210-million contract in late October 2005 for a subsea pipeline and free-standing hybrid riser to move Campos Basin production 56 km to shore. The 18-in. rigid line will run from the semisubmersible P-52 platform to PRA-01, a shallow water collection platform. Water depths for the project range to 1,800 m. Work is slated to begin in first-quarter 2007.


The proposed $5-billion (Aus.) Highlands natural gas pipeline extending 3,600 km from Papua New Guinea to Queensland, Australia, moved forward last year with the announcement (OGJ Dec. 13, 2004, p. 58) that Sydney-based Australian Gas Light Co. secured a long-term agreement to purchase 1.5 tcf of gas over 20 years, starting in 2009.

The Australian component of the pipeline, using 20 compressor stations, encompasses three routes: Torres Strait to Gladstone, along the east coast, Townsville to Ballera across outback Queensland, and Weipa to Gove, across the Gulf of Carpentaria. A branch off the east coast leg to Mount Isa is also being considered.

Project partners have total commitments for 220 bcf/year, above the threshold demand of 200 bcf/year in order to proceed with their plans.

AGL also reached an agreement with project participant Oil Search Ltd. to take a 10% equity interest in the project for $300 million. AGL already is in a partnership with Malaysian oil firm Petroliam Nasional Bhd as preferred developer in the $25-million program to design and construct the pipeline, which will deliver gas from the Kutubu and Hides fields in the central Papua New Guinea highlands.

AGL will purchase its gas for $4.5 billion to supply its eastern Australian network, which includes more than 3 million customers.

The project moved to the front-end engineering and development stage in late 2004, and the partners expect to make a final investment decision during second-half 2006.

Indonesia plans to build a 1,220-km natural gas pipeline from East Kalimantan to Central Java. The $1.47 billion, 1-bcfd project would be operational in 2009. Indonesian state gas distributor PT Perusahaan Gas Negara and China’s CNOOC SES Ltd. have expressed official interest in the gas transmission project. Registration for tendering was open Jan. 16-27, 2006,with offers due by Apr. 24-28.

Progress continued to be sporadic on the Trans-Asean Gas Pipeline, although a completion deadline of 2020 remained in place.

The $7-billion project has made cross-border interconnections between Myanmar and Thailand, Indonesia and Singapore, Indonesia and Malaysia, and the Malaysia-Thailand Joint Development Area and peninsular Malaysia. An estimated 4,500 km of new construction is still required, including various links out of Brunei and into the Philippines.

The Chinese government has yet to approve a plan endorsed in 1998 by the Asian-Pacific Economic Cooperation forum to build a 4,875-km pipeline from the ExxonMobil-owned D-Alpha block in the Natuna Sea off Indonesia to Shanghai. The $10-billion line would cross Malaysia, Thailand, and Vietnam en route to China.

Kazakhstan announced the completion of the 998-km Kazakh-Chinese oil pipeline from Atasu in western Kazakhstan to the Chinese border at Alashankou in December 2005. Oil shipments are scheduled to start in mid-2006, eventually reaching 10 million tonnes/year.

Petrochina Co. Ltd. announced in October 2005 that construction of a gas pipeline linking northern Hebei province to Nanjing, Jiangsu province, and a 246-km oil pipeline between the Alashankou Pass and the Dushanzi refinery in the northwestern Xinjiang Uygur Autonomous Region was proceeding smoothly. In all, PetroChina plans to spend $12 billion developing a pipeline network from Central Asia to its refineries.

PetroChina’s parent company, China National Petroleum Corp., is building a 4,000-km oil pipeline between Xinjiang and Gansu, passing through 28 cities at a cost of $1.8 billion and utilizing 7 pump stations. The line’s designed capacity is 20 million tpy. The 40-in. line was 36% complete as of September 2005 and is to be completed later this year.

In the meantime, a doubling of capacity of the Atasu-Alashankou oil line is already in the works, with plans to have a parallel 998 km, 32-in line in service 2008-10.

Kazakhstan and China also agreed in August 2005 to build a 40 to 48-in. natural gas pipeline running from western Kazakhstan to China.

China’s own West-East Gas Pipeline, running 4,000 km from the Xinjiang Uygar Autonomous region to Shanghai and other eastern provinces, entered service in 2004.

The Chinese government decided last year to expand the line’s capacity from 12 billion cu m/year to 17 billion cu m/year, requiring additional compression. GE Oil & Gas will provide 20 gas turbine-packaged drivers and 24 compressors for the expansion, to be divided between 12 new compressor stations. The turbines and compressors for eight of the new pipeline compression stations will be shipped and installed this year, starting in August, while equipment for the final four stations will by shipped by the end of 2008 and installed in early 2009.

Kazakhstan is not the only country actively pursuing export projects to China. OAO Gazprom will take part in the construction of the $20-billion crude line, from Irkutsk, Russia to eastern China, with a planned in-service date of 2008.

In early September 2005, Russian president Vladimir Putin confirmed that the long-discussed crude pipeline from Taishet, Siberia, would run to China first, and only later be extended to the Pacific for exports to Japan.

The first stage of the line will carry 30 million tpy through 2,400 km of pipe from Taishet to Skovorodino near the Chinese border. Two-thirds of the oil will then be piped south to Daquing, Heilongjiang province, China, with the remaining 10 million tpy transported by rail to the Sea of Japan coast near Nakhodka.

This phase of the project is to be completed by second-half 2008, with extension of the pipe to Nakhodka, for a total length of 4,130 km, expected to be complete by 2010.

Putin also said that the project could be expanded to 50 million tpy as part of its eastward extension. Work is to begin later this year. Transneft will finance the first stage of the project.

Finally, Turkmenistan and China plan to sign an agreement this year to build a natural gas pipeline from eastern Turkmenistan to China and jointly develop Turkmen gas fields to fill the line.


Work started in early December 2005 on the Russian onshore section of the North European Gas Pipeline in Babayevo. This 56-in. segment will stretch 917 km to the Baltic Sea coast near Vyborg, linking existing gas pipelines from Siberia to the NEGP project.Seven compressor stations will provide the necessary pressure.

The pipeline will cross the Baltic, making landfall near Greifswald, Germany. This section will be 1,200 km long with a 48-in. OD.

The full system is scheduled to start operations in 2010 at a capacity of 27.5 billion cu m/year. The project includes the possibility of building a second, parallel pipeline, doubling capacity to about 55 billion cu m/year.

A joint venture consisting of Gazprom (51%), BASF AG (24.5%), and E.ON AG (24.5%) is building the pipeline. For the two-leg option, the total cost for the offshore project will amount to more than €4 billion, with Gazprom investing an additional €1.3 billion in the onshore section.

Both the Netherlands and Gaz de France have also voiced interest in participating in the project.

Greece and Italy signed an agreement in early November 2005 for the construction of an 8-10 billion cu m/year subsea natural gas pipeline between the two countries. Depa, Greece’s natural gas supplier, and Italy’s Edison SpA will build the pipeline. Plans exist to link this pipeline to another being built between Greece and Turkey, forming part of an eventual South European Gas Ring.

The trans-Adriatic segment of the project will be 200 km long with a price of €350 million. Depa will build the remaining 600 km overland segment to Turkey at an estimated cost of €650 million. Turkey’s Botas Petroleum Pipeline Corp. could join the project later. Work will begin in 2007 and be completed by 2010.

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Statoil ASA completed laying pipe for the southern segment of the 771-mile Langeled gas pipeline, between the Sleipner field in the North Sea and Easington, UK, in early November 2005. The line will move treated Ormen Lange gas to the UK using 445 miles of 42-in. pipe from Nyhamna, Norway, to Sleipner and 326 miles of 44-in. pipe from Sleipner to Easington. Sleipner to Easington will start operations in October 2006 with the entire line up and running by late 2007.

Prior to the treated Ormen Lange gas moving south from Nyhamna, the line will transport Sleipner’s own production to the UK. The northern section of the line will be laid later this year. The completed line will transport 70 million cu m/day of Ormen Lange gas. Total cost of the project is estimated at $10 billion.

Norway’s Gassco AS has presented plans to build a $1.3 billion, 7 billion cu m/year pipeline from the North Sea to eastern Norway and Sweden. If approved by investors, the line could start operation as early as 2008, with full capacity reached by 2015. Preliminary plans for the pipeline bring it from Kårsto, on Norway’s west coast, south along an offshore route to Telemark, before branching to Oslo and Sweden.

In January 2004 Austria’s OMV AG signed an MOU with National Iranian Gas Export Co. regarding possible cooperation on the 1,765 mile, 56-in. OD Nabucco pipeline, which would bring Iranian natural gas via Turkey, Bulgaria, Romania, and Hungary to Austria for EU distribution. The estimated cost of the 25 billion cu m/year project is $4 billion, and start-up is planned for 2009, pending full approval.

Middle East

Iran, Pakistan, and India accelerated the pace of discussions toward building the long-discussed gas export line from Iran to India as 2005 drew to a close. Gazprom also expressed interest in participating in the $7 billion project, which would transport as much as 120 million cu m/day of natural gas from the South Pars field in the Persian Gulf through 2,100 km of 56-in. OD line. (Iran, 1,100 km; Pakistan, 750 km; India, 250 km).

India’s state-owned gas utility, GAIL India Ltd., appointed the UK’s ILF Consulting Engineers Ltd. as its technical consultant for the project’s pre-feasibility studies. Pakistan is also undertaking pre-feasibility studies in preparation for trilateral talks this year.

India has also expressed renewed interest in joining the 1,680 km, 3 bcfd Turkmenistan-Afghanistan-Pakistan gas pipeline project, having at least for the time put aside concerns regarding Turkmenistan’s ability to effectively fill the line (given volumes already committed to Russia and Ukraine) and Afghanistan’s ability adequately to protect its 735-km stretch. For its part, the Afghan government said that construction of the $3.6-billion pipeline would begin this year. The Afghan segment lies between a 145-km Turkmen length and the final 800 km through Pakistan.

The recently completed 1,760-km Baku-Tbilisi-Ceyhan crude pipeline stretches from the Sangchal terminal south of Baku, capital of Azerbaijan, through Tbilisi, capital of Georgia, to Ceyhan, Turkey, on the Mediterranean coast. At capacity it will transport 1 million b/d.

Testing and commissioning of the 1,070-km Turkish leg of the pipeline caused slight delays in start-up, but first shipments were to have occurred by the end of last month.

The South Caucasus Pipeline, which will transport natural gas along a route parallel to the BTC from Baku to Tbilisi before branching off to Erzerum, Turkey, and connecting to the Turkish grid, will be complete by yearend 2006. At a cost of roughly $1 billion, the 550-mile pipeline will carry natural gas from Azerbaijan’s Shah Deniz field at an initial capacity of 1.5 bcfd. The operating consortium, led by BP and Statoil, plans to expand this capacity to 3 bcfd in 2007.

Also expected to be in service in 2006 is the Dolphin Gas Project, which includes 273 miles of 48-in. subsea line running first from Qatar’s North field to the Ras Laffan treatment plant and then splitting into twin export lines, one to Tawilah, Abu Dhabi, the other to Jebel Ali, Dubai. The $3.5-billion project’s initial planned capacity is 2 bcfd. The pipeline, however, would have the capacity to carry nearly 3.2 bcfd if demand justifies it. Qatar plans to export 200 MMcfd to Oman starting in 2008.

In late September 2005, AMEC PLC won a $200-million contract to build a pipeline in Yemen from a natural gas field close to the town of Marib to an LNG plant being built close to Bal Haf on the Gulf of Aden. The project will involve construction of 320 km of 38-in. gas pipeline and 25 km of 20-in. line. Work on the 6.7 million tpy system is to be completed in 2008.

Saudi Aramco let contract to Saipem SpA in early December 2005 to convert a crude oil pipeline in Saudi Arabia’s East-West system, called Petroline, to natural gas use. Saudi officials said the 5-million-b/d Petroline has been operating at half capacity. Saipem will empty, clean, and purge the 56 in., 960-km pipeline as well as conduct detailed design, fabrication, construction, and installation of any new sections which might be required. Completion is due in early 2008.

In November, Saudi Aramco had announced plans to use 11,000 km of line pipe in diameters up to 84 in. during the next 5 years on various pipeline projects, signing 13 manufacturing capacity agreements to secure the necessary pipe.


Nigeria and Algeria have signed a cooperation agreement regarding the 4,000 km Trans-Saharan Gas Pipeline, with their respective national oil companies, Sonatrach and Nigerian National Petroleum Corp., signing a separate joint-venture agreement to conduct a feasibility study of the $7-billion project. Gas would flow north to Algeria and then on to Europe. Financing continues to be difficult, but given regional supplies and European demand, the project is at least being investigated.

On a somewhat smaller scale, Chevron Corp. announced in early September 2005 that installation had begun of the 353-mile main offshore segment of the West African Gas Pipeline. When complete, the estimated $560-million project will be the first regional natural gas transmission system developed in sub-Saharan Africa. First gas delivery is scheduled for December 2006.

The offshore route of the 475-MMcfd pipeline will run parallel to the coastline, about 9-12 miles offshore in water between 98 and 246 ft deep. When the offshore section is completed, it will be connected to a new onshore pipeline and compressor station in Nigeria and the entire 420-mile pipeline will transport Nigerian natural gas to the Volta River Authority’s power plant at Takoradi, Ghana. Additional onshore delivery points will be sited at Tema, Ghana; Lome, Togo; and Cotonou, Benin.

In February 2005, Sudan hired ONGC Videsh Ltd. to build a 740-km, $200-million multiproduct export line from the Khartoum refinery to Port Sudan on the Red Sea.