World's developing regions provide spark for pipeline construction

A. D. Koen
Senior Editor-News
Warren R. True
Pipeline/Gas Processing Editor

Pipeline Construction, 1996 and Beyond (124435 bytes)
Pipeline Construction in 1996 (58939 bytes)
Pipeline Construction in 1996 and Beyond (65216 bytes)

Pipeline construction in the developing regions of the world, especially Latin America and Asia-Pacific, will increase in the rest of this decade and into the next century.

Plans for several large diameter gas projects will drive the activity.

In Canada and the U.S., by contrast, pipeline construction during the foreseeable future will continue to slow.

Those and other trends are evident in the latest Oil & Gas Journal pipeline construction data, derived from a worldwide survey of pipeline operators, other industry sources, and published information.

More than 66,500 miles of crude oil, product, and gas pipeline are planned for construction in 1996 and beyond, an increase from plans revealed 1 year ago. Construction expected to conclude by yearend also shows a relative increase.

For 1996, companies expect to complete more than 21,000 miles of line construction worldwide at a cost of $13.7 billion. For 1995, companies had predicted more than 16,000 miles at a cost of nearly $14 billion.

For projects to be completed after 1996, companies expect to spend another $29.2 billion to lay more than 45,000 miles of line. Last year, when these companies looked beyond 1995, they expected to lay nearly 45,000 miles at a cost of $28.9 billion.

Expectations of 1996 pipeline mileage reflect only projects due to be completed by yearend, including construction in progress at the first of the year or set to begin during the year.

Projections for mileage in 1996 and beyond include construction that might begin this year but will be completed in 1997 or later. Some projects certain to be built are included even though sponsors will not break ground until 1997 or later.

Cost estimates are based on U.S. average cost per mile for onshore and offshore gas pipeline construction as determined by OGJ's most recent annual pipeline economics report (OGJ, Nov. 27, 1995, p. 39).

Cost projections assume 90% of all construction will be onshore and 10% offshore. Pipelines of 32 in. diameter or larger are assumed to be onshore projects.

Here is a breakout of costs by line diameter:

Total onshore construction for 1996 will cost $12.7 billion-$1.9 billion for 4-10 in. pipelines, $5.4 billion for 12-20 in., $3.5 billion for 22-30 in., and $1.9 billion for 32 in. and larger.
Total offshore construction for 1996 will cost slightly more than $1 billion-$174.8 million for 4-10 in. pipelines, $505 million for 12-20 in., and $323 million for 22-30 in.
Total onshore construction for 1996 and beyond will cost nearly $27.6 billion-$2.2 billion for 4-10 in. pipelines, $10.3 billion for 12-20 in., $5.3 billion for 22-30 in., and $9.8 billion for 32 in. and larger.
Total offshore construction for 1996 and beyond will cost more than $1.7 billion-$200 million for 4-10 in. pipelines, $955.9 million for 12-20 in., and $493 million for 22-30 in.

Ocensa crude line

Projected gas market growth is keying expansions of pipeline networks in several South American countries. But not all notable activity involves gas.

Efforts in several countries to privatize energy industries are creating new opportunities for private investors. Argentina, Chile, Brazil, Peru, Colombia, and Venezuela all are reforming regulatory and legislative frameworks to allow more participation and control by private parties.

As a result, big North American pipeline companies are taking leading roles in several large diameter pipeline construction projects on the continent in construction and operating phases.

One international group is working on phase two of Colombia's Oleoducto Central SA (Ocensa) pipeline, already shipping oil from Cusiana and Cupiagua fields. Two other combines are laying Colombia's first two large diameter gas transmission lines.

Ocensa partners Dec. 1, 1995, began phase two construction of the 500,000 b/d crude pipeline system. Work began between La Belleza and Miraflores pump stations on the southern section of the line. Crews in mid-January were preparing the right-of-way, as well as stringing and welding pipe at work fronts along the route.

Cusiana-Cupiagua operator BP Exploration Co. (Colombia) Ltd. and partners began using Ocensa's phase one facilities last year. By fourth quarter 1995, production from the two fields had reached 185,000 b/d, all of which was being shipped to the U.S., in part through the phase one trunk line (OGJ, Nov. 20, 1995, p. 27). The 500 mile Ocensa pipeline system transports crude to a tank farm and export terminal at Covenas on the Gulf of Morrosquillo.

Funds for 1996 construction were approved in December 1995 through a $566 million loan agreement signed by Ocensa, Colombia's state owned Empresa Colombiana de Petroleos (Ecopetrol), and more than two dozen lenders.

Ecopetrol holds a 25% interest in Ocensa. Canada's TransCanada PipeLine Ltd. and IPL Energy Inc., each with 17.5%, hold the two largest foreign equity interests in Ocensa and act as cooperators of the system by providing management personnel and technical support (OGJ, Apr. 10, 1995, p. 32). Units of BP and Total each hold 15.2% interests in Ocensa and Trident Pipeline Colombia Inc. 9.6%.

With completion of phase two facilities, crude shipments through the Ocensa system by yearend 1997 are to exceed 500,000 b/d.

Colombia's projects

TransCanada and a unit of BP, with 34% and 20% interests, respectively, also are leading a group of international companies in a $310 million program to develop Colombia's second large diameter gas pipeline system (OGJ, Mar. 6, 1995, p. 30).

The TransGas de Occidente gas pipeline construction program in West Central Colombia is part of a nationwide gasification plan. Aim of the project is to transport gas from the city of Mariquita, northwest of Bogota in Tolima department, to Cali, near the Pacific coast in Cauca department.

Partners last month began construction of the system's 215 mile, 20 in. main line. Work on the main line is to proceed in three spreads. The system includes about 260 miles of 2-8 in. distribution laterals to serve 47 communities in the Cauca Valley.

Gas is to begin flowing from Mariquita to Cali by yearend 1996.

Meantime, Enron Corp. expects to complete Colombia's first large diameter gas pipeline this month. The 357 mile, 18 in. trunk line will move about 150 MMcfd from Ballena on Colombia's northern Caribbean coast to Barrancabermeja in Central Colombia (OGJ, May 23, 1994, p. 29).

Enron earlier agreed to build, own, and operate the $215 million system under a 15 year agreement with Ecopetrol. Enron Colombian affiliate Centragas is to provide transportation services on the line but won't market gas from the system.

Enron late last month said it had sold a 25% interest in the project to Tomen Corp. of Japan. Enron this year expects to offer a 50% interest in the project to its global power and pipeline unit. The other 25% is held by Colombian pipeline operator Promigas SA.

Also in late January, Enron through its Enron Capital & Trade Resources unit solidified its position in Colombia's growing gas industry by acquiring a 38.67% interest in Promigas. Promigas is to operate the Ballena-Barrancabermeja gas pipeline.

Race to Chile

Expected gas demand in South America's Southern Cone region has pitted two international groups of companies in a race to serve new markets in Chile with gas from Argentina's Neuquen basin.

Debate continues about whether Chile will need both pipelines the two groups are sponsoring.

Vying to serve Chile's future gas markets are:

Gasoducto Transandino (TransGas), a $689 million plan to construct a 750 mile gas trunk line beginning in the Neuquen basin near Loma La Lata, Argentina, across the Andes Mountains to a point near Concepcion, Chile, before heading north to Santiago.
GasAndes, a $350 million, 24 in. trunk line designed to transport 350 MMcfd of Argentine gas along a 290 mile route from La Mora, Argentina, to Santiago. GasAndes sponsors propose to use an existing pipeline to ship gas from the Loma La Lata area to La Mora.

GasAndes in mid-January appeared to have edged ahead in the competition. Argentine officials have granted the project all required environmental approvals. GasAndes crews were clearing right-of-way in Argentina's high country and had begun welding pipe at staging areas along the route.

In Chile, where officials have approved GasAndes preparatory work, crews are building roads along the route and delivering pipe to staging areas.

GasAndes expects Chile to grant final environmental approvals as early as this month. GasAndes crews could begin trenching immediately.

NOVA Gas International Ltd. leads the GasAndes group with a 40% interest in the main line and a 15% interest in a $235 million power station to be built at Renca, Chile. The system is to begin operating in mid-1997.

TransGas officials, meantime, say they are on schedule to begin construction in May 1996 and to start moving Argentine gas through the $689 million system into Chile by September 1997.

Units of Tenneco Energy and British Gas each own 30% interests in TransGas (OGJ,Aug. 21, 1995, p. 74). Tenneco will operate the pipeline.

Plans in the past year also have firmed for the $2 billion Bolivia to Brazil gas pipeline project. The proposed 2,000 mile, 32 in. line eventually is to transport more than 1 bcfd of gas into Brazil from Santa Cruz, Bolivia.

The international pipeline first is to transport gas as far as Sao Paulo and later as far as Porto Alegre, in southern Brazil.

When Petroleos Brasileiro SA (Petrobras) formed the Bolivia-Brazil pipeline group in summer 1994, construction of facilities was to begin in 1995, with gas scheduled to flow in 1997 (OGJ, Aug. 22, 1994, p. 24). As of mid-January, start of construction had slipped to early 1997, and gas was to begin flowing in second quarter 1998.

European projects

Gas system construction dominated 1995 pipelining in Europe, with more transmission capacity going on line in the North Sea and on the continent.

Europipe gas trunk line on Oct. 1, 1995, began regular gas deliveries from Draupner riser platforms on Block 16/11 in the Norwegian North Sea to landfall at Emden, Germany. Deliveries to customers in Germany, Austria, and Netherlands through the 390 mile, 40 in. line are to peak in 2001 at 477 bcf.

Plans also firmed last year for two offshore gas pipeline projects to begin service before 2000.

The 11 member NorFra gas pipeline group about mid-1995 decided to roughly parallel Zeepipe I trunk line's North Sea route from Norway's Sleip- ner area. NorFra is to extend 536 miles from Block 16/11 to landfall at Dunkerque, France (OGJ, Feb. 27, 1995, p. 23). NorFra partners plan to build a gas receiving terminal at Dunkerque in partnership with Gaz de France.

Sponsors of the 40 in. line aim to start service in fourth quarter 1998. Work on the $1.4 billion project could begin by yearend 1996.

A group of nine companies, meantime, has settled on plans for its Interconnector pipeline system. The 150 mile, 40 in. line is to begin shipping gas in October 1998 from Bacton, U.K., to Zeebrugge, Belgium.

Belgium gas distributor Distrigaz has set a Feb. 29 deadline for companies to specify the volumes of Interconnector gas they want to ship through Belgium to Germany. Shippers by June must conclude deals for transit capacity through Belgium to allow Distrigaz time to prepare for Interconnector volumes by the project's start up date.

The $1.7 billion Interconnector pipeline is designed to handle as much as 530 bcf/year.

Onshore European lines

Gas began flowing just before yearend 1995 through the 180 mile Norddeutsche Ergas Transversale (Netra) pipeline (OGJ, Dec. 4, 1995, p. 42).

Netra transports gas from Etzel, Germany, near Norway's Emden terminal for North Sea pipelines, through Wardenburg and Achim, Germany, to Salzwedel in the eastern part of the country. From there, it links up with other gas lines recently laid in the region (see map, OGJ, Oct. 24, 1994, p. 36). Netra receives gas from Emden through a 42 mile pipeline.

With more compression, the $720 million, 1,200 mm Netra line could handle as much as 630 bcf/year.

In a related project, Germany's Ruhrgas AG in 1995 laid a 125 mile, 1,200 mm gas line in Germany from Wardenburg to Werne. The Wardenburg-Werne line can take gas from Netra.

In all, companies in the past 3 years at a combined cost of about $2.16 billion have created a 620 mile gas pipeline network capable of transporting and distributing gas from the North Sea to markets in western, southern, and eastern Germany.

Meantime, construction of the Maghreb-Europe gas pipeline in fourth quarter 1995 was advancing on all fronts. Officials last October said this mileage had been completed (OGJ, Oct. 16, 1995, p. 25):

In Algeria, 112 miles of the 323 mile section from Hassi R'Mel field to the Moroccan border.
In Morocco, 105 miles of the country's 335 segment.
In Spain, 62 miles of the 160 mile sector from Tarifa to Cordoba.

In addition, contractors have completed the dual 27 mile, 22 in. pipeline crossing of the Strait of Gibraltar, connecting the African portion of the project with Europe.

North American crude lines

Crude oil pipeline construction heated in 1995 across North America, as U.S. and Canadian pipeline companies scrambled to expand and reorganize assets. The goal: to boost crude supplies to U.S. refiners inland.

Competition between two Canadian rivals for future crude markets in the U.S. Rocky Mountain and Midcontinent regions intensified late last month, when Express Pipeline Ltd. said it had agreed to buy Platte Pipe Line Co. (PPC), Findley, Ohio (OGJ, Jan. 29, Newsletter).

Express Pipeline is to transport Canadian crude from the international border at Wild Horse, Alta., to the crude transportation hub at Casper, Wyo.

PPC through Marathon Pipe Line Co. operates a 940 mile, 20 in. main line between Casper and Wood River, Ill.; 335 miles of gathering line, and more than 3.8 million bbl of oil storage. Acquiring PPC facilities would enable Express to serve refiners in the U.S. Upper Midwest, as well as in the Rockies.

Express Pipeline partners Trans- Canada and Alberta Energy Co. Ltd. revived the $530 million (Canadian) project last year and began seeking support of Canadian producers and U.S. refiners (OGJ, Sept. 25, 1995, p. 47). The two companies in late 1995 said they had secured firm shipping commitments for 85% of the pipeline's 172,000 b/d capacity.

A joint panel of Canada's National Energy Board (NEB) and the Canadian Environmental Assessment Agency began hearings Jan. 15 on the proposed 785 mile, 24 in. Express crude pipeline.

Meantime, units of IPL Energy Inc., Calgary, proposed to expand crude oil export capacity into the U.S. by 120,000 b/d to serve the same Upper Midwest crude markets Express wants to connect.

NEB already has approved a plan by IPL's Interprovincial Pipe Line Inc. and Lakehead Pipe Line Co. to expand export capacity into Chicago by 120,000 b/d by yearend 1996 (see map, OGJ, Aug. 28, 1995, p. 39). The IPL units, in addition, are seeking permission for another 120,000 expansion project to go on line after 1996. IPL 2 years ago completed a $405 million, 175,000 b/d expansion.

In the U.S., ARCO Pipe Line Co. and units of Phillips Petroleum Co. in early 1996 expect to finish reshaping selected assets to form a 430,000 b/d oil corridor from the U.S. Gulf Coast to Cushing, Okla. (see map, OGJ, Feb. 20, 1995, p. 38). Capacity of so-called Seaway pipeline eventually could be expanded to as much as 800,000 b/d, if needed (OGJ, Oct. 9, 1995, p. 38).

Earlier in 1995, Mobil Oil Corp. said it was beginning to ship waterborne crude to customers in the Patoka, Ill., area through a pipeline from Nederland, Tex. (OGJ, May 1, 1995, p. 46). The line added 200,000 b/d of capacity into the Upper Midwest.

About the same time, the Trunkline Gas Co. unit of PanEnergy Corp. said it was considering converting a 26 in., 680 mile gas line to transport crude from Lake Charles, La., to a point near Patoka.

North American gas expansions

Gas pipeline companies in North America are curtailing main line megaprojects in favor of eliminating transportation bottlenecks by laying more extensions, laterals, and loops and adding compression.

The relatively small capacity expansions are having significant regional effects.

El Paso Natural Gas Co. late last year completed a 300 MMcfd expansion of its San Juan Basin Triangle facilities (OGJ, Dec. 25, 1995, p. 26). The $26 million project boosted El Paso's capacity from the San Juan region to as much as 2.9 bcfd.

Meantime, Transwestern Pipeline Co. late last month still was awaiting Federal Energy Regulatory Commission approval of a $35 million plan to boost capacity of its San Juan lateral in New Mexico by about 255 MMcfd.

Transwestern expects to spend about $14.6 million to add compression and $21 million to buy a 77.7% interest in Northwest Pipeline Corp.'s La Plata facilities between Bloomfield and Ignacio, Colo. (OGJ, Nov. 6, 1995, p. 29).

The new facilities will allow access to coalbed methane reserves capable of producing about 1 bcfd of gas. The project's targeted in service date is December 1996.

Pipelines also are adding capacity to serve new gas customers.

In late January, Southern Natural Gas Co., Birmingham, Ala., asked FERC for a permit to extend its pipeline system to provide firm gas transportation services to customers in northern Alabama, where five customers signed long term firm transportation agreements for the 76 MMcfd of new capacity. The $53 million project includes laying 118 miles of gas pipeline and adding compression on Southern Natural's system. The company expects to complete the expansion by Nov. 1, 1997.

Canadian expansions

Canadian gas export capacity to the U.S. crept higher in 1995 as a result of pipeline expansions. But no big export projects were completed.

In one notable project, the St. Clair Pipelines unit of Union Gas Ltd., Chatham, Ontario, and the CMS Gas Transmission & Storage unit of CMS Energy Corp., Jackson, Mich., in fourth quarter 1995 were to complete a 200 MMcfd line under the St. Clair River. The $53 million line linked Union's pipeline system in Canada with the Consumers Power Co. unit of CMS.

TransCanada in 1995 boosted main line capacity to about 7.5 bcfd with expansions totaling 200 MMcfd.

The company about mid-1995 asked NEB for permission to revise its 1996-97 facilities application to meet requests for new long haul firm gas transportation services amounting to 242.3 MMcfd (OGJ, June 19, 1995, p. 28). About 117.5 MMcfd of the new capacity was to serve Canadian markets and the rest exports.

TransCanada this year expects to spend about $650 million to add loops and compression to lift main line capacity another 200 MMcfd. About half of the new capacity will be added at TransCanada export points into the U.S. Most of the work is to be completed by November.

Elsewhere, NEB in late January approved a plan by Novagas Clearinghouse Ltd., Calgary, to build and operate gathering and processing facilities and a transmission line to move gas out of fields about 90 miles northeast of Fort Nelson, B.C. The transmission line is to connect at the Alberta border with NOVA Gas Transmission Ltd.'s system. Gathering and processing facilities are to be in service by April.

Next big gas project

Canada's gas export capacity into the U.S. is to jump 700 MMcfd in early 1998, when Enron and partners place expanded facilities in service on Northern Border Pipeline.

The new capacity will be available on Northern Border's main line from the Canadian border to Harper, Iowa. The company also is to extend the main line from Harper to a point near Manhattan, Ill.

Northern Border proposes to lay 17 miles of 42 in. and 147 miles of 36 in. loops to expand the main line. The system extension would involve installing about 224 miles of 36 in. pipe and 19 miles of 30 in. Compression additions also are planned.

Northern Border earlier had sought FERC approval of a $370 million plan that would have increased main line capacity by 200 MMcfd to a new high of 1.9 bcfd. The amended $800 million project would boost Northern Border's receipt capacity at the Canadian border to 2.4 bcfd. Deliveries from Ventura, Iowa, to Harper would increase 962 MMcfd, while the extension from Harper would allow delivery of 684 MMcfd into the Chicago area.

Northern Border Pipeline Co., Omaha, is owned 70% by Northern Border Partners LP (NBP) and 30% by TransCanada. Enron, which holds a 13% interest in NBP, in late January said FERC approval still was pending.

Asia's systems

Growing gas demand in the Asia-Pacific region in 1995 spawned a series of relatively small pipeline projects, which in turn were creating a solid foundation for future expansions.

In mid-January, one observer counted nearly 40 strategically significant gas pipelines under consideration, all spawned by a regional 7%/year rise in gas demand (OGJ, Jan. 29, Newsletter).

If all 40 Asian pipeline projects reach development, installed lines would total more than 18,600 miles. With an estimated combined cost of more than $100 billion, however, the level of funding needed likely won't be available.

In late 1995, Wood Mackenzie Consultants Ltd., Edinburgh, said piecemeal gas pipeline development in Asia-Pacific had achieved the critical mass needed to underpin future, more ambitious gas grid development.

Asia-Pacific officials this year have continued announcing incremental pipeline projects.

Petroleum Authority of Thailand (PTT) in late January advanced one such project when it let an engineering, procurement, and construction management contract for a 160 mile onshore pipeline to transport gas produced in Yadana field off Myanmar in the Gulf of Martaban to a combine of NOVA Gas International and OGP Technical Services Sdn. Bhd., Kuala Lumur.

The pipeline is to extend from Ban-I-Thong at the Myanmar-Thai border to Ratchburi, about 60 miles southwest of Bangkok. Thailand's power generating authority plans to build a gas fired power generating station at Ratchburi.

PTT will own and operate the Ban-I-Thong to Ratchburi pipeline, to be complete by mid-1998.

In Indonesia, gas could begin flowing in late 1997 to Duri, Sumatra, through a 335 mile trunk line from the Corridor Block Gas Project in South Sumatra. Indonesia's state owned Perum Gas Negara (PGN), which will own and operate the system, also plans a 175 mile spur to transport gas to the island of Batam.

PGN has arranged financing for the $600 million pipeline system through a syndicate that includes Asian Development Bank, Export-Import Bank of Japan, and European Investment Bank.

Also late last month, Gulf Canada Resources Ltd. and Talisman Energy Inc., both of Calgary, disclosed they had arranged financing of as much as $450 million (U.S.) to drill more Corridor Block wells and construct field and processing plant facilities. Corridor facilities are being designed to handle about 300 MMcfd.

Gas in Australia

A national gas grid is emerging in Australia, as a series of regional projects have begun setting the stage for a big increase in domestic gas use.

A Tenneco unit in December 1995 started building the 470 mile Southwest Queensland pipeline. The 16 in. line is to transport more than 43 bcf/year from the Cooper basin in Southwest Queensland to an interconnect at Wallumbilla, Queensland, with a gas distribution system serving residential, commercial, and industrial markets in Gladstone and Brisbane (OGJ Jan. 23, 1995, p. 67).

Cooper basin gas will replace dwindling reserves at Roma, Queensland, near Wallumbilla.

The $170 million Southwest Queensland system, designed to handle more than 83 bcf/year, is to begin service in January 1997.

Tenneco last June completed a $200 million acquisition of the Pipelines Authority of South Australia (PASA), including the 488 mile Moomba-Adelaide gas pipeline and related facilities. Built in 1969, the 22 in. PASA main line transports about 81 bcf/year of Cooper basin gas to Adelaide.

Officials in New South Wales and Victoria are near deciding whether to proceed with proposed gas pipeline links between the two Southeast Australian states.

A combine of BHP Petroleum and Canada's Westcoast Energy Inc. proposes to lay a 435 mile system between Sydney, New South Wales., and Longford, Victoria (OGJ, Apr. 10, 1995, p. 28). Gas would flow from Longford to Sydney by way of the New South Wales cities of Bombala, Cooma, Canberra, and Wollongong. Deliveries could begin as early as late 1997.

Meantime, East Australian Pipeline Ltd. and Victoria's state owned Gas Transmission Corp. propose to link the gas grids of New South Wales and Victoria with an 83 mile line in New South Wales between Wagga Wagga and Albury (OGJ, July 3, 1995, p. 30). Albury is on the Victoria-New South Wales border.

Project sponsors said the connection would ensure the long term security of gas supplies in New South Wales and Victoria, as well as heighten gas sales opportunities and competition for producers in Queensland, South Australia, Victoria, and off Victoria in Bass Strait.

Construction started last summer in Western Australia on an 870 mile pipeline system to link gas supplies near Yarraloola in the northwest part of the state with mining operations the Eastern Goldfields area at Kalgoorlie in the south. Completion of the $400 million 14-16 in. gas line is expected in mid-1996.