WATCHING THE WORLD EUROPE'S CATCH-22 GAS PIPELINE

With David Knott from London In the Joseph Heller novel Catch-22 there is a character called Milo Minderbinder, a bomber pilot/wheeler dealer who takes business logic to the limits. The peak of Minderbinder's achievement is arranging for his squadron's aircraft to bomb their own airbase, in a deal agreed with the enemy. While the oil and gas industry generally avoids such frivolity, one British project holds promise of a future period of absurdity.
Nov. 15, 1993
3 min read

In the Joseph Heller novel Catch-22 there is a character called Milo Minderbinder, a bomber pilot/wheeler dealer who takes business logic to the limits.

The peak of Minderbinder's achievement is arranging for his squadron's aircraft to bomb their own airbase, in a deal agreed with the enemy.

While the oil and gas industry generally avoids such frivolity, one British project holds promise of a future period of absurdity.

Seven oil and gas companies have teamed up to develop plans for the U.K.-Continent Gas Interconnector. This will be a 290 million ($435 million), 36 in. gas pipeline from Bacton, Norfolk, to Zeebrugge, Belgium.

Partners are British Gas plc, British Petroleum Co. plc, Conoco (U.K.) Ltd., Elf U.K. plc, Norway's Den norske stats oljeselskap AS, Norsk Hydro AS, and Distrigaz SA of Belgium.

ADVANCE BOOKINGS

A study group set up by the partners canvassed gas companies throughout the European Community to establish interest in using the interconnector. Thirty-five companies wanted to book pipeline capacity.

Those potential users fall into four main groups, said Paul Reed, commercial director of the U.K.-Continent Gas Interconnector study group.

There are U.K. producers wishing to export, continental marketing companies wishing to import, power generators, and gas resellers. All interest to date has been in taking gas from the U.K. to continental Europe.

The study group is about to start a fully costed technical design for the pipeline and begin negotiating a transportation agreement. Preliminary design capacity is 530 bcf/year. Pipeline commissioning is slated for October 1997.

Reed said, "Allowing for double counting where U.K. producers and continental suppliers have booked pipeline space for the same volumes, the range of demand is more than enough to justify the base case design capacity."

ABOUT-FACE

However, Reed said U.K. demand is expected to outstrip supply in the next 15-20 years. Then the gas flow would turn around, with the interconnector possibly being used to carry as much as 350 bcf/year of gas to the U.K.

Howard Dalton, managing director, exploration and production, British Gas plc, told a recent conference it is possible that contracts to take gas in either direction would balance out.

Rather than incur extra operating costs by pumping gas through, offsets would be arranged at terminals. The pipeline would be full of gas that was going nowhere.

Reed said such a case is possible but only during a transition phase. This does not affect commercial justification for the pipeline.

He said, "Viability is based on the first 15 years of flow from the U.K. to the continent. If, after the initial phase, the pipeline has paid for itself, nobody cares what happens to it."

Copyright 1993 Oil & Gas Journal. All Rights Reserved.

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