Installation: on the up?

the Turkmen government delegation visiting Kabul on 1 November of its ensuring the pipeline’s completion and security as reported by Reuters, the existence of armed opposition to the Taliban in the Panjshir Valley and the hesitance of the regional and non-regional countries to recognise the Taliban government have cast doubt on its completion.

Its Turkmen section (214 km) is the only completed section leaving the bulk of the pipeline (774 km in Afghanistan and 826 km in Pakistan) for construction to be connected to the Indian oil pipeline network. Funded by the Asian Development Bank, the TAPI (33 billion m3; US$10 billion) is meant to fed Afghanistan (500 million ft2) and Pakistan and India (each 1.325 billion ft2) for 30 years.

Goureh-Jask oil pipeline The completion and operation of the Goureh-Jask oil pipeline in May marked a major achievement for Iran. The pipeline (1100 km; 42 in.; 1 million bpd; US$1.1 billion) enables Iran to bypass the Strait of Hormuz for exporting its oil by using Jask’s oil terminal on the Sea of Oman with the storage and export capacity of 1 million bpd of crude oil.

Iran has used its Persian Gulf Khark Island for “more than 90%” of its crude exports, leaving the rest for its smaller Persian Gulf terminals of Lavan, Sirri and Soroush islands as well as the Assaluyeh terminal for exporting condensates, as reported by Iran’s Press TV.

Fed with Iran’s West Karun oil fields, the pipeline is the largest pipeline project of the Iranian oil industry, according to Chief Executive of the National Iranian Oil Company Mehdi Karbasian. He also stressed that the Iranian companies conducted the entire project.

Israel-Egypt gas pipeline Israel is considering the construction of a new pipeline to increase its gas exports to Egypt currently done via a subsea pipeline (5 billion m3) passing through the Sina Peninsula, according to the Israeli Energy Ministry in October. Estimated at US$2 billion, the proposed onshore pipeline – to be owned by Israel Natural Gas Lines, and which could reportedly go online in two years – will provide for annual export of 3 - 5 billion m3 of gas from Israel’s Mediterranean Sea gas fields of Leviathan and Tamar. As reported by Reuters, the two sides are considering the pipeline as an option within the context of Egypt’s request from Israel for additional gas exports. Reportedly, the approval process of the pipeline’s route from local authorities is underway.

Southern section Consisting of Chinese and Russian systems, the East Route gas pipeline system (ERGS) went online on 2 December 2019 to begin Russian gas exports to China (38 billion m3/y) to last for 30 years, as part of the world’s single largest energy deal (US$400 billion) made between Gazprom and CNPC in 2014. Having northern, southern and middle sections, China started constructing its system’s remaining southern section (50 million m3/d) in January planned to go online in 2025, as reported by Xinhua. Respectively, its northern and middle sections went online in 2019 and 2020.

The Chinese system combines building a 3170 km pipeline and using an existing 1800 km pipeline passing through six Chinese provinces (Heilongjiang, Jilin, Liaoning, Hebei, Shandong and Jiangsu), the Inner Mongolia Autonomous Region, Tianjin and Shanghai. The southern section (1509 km) will feed Shanghai with Russian gas by connecting Yongqing county in Hebei province to Shanghai passing through Shandong and Jiangsu provinces, according to the China Oil & Gas Piping Network Corporation (PipeChina).

Feeding the Chinese system, the Russian system known as the Power of Siberia (3000 km, 1420 mm, 38 billion m3/y), passes through the Irkutsk and Amur Regions and the Republic of Sakha (Yakutia) to supply gas from the Chayandinskoye field in the Yakutia gas production centre to the consumers in Russia’s Far East and to China. According to Gazprom, the three-line system is currently under extension to have another feeding line (803 km) scheduled for completion in late 2022 to link the Kovyktinskoye field in the Irkutsk gas production centre to the Chayandinskoye field.

Europe

Nord Stream 2 (NS2) The NS2 was finally completed in September despite the sustained US opposition to the project and its associated threat of sanctions. As a prelude to its commercial operation, Russia filled its first string with 177 million m3 of technical gas on 18 October, according to its operating company.

Russia hopes that its commercial operation could start before the end of 2021 as the EU’s gas demand is growing. However, the NS2’s required certification process, which began in October, may not be completed in this timeframe, although the German Federal Economy Ministry determined on 29 October that its certification would not threaten Germany’s or the EU’s gas security. Nevertheless, the two reaming hurdles are its certification by Germany’s Federal Network Agency to be completed by early January. Its recommendation then must be accepted by the European Commission, for which it has two months.

The Trump administration’s threat of imposing sanctions on any company completing the project halted the construction of its remaining short Danish and German parts in their Baltic sea’s exclusive economic zone (EEZ) in December 2019, when Swiss-based Allseas laying the pipeline ended its operation. The threat deterred all the potential pipelaying companies, forcing Russia to use its own pipelaying vessels (Fortuna) to resume the operation in January 2021.

The pipeline system connects the Russian gas network near Narva Bay in the Kingisepp district of Russia’s Leningrad region to Germany’s gas network in the northern German coast near Greifswald, to feed Germany and other EU countries.

Mirroring the operating Nord Stream, the joint venture of Russia’s Gazprom (51%), Austria’s OMV, Germany’s E.ON and BASF/Wintershall and Royal Dutch Shell (10% each) and France’s ENGIE (9%) consists of twin-offshore pipelines buried under the Baltic Sea’s seabed (each about 1200 km; 27.5 billion m3/y; 48 in.) passing through the EEZs of Finland, Sweden, Denmark and Germany.

TurkStream Russia started exporting gas to Hungary and Croatia on 1 October through the TurkStream gas pipeline connected to Bulgaria and Serbia, through which the two EU members received Russian gas, according to Gazprom.

Inaugurated on 8 January 2020, the TurkStream consists of two parallel pipelines (each 930 km, 32 in.; 15.75 billion m3/y) of which one is for feeding Turkey and another for feeding the EU countries via Turkey with Russian gas. They run through the Black Sea from the Russkaya CS near Anapa, on the Russian coast, and come ashore on the Turkish coast some 100 km west of Istanbul, near the village of Kiyikoy. From there, one of them connects to the existing Turkish gas network at Luleburgaz while the other one continues to the Turkish-Bulgarian border.

The TurkStream was subsequently connected to Bulgaria and Serbia via the Balkan Stream (474 km; 20 billion m3/y; US$1.2 billion), which was completed and became operational in December 2020 despite the EU’s policy of reducing dependency on Russian energy. Bulgaria opened the 11 km pipeline connecting its gas network with Turkey in October 2019 as a necessity for importing Russian gas once the Balkan Stream is operational.

Feeding Hungary and Croatia became possible thanks to Hungary’s construction of a new gas trunkline and the expansion of the national gas transmission systems in Bulgaria and Serbia. On 27 September, Gazprom signed two 15-year contracts for exporting up to 4.5 billion m3/y of gas to Hungary.

Americas

Line 3 Enbridge announced completing the upgrading of its oil sands crude pipeline (1765 km; US$8.2 billion) Line 3 on 29 September and its operation on 1 October. The upgrading increased the pipeline’s capacity from 390 000 bpd to 760 000 bpd.

Connecting Canada’s Alberta to Enbridge’s terminal in the United States’ Superior in Wisconsin, the Line 3, which went online in the 1960s, passes through North Dakota and Minnesota. An upgrade to its Canadian section was finished about two years ago, but severe opposition from environmental groups and Indigenous communities mainly in Minnesota prevented the upgrade of its American section. Its North Dakota and Wisconsin legs were also completed earlier. The Indigenous communities would reportedly continue their efforts to shut it down through the American federal courts. Dakota Access crude pipeline (DAPL) The DAPL’s faith is again in doubt as the US District Court for the District of Columbia cancelled its environmental permit last year and ordered an additional environmental study, as Native American tribes and environmental groups argued its potential contamination threat to the Missouri River and drinking water sources. In September, Energy Transfer (operating company) asked the US Supreme Court to determine whether the study was required.

Connecting the shale oil fields of the Bakken formation in northwest North Dakota to an oil terminal near Patoka, Illinois through South Dakota and Iowa, the DAPL (1886 km; 30 in.) had a controversial beginning as environmental opposition delayed its operation in 2016 only to go online in June 2017. Energy Transfer completed its capacity increase from 570 000 bpd to 750 000 bpd in August.

Guyana subsea gas pipeline As an emerging South American oil and gas producer, Guyana’s government announced in October the construction of an offshore gas pipeline (220 km) to be started as part of its plan to begin constructing a major gasfired power plant next year, as reported by Bloomberg. Its start date is being finalised according to Peter Ramsaroop, the CEO of GoInvest, a government agency encouraging foreign direct investment in Guyana. Reportedly, the pipeline would transport nearly 50 million ft3/d of gas from Exxon’s Liza Phase 1 and 2 oil projects.

Australasia

Northern Goldfields Interconnect (NGI) The NGI’s construction is expected to be completed by mid-2022. Its undertaker, Australia’s APA Group, announced in November 2020 its plan to construct the pipeline to connect the emerging fields in the North Perth basin to the Goldfields region in Western Australia.

The NGI (580 km; 304 mm; AUS$460 million) is part of the Western Australian gas grid. Reportedly, it will connect to APA’s existing Goldfields Gas Pipeline (GGP) connected to the APA Group’s major Eastern Goldfields network to add capacity to APA’s gas grid. In June 2021, the first of four shipments of steel pipes arrived in Geraldton for its construction, according to APA.

Africa

Dangote pipeline (DP) Being installed by China’s Offshore Oil Engineering Co. Ltd., the subsea pipeline (1177 km; 3 billion ft3; US$2.5 billion) consists of twin pipelines (each 588.5 km), which will transport gas from Bonny Island in Nigeria’s Niger Delta to Lekki Free Trade Zone in Nigeria’s Lagos via Olokola. Scheduled for completion by this year’s end, the pipeline is a component of Dangote Group’s US$17 billion integrated fertilizer, petrochemical and refinery complex project.

Ben Wilby and Arindam Das, Westwood Global Energy Group, UK, discuss the company’s forecast for the onshore pipeline installation market.

The global onshore pipeline installation market was deeply affected by the COVID-19 pandemic, with several projects delayed as restrictions impacted construction schedules. At the same time, the collapse in commodity (i.e. oil) pricing, rising uncertainties, negative sentiment and continued legal challenges in certain jurisdictions had an impact on several pipelines in the pre-FID stage. As a result, pipeline installations are estimated to have dropped by approximately 20% in 2020, with pipeline CAPEX estimated to have contracted from approximately US$56 billion in 2019 to US$41 billion in 2020.

Over the course of year-to-date 2021, there has been only a small improvement in overall pipeline installation activity levels, as operators remain cautious whilst continuing to face a range of uncertainties. Important factors such as public and political opinion, as well as material costs, continue to pressure projects. There exists the potential that many project financiers and lenders may not necessarily have the same latitude (as before) to finance fossil fuel projects going forward, driven by ESG considerations. The cancellation of permits for the Keystone XL pipeline project following years of political back and forth, highlights that oil and gas pipelines remain

Figure 1. Onshore Oil & Gas Pipeline Installations by region 2016 - 2025 (Source: Westwood Onshore Pipeline Market Forecast).

Figure 3. Onshore Oil & Gas Pipeline Installations by Region 2016 - 2020 vs 2021 - 2025 (Source: Westwood Onshore Pipeline Market Forecast).

Figure 2. Onshore Pipeline Installations by Phase Type 2016 - 2025 (Source: Westwood Onshore Pipeline Market Forecast). a contentious issue, particularly in the Western hemisphere.

Looking forward, Westwood does not expect the same volume of installations over the forecast 2021 - 2025 period as was seen in the hindcast period (2016 - 2020). We estimate approximately 200 000 km of installations over the forecast, compared to approximately 220 000 km of installations over the hindcast (10% reduction). The associated CAPEX over the forecast is estimated at US$220 billion (compared to US$247 billion over the hindcast) and includes several long distance and large diameter lines, such as the Tianjin - Inner Mongolia Pipeline (China), Donlin Gold Natural Gas Pipeline (USA) and Murmansk - Volkhov gas pipelines (Russia).

The stability and rise in commodity (i.e. oil) prices during 1Q21 to 3Q21, coupled with an improvement in sentiment, has seen some lines (such as the East Africa Crude Oil Pipeline) progressing, having been stalled earlier due to economic concerns. In addition, the emphasis in certain regions, particularly Asia and the GCC, to increase domestic production levels will require substantial pipeline infrastructure to become a reality, supporting forecast installation activity. Thirdly, the development of gas pipelines as countries seek to diversify their energy supply, is also expected to be a key factor over the forecast, with gas pipelines accounting for approximately 65% of total installations.

At a regional level, Westwood expects Asia and North America to lead installation activity, accounting for a combined 60% of total installations and 65% of CAPEX (US$145 billion), over the forecast period. North America has historically been the largest region for pipeline installations with both Canada and the US requiring large kilometres of pipeline infrastructure to help transport the vast quantities of oil and gas produced, especially in the US Shale plays. 2016 - 2019 saw strong installation activity, with an average of 19 000 km installed each year. This was predominantly a result of operators attempting to ease bottlenecks in key shale plays which were beginning to impact the rate at which new wells could be brought onstream. As the pandemic gained momentum during 2020 and global demand shrunk significantly, US benchmark crude (i.e. WTI) prices