Food for POSITIVE thoughts about STWA's very near future:
Worldwide Pipeline Construction: Crude, products plans push 2013 construction sharply higher02/04/2013
By Christopher E. Smith
Pipeline Editor “Oil & Gas Journal”
www.ogj.com/articles/print/volume-111/issue-02/special-report--worldwide-pipeline-construction/worldwide-pipeline-construction-crude-products.html
Planned pipeline construction to be completed in 2013 jumped 73% from the previous year, with sharply higher levels of planned crude and products pipelines more than countering somewhat softer natural gas pipeline construction plans.
Operators plan to complete installation of 15,358 miles in 2013 alone (Table 1), with crude and product construction's combined share of the plans (more than 9,195 miles) making up nearly 60.5% of the total, based on reports from the world's pipeline operating companies and data collected by Oil & Gas Journal.
Looking forward to beyond 2013, however, for the fifth consecutive year less mileage is planned than had been the previous year, as gas pipeline plans softened in almost all regions.
This shrinkage in natural gas pipeline plans was consistent with 2013-only plans. But long-term construction plans (beyond 2013) saw products line plans relatively flat from the year before as NGL lines in the US begin to be completed.
Larger long-term crude pipeline plans in Canada, Europe, the Middle East, and Africa boosted beyond-2013 crude miles by 14% from global totals the previous year.
Planned product pipeline construction for beyond 2013 registered sharp decreases in the US.
As a whole, combining both current-year and forward estimates (Fig. 1), the US, Canada, Europe, and Africa saw increases in planned construction, with decreases in all other regions.
As 2013 began, operators had announced plans to build more than 44,800 miles of crude oil, product, and natural gas pipelines extending into the next decade, a 1.7% decrease from data reported the previous year (OGJ, Feb. 6, 2012, p. 102). The majority (nearly 66%) of these plans is still for natural gas, but this segment continues to contract globally relative to crude and products.
Outlook
The downturn in worldwide pipeline construction trends reflects US Energy Information Administration energy consumption forecasts, which show a slowdown in expected growth.
EIA forecast world marketed energy consumption to increase by 53% through 2035 (using a 2008 baseline), a period that encompasses the long-term pipeline construction projections stated here.
Energy demand growth will be strongest, according to the September 2011 analysis (the EIA did not publish an International Energy Outlook in 2012), among countries not members of the Organization for Economic Cooperation and Development (non-OECD), where economic growth remains high, driven in part by strong capital inflows and high commodity prices. Non-OECD growth will be led by China and India where combined energy use will more than double over the projection period to make up 31% of total global demand by 2035. China's energy demand will be 68% higher than US energy demand by the end of the projection period.
Fuelling this energy demand growth is projected gross domestic product growth in non-OECD Asia of 5.3%/year through 2035—led by China at 5.7%/year, the highest projected growth rate in the world—compared with 3.4%/year worldwide. China's rate of growth is slightly lower than EIA projections from a year earlier, while non-OECD Asia and worldwide growth were both higher than year-earlier estimates.
Structural issues that have implications for medium to long-term growth in China include the pace of reform affecting inefficient state-owned companies and a banking system carrying a large number of nonperforming loans, according to the EIA. The development of domestic capital markets to help macroeconomic stability and ensure China's large savings are used efficiently supports medium-term growth projections, said the EIA.
EIA described the acceleration of structural reforms as essential to stimulating potential growth and reducing poverty in India over the mid to long-term. Even so, EIA projects 5.5%/year GDP growth in India 2008-35, up from 5.0% the previous year.
In December 2012 the EIA forecast up and down movement in US liquid fuels consumption through 2040, rising to 19.8 million b/d by 2019 (from 18.9 million b/d in 2011) before dropping back to 18.9 million b/d by 2040. Biofuels consumption increases over most of the projection period.
EIA projects US oil production climbing more than 31.5% from 5.7 million b/d in 2011 to 7.5 million b/d in 2019 and remaining greater than 6 million b/d through 2040, with production increases stemming from tight onshore formations.
The agency increased its cumulative production of dry natural gas estimate for 2011-35 from its Annual Energy Outlook 2012 forecast by 8%, primarily reflecting continued increases in shale gas production. It projects 2040 US production of roughly 34 tcf.
The 2013 outlook projects the US becoming a net exporter of LNG in 2016 and an overall net exporter of natural gas in 2020. EIA sees LNG exports from new liquefaction capacity peaking at 4.5 bcfd in 2027 and net pipeline exports beginning in 2021 as imports from Canada fall steadily and net pipeline exports to Mexico grow by 387%.
For projects completed after 2013 (Table 2), companies plan to lay more than 44,800 miles of line and spend roughly $144 billion. When these companies looked beyond 2012 last year, they anticipated spending roughly $203 billion to lay more than 45,500 miles of line. Construction costs dropped in the meantime to $3.1-million/mile from $4.4-million/mile.
• Projections for 2013 pipeline mileage reflect only projects likely to be completed by yearend 2013, including construction in progress at the start of the year or set to begin during it.
• Projections for mileage after 2013 include construction that might begin in 2013 but be completed later.
Also included are some long-term projects judged as probable, even if they will not break ground until after 2013.
US average cost-per-mile for onshore pipeline construction (Table 4, OGJ, Sept. 3, 2012, p. 118) on FERC applications submitted by June 30, 2012, was $3.1 million. There were no offshore applications submitted.
US average cost-per-mile for offshore construction (Table 7, OGJ, Sept. 14, 2009, p. 69) on projects completed in the 12 months ending June 30, 2009, was $5.37 million. These costs were used again in this year's report due to the absence of offshore filings to FERC in the 12 months ending June 30, 2010, 2011, or 2012.
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 (14,290 miles) for 2013 only will cost more than $44 billion:
—$578 million for 4-10 in.
—$15.8 billion for 12-20 in.
—$13.4 billion for 22-30 in.
—$14.5 billion for 32 in. and larger.
• Total offshore construction (1,068 miles) for 2013 only will cost more than $5.7 billion:
—$111 million for 4-10 in.
—$3 billion for 12-20 in.
—$2.6 billion for 22-30 in.
• Total onshore construction (42,565 miles) for beyond 2013 will cost nearly $132 billion:
—$2.9 billion for 4-10 in.
—$19.7 billion for 12-20 in.
—$41 billion for 22-30 in.
—$68.4 billion for 32 in. and larger.
• Total offshore construction (2,270 miles) for beyond 2013 will cost more than $12 billion:
—$558 million for 4-10 in.
—$3.8 billion for 12-20 in.
—$7.9 billion for 22-30 in.
Action
What follows is a quick rundown of some of the major projects in each of the world's regions.
Pipeline construction projects mirror end users' energy demands, and much of that demand continues to center on natural gas, with the industry remaining focused 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.
Crude
TransCanada announced plans in July 2008 for the Keystone Gulf Coast Expansion Project (Keystone XL), providing additional capacity of 500,000 b/d from western Canada to the US Gulf Coast by 2012. The expansion would boost the Keystone system's capacity to 1.1-million b/d at a total capital cost of about $12.2 billion. Keystone XL secured initial firm, long-term contracts for 380,000 b/d for an average of 17 years from shippers.
Keystone XL would include 1,980 miles of 36-in. OD line starting in Hardisty, Alta., and extending to delivery near existing terminals in Port Arthur, Tex. XL will also include 41 pump stations—33 in the US and 8 in Canada—at roughly 50-mile intervals. Each station will use two-to-three 6,500 hp electric pumps, providing up to 19,500 hp/station. Each station could be expanded to 32,500 hp as part of boosting the combined Keystone system's throughput to 1.5 million b/d.
Keystone XL, however, became embroiled in US domestic politics, with the administration of President Barack Obama in November 2011 deferring a decision on the pipeline until 2013 to consider environmental concerns regarding its routing through Nebraska. In May 2012, TransCanada submitted a new application to the US Department of State for the project and in September the company filed a new route for the pipeline, bypassing the Sandhills region, with Nebraska's Department of Environmental Quality. The State Dept. is to make a decision later this quarter.
TransCanada in the meantime began work on its Gulf Coast Project crude oil pipeline between Cushing, Okla., and Nederland, Tex., despite both the delays to Keystone XL (of which the Gulf Coast Project would be a component) and plans to reverse the Seaway pipeline to deliver crude along a similar route. TransCanada separated the Gulf Coast Project from Keystone XL in February 2012 and in July received the final of three key permits needed from the US Army Corps of Engineers to advance the 485-mile pipeline (OGJ Online, July 27, 2012). It expects to place the pipeline in service by late this year.
Enbridge bought ConocoPhillips's share of Seaway, joining with EPP in its ownership and jointly announcing that its flow would be reversed to deliver crude from Cushing to the Gulf Coast. Initial capacity of the reversed pipeline was 150,000 b/d, with expansion to 400,000 b/d completed in January 2013. Seaway plans to reach a final capacity of 850,000 b/d by mid-2014.
Enbridge is also building its Flanagan South Project between Flanagan, Ill., and a connection with Seaway at Cushing. The company currently operates the 193,300-b/d Spearhead Pipeline along this route. The 600 mile, 36-in. OD Flanagan South line will open mid-2014 with 600,000 b/d capacity, expandable to 800,000 b/d.
Enbridge plans to build the Northern Gateway Pipeline to transport 525,000 b/d of oil sands crude from near Edmonton, Alta., to a tanker terminal in British Columbia for shipment to China, other parts of Asia, and California. A line running parallel to the crude line would ship 193,000 b/d of condensate from the coast to Alberta.
Enbridge expects to build Northern Gateway in 2013-16, pending regulatory approval of filings made in 2009. Commissioning and start-up would occur 2014-15. Enbridge would also operate the Kitimat terminal. It would have 2 mooring berths, 14 storage tanks for petroleum and condensate, and be called on by roughly 225 ships/year.
British Columbia Premier Christy Clark, however, declared in July 2012 that the environmental risks of the project outweigh its economic benefits and asked that B.C. be compensated for allowing the pipeline to cross. The pipeline was already encountering opposition from environmentalist groups.
That same month Northern Gateway announced additional measures to ensure pipeline integrity, including increased WT, more remote-operated isolation valves, more in-line inspections, and staffing at remotely located pump stations.
Products
Kinder Morgan Energy Partners LP will build and operate a 136-mile, 16-in. OD pipeline to transport gasoline, jet fuel, and diesel from refineries in Norco, La., to an existing petroleum transportation hub in Collins, Miss., owned by Plantation Pipe Line Co. From this hub, the products can move to major markets in the southeastern US.
Kinder Morgan is partnering with Valero Energy Corp. in the joint venture. The pipeline will have an initial capacity of 110,000 b/d with the ability to expand to more than 200,000 b/d. Kinder Morgan began building the pipeline in August 2012 and expects it to be in service September 2013.
AI
