-AN OVERVIEW OF WORLD Transmission and Transnational Gas Pipelines
-AN OVERVIEW OF WORLD
Transmission and Transnational Gas
Pipelines
Why ‘Transnational’ Pipelines Exist?
Natural Gas as Upcoming Fuel Advantages of Pipeline
The Clean Fuel of 21st Century Mainly used in Power Sector; but also
in Refining Industry and Domestic Consumption
Key to Economic growth Not enough gas reserves are available
in all parts of country Main source of Natural Gas?
Russian Part of Asia- 27% of world’s reserves
Over 70% gas reserves are in Northern Central Asia and the Gulf Countries
First Pipeline? Constructed by Soviet Union in 1970 Supply Natural Gas to West Germany
& Parts of Western Europe
Cheapest Mode Out of 3 available ways (LNG; Deep Sea
Pipeline; Gas Pipelines on Land), its is the cheapest
Doesn’t entail any loss of energy in conversion
Increase Stability in Region Transit countries which have internal
insurgency problem; will benefit as it’ll guarantee a source of income
Effect on Economic Relations Widen and Deepen Economic Relations in
other parts of World Overcome Security Risks
Bind through close economic ties Security risk minimized by gains of
economic prosperity
Basis of Existence
Risk Involved
Security Risk On shore pipelines are insecure (can be blown by militants) Given the history of Indo-Pak relations; the Vision of Friendship is a
Gamble Gas Supplying Nations (Iran, Turkmenistan, etc..) are not stable
democracies.Political Tools
Energy Rich countries are using TransNational Pipelines as Political Leverage
To forge Political Alliances, Extract Concessions High Economic Cost
Energy rich countries demand a higher cost for supply of gas. Eg: ‘IPI’ is unable to proceed due to Iran’s high demand for price.
-AN OVERVIEW
Major Gas Pipelines OF WORLD
Major Pipelines
Major 6 Pipelines of World:
1. Langeled Pipeline
2. Medgaz Pipeline
3. Russia to Europe Pipeline
4. Turkmenistan-Afghanistan-Pakistan-India (TAPI)
5. Power of Siberia Pipeline
6. Iran-Pakistan-India (IPI)
A SUBSEA NATURAL GAS PIPELINE BETWEEN NORWAY AND BRITAIN
Langeled
Location
Country: Norway and UK Direction: East-South-WestFrom: Nyhamna, Norway To: Easington, UK Through: Sleipner Riser Platform
Country: Norway Region: North Sea Operator: StatOil (Norwegian Multinational Oil and Gas) Discovery: 1974
Overview The pipeline construction began in
2004, and it was opened in two stages : Southern Part
Sleipner Riser Platform to Easington Started : October 1, 2006
Northern Part Area : Nyhamna to Sleipner Rise Started : October, 2007
TECH SPECS
Total Length: 1166 km
Maximum Discharge: 25.5 bcm/year
Project Cost: 1.7 billion pounds
Funding by: ABN AMRO, Barclay’s Bank,
RBS, Defoe Fournier
PROJECT HANDLING
Owner: Gassled Tech Service Provider: StatOil Operator: Gassco Partner:
Petoro (Petro company multinational Oil & Gas Co.)
StatOil Norkse Shell (Anglo Dutch multinational Oil
& Gas Co.) DONG Energy (Denmark’s Energy Co.)
(Dansk Olie og Naturgas) Exxon Mobile (American Multinational Oil &
Gas Co.) Conoco Philips (American Multinational
Energy Coorporation) Gassco (Norwegian state owned company of
Petroleum Industry)
Easington Terminal of Langeled
A SUBMARINE NATURAL GAS PIPELINE
BETWEEN ALGERIA AND SPAIN
Medgaz
Location
Country: Algeria and Spain
General Direction: South to North
From: Hassi R’mel, Algeria
To: Almeria, Spain
Passing Through: Mediterranean Sea
Overview
HISTORY
Idea arose in 1970 ; but couldn’t be implemented due to technical limitations.
Preparation started in 2001 Feasibility study carried out in
2002-2003 Construction :
Started – March 7, 2008 Started at – Almeria Ended in – December, 2008
Inaugurated on March 1, 2011
TECH SPECS
Total Length: 757km On Shore: 547km Off Shore: 210km
Diameter of Pipeline: On Shore: 48 inch Off Shore: 24 inch
Maximum Discharge: 8 bcm/year
Total Cost: 900 million euro On Shore: 270 million euro Off Shore: 630 million euro
Project Handling
Partner Companies with Share %
Sonatrach- 43% State owned Algerian Oil & Gas Company
CEPSA- 42% International Petroleum investment company
Gas Natural Fenosa- 15%
43%
42%
15%
SonaTrach
CEPSA
THE TRANSNATIONAL YAMAL – EUROPE GAS PIPELINE RUNS ACROSS FOUR COUNTRIES: RUSSIA, BELARUS, POLAND AND GERMANY.
Russia – EuropePipeline
Tech Specs
CAPACITY: 33 billion cubic meters per annum. DIAMETER: 1,420 millimetres (56 in). This new export corridor increased flexibility and reliability of Russian gas
supply to Western Europe. The gas pipeline construction started in 1994 and finished in 2006.
Economics of Yamal-Europe pipeline Russia offering discounted price on natural gas in lieu of full control of natural
gas pipeline to Europe. Poland’s apprehension of being heavily dependent on Russia.
Future Plans Yamal – Europe-2
Ownership Gazprom:
Russian section(402 kms) and Belarusian section(575 kms) of the pipeline is owned and operated by Gazprom.
EuRoPolGaz: A joint venture of Gazprom and
Polish PGNiG owns the Polish section of the pipeline which is about 683 km long.
WINGAZ: A joint venture of Gazprom and
Wintershall Holding GmbH owns and operates the German section of the pipeline.
NORD Stream Pipeline Nord Stream (North Trans Gas and
North European Gas Pipeline) Offshore natural gas pipeline from Vyborg in the
Russian federation to Greifswald in Germany.
It is owned and operated by Nord stream AG.
CAPACITY: 55 billion cubic meters per annum.
DIAMETER: 1,220 mm(48in)
The project includes two parallel lines. 1. First line of the pipeline was laid by
May 2011 and was inaugurated on 8 November 2011.
2. The second line was laid in 2011–2012 and was inaugurated on 8 October 2012.
AnalysisCosting According to Gazprom the costs of the
onshore pipelines in Russia and Germany are around €6 billion.
The offshore section of the project is expected to cost €8.8 billion.
Political aspects Move by Russia to bypass traditional
transit nations. To exert political influence on some of the
transit countries. Europe could dangerously depend on
Russia for its gas supply.
Security and military aspects Security threat to Sweden. Espionage.
Economic Aspects Economic Savings in transits. But higher maintenance costs.
Environmental Aspects Sea-bed being disturbed. Baltic marine habitat being
disturbed.
Expansion Plan Two additional lines doubling the
capacity.
Northern Lights Pipeline
Northern Lights Pipeline(built in the Soviet Union from the 1960s to 1980s) is a natural gas pipeline system in Russia and Belarus.
It is one of the main pipelines supplying north-western Russia and is an important transit route for Russian gas to Europe.
The Northern Lights pipeline system was built in the Soviet Union from the 1960s to 1980s
The Northern Lights pipeline system has a total length of 7,377 kilometres.
Around 2,500 kilometres of 7,377 is used to transport Russian gas to Europe.
Owners Gazprom Beltransgaz
South Stream
South Stream pipeline is an abandoned pipeline project to transport natural gas of the Russian Federation.
ROUTES Through the Black Sea to Bulgaria and through Serbia, Hungary and Slovenia further to Austria. Diameter: Diameter of pipeline is 32 inches(810mm) Discharge: Designed discharge capacity of pipeline is 63 billion cubic meters per annum.
REASON FOR ABONDONING THE PROJECT Non-compliance with European Union’s condition. Russia’s focus on Asia and Turkish market. Lack of proper funds due to sanctions imposed. Legal problems.
IMPLICATION Conflict with Ukraine. Nabucco Pipeline Project.
T.A.P.ITurkmenistan – AFGHANISTAN –
PAKISTAN – INDIA
Route
Main Route The 1,735 kilometres (1,078 mi)-long pipeline will run from gas fields in
Turkmenistan through Afghanistan and Pakistan to India. Dauletabad Gas fiels while more recent reports indicate that it will start
from the lolatan(Galkynsh) gas field (Reserves of 16 trillion cubic feet). Afghanistan, TAPI pipeline will be constructed alongside the Kandahar-
Heart highways in western Afghanistan. Pakistan via Quetta and Multan in Pakistan. India the Indian town of Fazilka, near the border between Pakistan and
India
Alternative Route Taskepri in Turkmenistan to Faryab followed by Balkh, Samangan, Kabul
and Nangarhar Province of Afghanistan, and from there to Peshawar, Nowshera, Attock, Islamabad and Lahore in Pakistan to India
Peace Pipeline Turkmenistan Perspective Reached out to Turkey, Japan, and
South Korea. To develop projects in Turkmenistan
for LNG, Gas-to-Liquids. The manufacture of fertilizers from
natural gas. Chance to market its gas to deficit
south Asian countries.
Afghanistan Perspective Critical source of employment and
revenue spinner Contributing to the country's energy
security and thus boosting Afghan development
Pakistan Perspective Economic development Rising energy demand will be
catered to an extent. Improve relations with India &
Afghanistan Create pressure to Iran as it is an
alternative to IPI/
India Perspective A growing power crisis The steady drop in Krishna Godavari
basin (KG-D6) natural gas production
Lessen the dependence on petrol First joint pipeline between India-
Pakistan Economic development
OverviewHISTORY
MoU between the governments of Turkmenistan and Pakistan for a pipeline project was signed.
Chose CentGas- Unocal withdrew from the consortium .
Pakistan, India and Afghanistan signed a framework agreement to buy natural gas from Turkmenistan.
India and Afghanistan failed to agree on transit fee for gas passing through Afghan territory & Pakistan.
GAIL to sign the Gas Sale and Purchase Agreement (GSPA) with TurkmenGaz, Turkmenistan’s national oil company.
TECH SPECS
Total Capacity:1,078 millimetres pipeline Working pressure :100 standard atmospheres
(10,000 kPa).
Initial capacity: 27 billion cubic metres (950 billion cubic feet) of natural gas per year. Afghanistan: 2 billion cubic metres
(71 billion cubic feet) Pakistan:12.5 billion cubic metres
(440 billion cubic feet) India: 12.5 billion cubic metres(440 billion
cubic feet)
Future Development: 33 billion cubic metres (1.2 trillion cubic feet). Six compressor stations would be
constructed along the pipeline. The pipeline was expected to be operational
by 2014.
Challenges
Key Challenges
The seller’s willingness to sell gas at a price feasible for the ultimate buyer.
Volume off-take assurance by end-consumers.
Funding of the pipeline.
Geopolitical risks associated with the construction and operation of the 1,735km long pipeline.
Commercial Challenges
Cost Implication- Inability to find financing.
Selection of commercial consortium.
Geopolitical Challenges
Security Issues in Afghanistan
Tribal areas in Pakistan
Issues between Washington, Iran and Pakistan
India has concerns regarding project security after the 2014 withdrawal of US forces from Afghanistan.
Iran keen on alternative to TAPI- (IPI)
Iran-American & Russian American factors
China factor
AnalysisSize of TAPI Pipeline Length : 1735 km
Turkmenistan: 200 Km Afghanistan : 735 km Pakistan- India : 800 km
Diameter : 1420 mm (56 inch)
Capital Spending $7-$10 billion Asian Development Bank is the Transaction
Advisor for the project.
Start & End of the Project Proposed Project : In 1990s (almost 20
years ago) Original Project Start Date : 15th
March 1995 (Turkmenistan-Pakistan) TAPI Agreement Date : 24th April 2008 Implementation Start Date:
December 2015 (Tentatively) Project End Year : 2018 (Tentatively)
Owners of the Pipeline Land Ownership : Turkmenistan Leader of Consortium: To be
decided in September 2015 Contenders : Total S.A &
PETRONAS
Financing of the Project Total S.A to be consortium leader
constructing the pipeline. (Tentatively)
Companies with Equal Stake Turkmengaz Afghan Gas Enterprise Inter State Gas Systems (Private)
Limited GAIL (India) Limited
Risks
Geopolitical Risk India-Pakistan Relations Security Issues
Environmental Risk Displacement of communities and individuals Devastation of traditional livelihoods from pollution Environmental accidents. The lack of transparency in the dissemination of the findings of environmental
impact assessments (EIAs) is of major concern.
Commercial Risk Expected price of Natural gas will 10-12 millimeters/unit which is very high for
energy companies.
A NATURAL GAS PIPELINE BETWEEN RUSSIA AND CHINA
Power of Siberia
Tech Specs Technical Specifications Length – about 4,000 kilometers
(Yakutat – Khabarovsk – Vladivostok – 3,200kms)
(Irkutsk Region – Yakutat – nearly 800kms)
Working pressure – 9.8 MPa (100 Ata); Annual output – 38 billion cubic meters.
30 billion cubic meters from Kovyktin 8 billion cubic meters from Chayandin
Size and Capacity Diameter – 1,420 mm or 55.9 inches 68 billion cubic meters annually
Owners and the Users Gazprom (Owned by Russian Government) CNPC (China National Petroleum Corporation)
Beijing-Tianjin-Hebei metropolitan area in the north of China
Yangtze River Delta in the east.
Time Period 30 years (2018-2047)
Geo Political Implications
For Russia
The deal provides alternative market for Russian gas
Russian gas supplies as a result will be least affected by diversification of European gas supplies
Russia hardened its stand in Ukraine Ukraine as a result has the highest
gas prices in Europe The deal paves the way for Russia in
the Asian markets of the “pivot to Asia” initiative
The current pipeline will also facilitate
For China
Provides the Chinese players an entry in the Russian gas industry
Reduces the reliability of China’s demands on U.S LNG imports
China will rely comparatively less on U.S dominated sea routes
Gas supplied will also nullify the pollution tensions which may result in political instability
Both Russia and China coupled could challenge U.S supremacy
Strategic & Commercial Implications Gas deal viewed as a facet of maturing
economic ties between China and Russia 30 commercial deals signed between two
countries Included long term strategic implications like:
Currency Swaps Partnering on rail, power and port projects Joint development of a wide body long haul
passenger aircraft Chinese automotive assembly in Russia A Maturing Energy Partnership Doublilng of oil exports from Rosneft since July
2014 Yamal LNG Project Rosneft-CNPC deal Shanjhai Chemical Industry Park Tainjin Oil refinery Acquisition of technology from China for shale
gas Extraction
For China East Siberian gas can only be
developed with china as a customer China would pay around $10/mbtu
For Russia The size of the entire deal is estimated
to be $400 billion Russia can leverage this liquidity in a
time when it is sighting sanctions from European markets
This would enable Russia to be a “Swing Supplier”
This will be Gazprom’s most profitable endeavor
Analysis
FINANCIAL ANALYSIS Russia to invest a pre-payment capital of $50
billion
China to invest a pre-payment capital of $25
billion
Proposal to finance the pipeline through an
equity stake of CNPC in Gazprom
Laying of the pipeline to cost around $
5billion which will be bared by gazprom
This increses the capital spending by Russia
to $55 billlion
RISK ANALYSIS
Technical Corrosion (both internal and external) Pressure handling capacity Maintenance Other environmental factors which
could affect the
Financial Pricing
• Formula based on the basket of crude oil products
• Take-or-pay contractual obligation
-PRELIMINARY AGREEMENT
BETWEEN IRAN AND PAKISTAN 1995
AND BETWEEN IRAN AND INDIA IN 1998
Iran-Pakistan-India Pipeline
(IPI)
Tech Specs
• Type of pipeline - Natural gas
• Route – from Asaluyeh in Iran to Multan and Karachi in Pakistan to Delhi in India
• Length – 2700 km
• Diameter – 42 inch
• Capacity – 110 million cubic metres of gas a day
• Maximum discharge – 40 billion cubic metres per year
Challenges Risks Sanctions on Iran by the U.S and
other world powers Pressure of U.S on Pakistan and
to abandon the project due to its political relations
Disagreement between pricing Security reasons – the social
unrest in Iran and political unrest
Financial constraints for Pakistan
Unrest in Baluchistan Weak Transit negotiations
resulting in high transit fees to Pakistan
China bagging the project if over India due to failing negotiations
More Analysis
Financial Implications
Total cost-$ 7.5 billion Pipeline in Iran costs $700mPipeline in Pakistan -$2.5billionIran’s loan to Pakistan -$500mRussia’s aid to PakistanChina’s aid to Pakistan to build Pakistan side of
pipeline costing $2billion
Uses of Pipeline
Fulfilment of domestic gas needs Generation of revenue for Iran as an exporter and
Pakistan as a transit countryIncrease Investment opportunities Indirect benefits like employment avalibility of clean
fuel and industrial growthBuilding of cooperation and peace for the affected
countriesShift towards gas driven and environment friendly
economies
-AN INDIAN PERSPECTIVE
Natural Gas Pipelines in India
Gas Pipeline Network in India
There are presently three major pipeline entities in gas transportation across the country i.e. GAIL, RGTIL and GSPCL
Reason for under utilization: Acute domestic gas shortage Improvement solution : Government proposal on national gas
grid. Problem :
Not economically viable Lack of Funding.
Transporter (in KM) (in %)1 GAIL 10841 70.67% 2 RGTIL 1469 9.57% 3 GSPL 1874 12.22%
Challenges
Following are the main Challenges of pipeline transport:
1. It is not flexible, i.e., it can be used only for a few fixed points.
2. Its capacity cannot be increased once it is laid.
3. It is difficult to make security arrangements for pipelines.
4. Underground pipelines cannot be easily repaired and detection of leakage is also difficult.
Financing
• Finance comes from the project sponsors (which fund directly, or fully guarantee the debt), through project finance, or (most often) through a combination of the two.
• Finance is such a crucial element that the pipeline project needs to be structured from the beginning with the ultimate financing mechanism in mind.
• Pipeline fees: • Should be set to match the currency of funding
• Throughput reliability: • The shipping agreements should be with strong companies, and be of a longer term
than the project loans
• Supply risk: • A key risk to a pipeline financing is that there are either insufficient supplies to take up
the pipeline’s capacity, or inadequate infrastructure to bring the gas to the pipeline’s entry point.
GAIL India
• GAIL (India) Limited is the largest state-owned natural gas processing and distribution company in India
• GAIL (India) Limited was incorporated in August 1984 as a Central Public Sector Undertaking (PSU) under the Ministry of Petroleum & Natural Gas (MoP&NG)
• It has following business segments: Natural Gas, Liquid Hydrocarbon, Liquified Petroleum Gas , Transmission, Petrochemical, City Gas Distribution, Exploration and Production, GAILTEL and Electricity Generation
• GAIL commissioned Hazira-Vijaipur-Jagdishpur (HVJ) pipeline in 1991
• It was one of the largest cross-country natural gas pipeline projects in the world. This 1800-kilometre-long pipeline was built at a cost of INR 17 billion and it laid the foundation for development of market for natural gas in India
Challenges of GAIL
2012-13 2016-17 2021-22 2026-27 2031-320
200400600800
100012001400
DemandSupply
1. There is a great potential in the market but supply of natural gas is not meeting the demand.
2. Gail should search for more alternatives ie is more than Ras gas3. Land Accusation
Gail Plans to buy US shale Asset for Rs 9500 crore • We are searching for an asset that can produce about 3 million tones per annum. That
will help cover the pricing risk of about 50 % of LNG we have contracted to buy
GSPL
GSPL a GSPC group company in in developing energy transportation infrastructure and connecting natural gas supply basin and energy terminals to growing markets .
• It is the second largest gas transporter in the country
• GSPL plans to connect all 25 districts of Gujarat with 2200 km of high pressure gas pipe line.
• It is the only pipeline infrastructure company operating on an open access basis.
• Currently , GSPL operates a medium to high pressure gas transmission grid comprising approximately 1666 km of natural gas pipeline .
• GSPL has won the bid for two cross country pipelines Mallavaram – Bhillwara (1600 km) , Mehasana – Bhatinda (1670 km)
GSPL Finance
Gujarat State Petronet Ltd (GSPL) is likely to see better performance over the next two years.
First, its city gas distribution (CGD) business is expected to be merged with four companies of Gujarat State Petroleum Corporation (GSPC), a sister company. The merged entity will be named GSPC Distribution Networks (GDNL). The merger, likely to be completed in the June quarter, will boost GSPL's consolidated earnings per share (EPS) in 2015-16. The combined entity will be India's largest CGD company
Second, the company management expects the Petroleum and Natural Gas Regulatory Board (PNGRB) to raise rates by 8-10 per cent.
Third, softening LNG prices and higher offtake from Essar Steel, Essar Oil and ONGC Petro additions Ltd, among others, could boost transmission volumes