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Underground Construction's International Pipeline Construction Outlook.

Underground Construction's latest international construction survey figures indicate 96,434 km (59,923 miles) of oil and gas pipelines are in various stages of construction or planned for construction. The high number of pipeline projects and mileage seem to indicate a healthy and sustained growth for pipeline contractors through 2003 and beyond.

What could prove worrying is the high number of planned projects in the Former Soviet Union (FSU) and Eastern Europe (EE), accounting for 28,967 km (18,000 miles), where long delays in pipeline construction projects have become almost commonplace.

On a more positive note, natural gas use in the electricity generation sector is projected to grow rapidly in both Eastern and Western Europe, two areas expected to rely increasingly on imports from Russia.

The world's changed energy environment may also impact future construction. Energy markets were put to the test in 2000 with crude oil prices reaching levels not seen since the early 1980s, as supplies remained tight for most of the year. Natural gas prices lagged oil prices but followed upwards, reflecting the impact of contractual links and competition between fuels, according to The BP Statistical Review of World Energy 2001.

The Review's gas forecast indicated that this was the fastest growing fuel in 2000, with global consumption rising by 4.8% - the highest rate since 1996. Gas demand increased in all regions but grew especially fast in Asia-Pacific, where it increased by almost 8%. Chinese consumption was exceptionally strong, rising by 16%. Canada also outstripped the global average, with a 5.1% rise. In the Former Soviet Union, gas consumption increased for the second year running, rising by 2.9% and reversing a trend of near continuous decline since the early 1990s.

The Review shows that natural gas production increased globally by 4.1%. The biggest increases occurred in countries tapping into the even faster growing international trade in natural gas: output grew by more than 50% in Nigeria and Oman as new LNG projects began building towards capacity. Production in Turkmenistan more than doubled as Russia pulled in additional Turkmen gas to compensate for declining domestic production.

Construction Overview

Worldwide there is a great deal of construction activity to complete pipelines to meet future energy needs. Following is a discussion of some of the major projects planned and under construction within the seven basic country grouping used in this article. (See accompanying map).

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FSU & Eastern Europe

The fact that the FSU and EE currently account for some 28,967 km (18,000 miles) of new and planned pipelines is not altogether surprising. Russia is both the world's largest producer of natural gas and its largest exporter. Russia provides Turkey with more than 75% of the gas it consumes and almost one-third of the gas consumed by European Union (EU) member countries. While there has been much talk about a possible gas shortfall, Russia has not breached any of its supply contact with its European buyers. It has, however, been unable to meet contractual obligations to supply gas to Azerbaijan.

Still, gas markets in the FSU and EE have a number of issues to be resolved, including non-payment for energy - both between and within countries-and how to share Caspian Sea resources among the five countries bordering the area, namely, Iran, Russia, Azerbaijan, Kazakhstan and Turkmenistan.

Unfortunately, until these issues can be resolved, and a way is found for energy customers to pay in hard currency, many may never come to fruition.

Of pipelines in the region slated for operation this year, the most noteworthy is the Caspian Pipeline Consortium's (CPC) 1,579-km (980-mile) Tengiz-Novorossiysk oil pipeline. After years of planning, the first pipe on the project was installed in November 1999 and marked the start of construction on the project to connect Western Kazakhstan to the Russian Black Sea port of Novorossiysk. Line filling began in March 2000, followed by the opening of a valve by the Prime Minister of Kazakhstan that sent the first Kazakh oil on its 900-mile journey to the CPC marine terminal north of the Black Sea.

Oil flow didn't last long, however. It was soon halted after it was determined that yet another certificate was needed before the pipeline could remain in operation.

Scheduled to resume operation this month, the pipeline will allow maximum development of the Tengiz field, which holds potential reserves of six to nine billion barrels of recoverable oil and is planned to reach peak production of 700,000 barrels per day in 2010.

Chevron holds a 15% equity interest in the CPC and a 45% interest in Tengizchevroil, operator of the Tengiz field. According to a Chevron spokesman, the project serves as an example of the international partnership between Russian, Kazakhstan and foreign oil companies. Eleven companies from six different countries completed the world-class project.

Earlier this year, a contract was won by Karachagank Petroleum Operating B.V. to provide engineering and consulting services for an oil condensate pipeline from Bolshoi-Chagan to Atyrau, Kazakhstan. Plans call for the pipeline to connect with the recently completed CPC system. Karachagank Petroleum's contract includes the design of the 449-km (279-mile), 24-inch diameter pipeline to transport 150,000 barrels of condensate per day; the pump stations at Bolshoi-Chagan and Kalmikovo; and a terminal in Atyrau. The pipeline is scheduled for completion next year.

Second phase construction is also under way on the Turkmenistan-Iran gas pipeline project that means 20 million cubic meters of gas per year could be transferred to Iran by 2002. The 190-km (118-mile) first phase of the Korpedzhe-Kurtkui pipeline was launched in January 1998. It is the only gas pipeline to be constructed from Turkmenistan since its independence from the Soviet Union in 1993. Six billion cubic meters (Bcm) of gas have been pumped to Iran via this pipeline thus far.

A project to transport Caspian Sea oil to Poland is rapidly advancing. Some 600 km (373 miles) of the 667-km (414-mile) Odessa-Brody oil pipeline is in place, according to Ukraine's ambassador to Azerbaijan. The pipeline will form part of a project to transport Caspian oil from Azerbaijan across Ukraine: first through the Baku-Supsa pipeline, then by tankers to the Yuzhny terminal in Odessa and further on through the Odessa-Brody pipeline with subsequent linkup to the Druzhba pipeline for shipment to Poland. The pipeline will initially have a capacity of 12 million metric tons of oil per year, eventually reaching 40 million tons. The pipeline and Yuzhny terminal will be completed later this year.

With the $150 million engineering studies on the 1,743 km (1,083-mile) Baku-Tbilisi-Ceyhan (BTC) oil pipeline to transfer Azerbaijan oil to Western markets basically complete, construction could begin in the second quarter of 2002. Part of the basic engineering studies involved determining a 10-km (6.2-mile) transit corridor through Azerbaijan, Georgia and Turkey, as well as fixing the best location for a 500-meter wide portion of this corridor. The 42-inch diameter, 1 million barrel per day pipeline will. include seven pump stations and three metering stations. Line filling, initially from Azerbaijan International Operations Corporation's Azeri-Chirag-Guneshli fields, should begin late in 2004.

Apparently now on hold is Russia's touted Blue Stream Pipeline. Russian officials report the Trans-Caspian pipeline scheduled to carry natural gas from Russia to Turkey via the Black Sea will be delayed until early next year. Yuri Komarov, deputy head of Gazprom, said Russian gas would reach Turkey "in the first three months of next year," several months after the October 2001 goal for the pipeline to start working. He blamed the Turkish parliament's late approval of laws supporting the project and the government's delay in ratifying it on environmental grounds for slowing down work. Pipelay vessels were scheduled to begin work last month in the Black Sea. Blue Stream will carry Russian gas through a 1,206-km (750-mile) pipeline stretching from Russia to Ankara. The undersea connection is 216 miles long.

Despite delays, three significant agreements have been signed by Bechtel/ General Electric to build the pipeline system that will have an initial capacity of 350 Bcf/year expandable to 1.23 Tcf/year. It will take three years to build, but must first receive approval from the governments of Turkey, Georgia and Azerbaijan.

Russia's Lukoil said it hopes to use the Blue Stream gas export pipeline to ship gas from offshore deposits in the northern Caspian Sea in the event significant reserves are discovered there.

Still in the planning phase is a 980-km (610-mile) pipeline to transport Azerbaijani natural gas to Erzurum-Horasan, Turkey. The system will connect with the Iranian natural gas pipeline in Erzurum and with the planned Blue Stream pipeline 50 km (31 miles) east of Ankara.

BP and the administration of the Russian region of Irkutsk are partners in the development of the giant Kovyktinskoye gas condensate field in eastern Siberia. The partners are planning to build a 3,000-km (1,864-mile) pipeline from the field north into China, with a possible link into South Korea. BP says the pipeline will double China's natural gas supply and provide gas for the industrialized northeast region of China, including Beijing. The Kovyktinskoye gas reserves, estimated at more than 35 Tcf, are being appraised by Russia Petroleum, in which BP has a 22.3% stake and the Irkutsk regional administration, a 16.5% share. Natural gas from Kovyktinskoye is expected between 2005 and 2010.

Russia's Gazprom is keenly interested in increasing the amount of natural gas now being supplied to Western European markets. Aleksey Miller, Gazprom's new director, said the European Union remains the key foreign market for Gazprom. Gas consumption in Europe is expected to grow in the next ten years and Gazprom is ready to secure this growth on the basis of long-term contracts.

The Russian gas company also plans to invest about $20 billion to enhance the efficiency of the country's gas pipeline network by 2010. The gas giant plans to build an additional 15,000 km (9,320 miles) of pipeline within the next 10 years beyond the 150,000-km (93,208-mile) network that it operates already. In addition, gas throughput capacity is expected to increase from 600 Bcm in 1999 to 670 Bcm by 2010, due to a projected rise in gas production. Gazprom intends to focus on northern sea shelf development projects over the next 15 years.

Among his priorities, Miller named the stabilization of gas extraction. As to other plans, by 2010 Gazprom expects to boost extraction by 10-15%. Among other priorities, Miller named the Yamal-Europe pipeline, the linkage of pipelines in Poland, Blue Stream and several other projects.

This is not surprising since second phase development of the Yamal-Europe pipeline, which began operation in 1999, would allow Russia to transport gas to Western Europe through Belarus and Poland, and bypass the Ukraine, which Gazprom has long accused of being a slow or no-pay for supplies and of siphoning off gas during transit.

Russia's state gas pipeline operator KazTransGas is looking to improve its natural gas pipeline network by investing $124 million. The renovations are in anticipation of increased shipments of gas from Turkmenistan this year, which could total as much as 50 Bcm. Kazakhstan's pipeline system that links Turkmenistan and Russia has a capacity of up to 65 Bcm, but is limited to 40 Bcm without the repairs.

The European Bank for Reconstruction and Development may grant a credit for an estimated $70 million for a pipeline that would parallel the existing Ananyev-Tiraspol-Ismail gas pipeline. The joint Ukrainian-Russian-Turkish company Gaztransit plans to lay the 70-km (43-mile) pipeline parallel to the existing Ananyev-Tiraspol-Ismail pipeline to boost Russian gas transit to Turkey and Balkan states by 7 Bcm per year.

Armenia, Greece, Iran Agreement

Foreign ministers of Armenia, Greece and Iran have signed a memorandum of understanding aimed at promoting closer cooperation in the energy sector. Iran and Armenia pledged to cooperate in construction of a pipeline to export Iranian gas to Armenia. Greece completed a feasibility study for the project, which the European Union may help subsidize.

Russia, Bulgaria and Greece are also working on a project to transport Russian crude to Alexandropoulis, Greece.

Also in the planning phase is a 3,000-km (1,864-mile) pipeline to export oil from Kazakhstan's Aqtobe Oblast to China. Construction is not expected soon, according to a senior China National Petroleum Company official. Implementation of the $3 billion project will depend on the size of hydrocarbon reserves found in Aqtobe.

The Czech cabinet approved a plan for privatizing Transgas and the eight regional natural gas distribution companies. Transgas owns the 2,450-km (1,519 miles) transmission pipeline system with capacity of 70 Bcm per year. It provides gas transmission to Western and Southern Europe. Transgas also owns 14,000 km (8,699 miles) of long-distance gas delivery pipelines and an additional 20,000 km (12,428 miles) of local network pipeline.

Sakhalin Island

Seven oil and gas fields off Sakhalin Island are in various stages of development or planned for development in Far East Russia. Ultim-ately, investments totaling more than $100 billion and spanning 40 to 45 years may be required to support needed infrastructure to develop off-shore oil and natural gas reserves estimated at more than 3,600 Bcm of gas and a minimum of 1,000 million metric tons of crude, respectively.

While the Russian Duma has approved the use of Production Sharing Agreements (PSAs) to provide a stable tax and customs environment, there's little doubt that the pace of development is under the direction of the Sakhalin Administration and Ministry of Energy which must approve operating budgets throughout the region.

Nevertheless, the area continues to attract international players willing to make significant investments. A major challenge for operators is the severe environment. The offshore area is covered with moving ice six months of the year and typhoons are common in the fall.

First oil from the region came in 1999 from the Sakhalin 2 area operated by the Sakhalin Energy Investment Company. Over the next five years developers expect to spend $10 billion on field development and construction of a 600-km (373-mile) gas/oil pipeline from offshore platforms to an LNG plant and oil export terminal in the south of the island.

First phase development production totaled nearly 80,000 barrels of oil per day. Future production rates should increase with the operator's plan to extend the production season from about six months a year to year-round through an ice-free port beginning in 2005.

At Sakhalin 1 and 3, each comprising approximately 2.2 million offshore acres in water depths up to 300 feet, early exploratory drilling by ExxonMobil indicated more gas than oil. Last September, however, an offshore appraisal drilling program found sizeable crude deposits around the Chaivo gas field that flowed 6,000 barrels per day under test.

By next year, ExxonMobil and its affiliates, Exxon Neftegas Ltd., Rosneft and Rosneft-Sakhalinmorneftegas (SMNG) of Russia hope to have permission from the Sakhalin Administration and Ministry of Energy to begin a $3.5 billion early oil production development from Chaivo field. Plans calls for a horizontal directional drilling program and the installation of a modified Arctic drilling rig. Product would be delivered to market via a $400 million onshore pipeline that would extend west across the Tatar Straits and on to DeKastri in Khabarovsk Krai, where the crude could be offloaded to tankers at a new ice-free export terminal that could remain operational 11 months a year. The company's Phase 2 development is expected to be carried out simultaneously and will involve the construction of a 2,299 Km (1,429-mile) offshore gas pipeline to Japan, with first gas in 2006 ramping up to 1,000 MMscf/d by 2010.

Sakhalin 4, under the direction of several operators over the past 12 years, is now in the hands of Rosneft. Last summer, the company conducted an appraisal drilling program on the Astrakhan Block but has not made any official announcements.

At Sakhalin 5, BP is aligned with Rosneft/SNMG to determine area potential if and when the block comes up for tender.

Potential project participants in Sakhalin 6 include Rosneft and Rosneft/ SNMG with Texaco and ExxonMobil. However, the Al'fa Group of Russia bought a 95% share in a small local oil company, Petrosakh, gaining an interest in the block. Al'fa, which has not finalized a PSA, indicated it will conduct a directional drilling program from shore-based facilities to develop near shore fields if granted a license.

Middle East

Future gas exports are expected to drive near-term pipeline construction in the Middle East. Pipelines planned and under construction total 13,022 km (8,092 miles) and several of these are in excess of 2,413 km (1,500) miles in length. One example is the recently completed 2,574 km (1,600 mile) Iran-Turkey pipeline project. Gokhan Yardim, Director General of Turkish Pipeline Transportation Inc. (BOTAS), said pressure tests were recently completed and the purchase of natural gas from Iran would start July 31.

A 708 km (440-mile), 24-inch diameter pipeline is planned by Oman Gas that will extend from their Salh Rawl gas fields over to the metropolitan city of Salalah on the coast of the Arabian Sea. Bombay's Dodsal Limited has been selected as the general construction contractor. The in-service date is set for the third quarter of 2002

Although Middle East producers have been somewhat reluctant to allow foreign investors to act as operators, a multi-billion dollar program may soon change that. ExxonMobil was selected by Saudi Arabia as the leader and operator for Core Venture 1 & 2, a major three part Saudi natural gas initiative. Together, Core Venture 1 (Southern Ghawar) and Core Venture 2 (Red Sea) account for a total estimated industry investment of over $20 billion.

Conoco, along with Royal Dutch Shell and TotalFinaElf, has signed a preparatory agreement to take part in the country's Core Venture 3. This phase will include exploration in the Rub Al-Khali region, a relatively under explored area - gas gathering, processing, transmission and sales. It also includes the participation in petrochemical and power/desalination plants. A final detailed agreement is expected later.

Africa

Although accounting for only 8,184 km (5,086 miles) of pipelines under construction and planned, improvements in political stability and the growing demand for natural gas for electricity could vastly increase pipeline demand in Africa. Already, Ghana and the Ivory Coast are both areas where economic growth is driving the demand for energy and interest in natural gas development, primarily for electricity.

Egypt, too, is working to expand its domestic gas market. The Burullus Gas Company consortium, which includes the BG Group (operator), Edison and the Egyptian General Petroleum Corporation, awarded a contract in May to Stolt Offshore valued at $145 million that includes the installation of gas export pipelines in water depths ranging from 20 to 415 meters. The project will be the first deepwater gas development in the Eastern Mediterranean. Shore approach work is slated to begin later this year with deep water work in the second quarter of 2002. The two gas fields are scheduled to begin delivering 0.5 Bcf/d of gas into the Egyptian national transmission system by January 2003.

One of Chad's most ambitious projects is being undertaken by ExxonMobil affiliate, Esso Exploration and Production Chad. Work began this year on a 1,049-km (650-mile) pipeline to develop landlocked oil-fields in southern Chad and transport the crude to the coast of Cameroon for export to world markets. Drilling of the first of 300 wells is under way and will continue through initial production start-up. The completed drilling program will eventually produce about 225,000 barrels of oil per day. Start-up is expected as early as 2003. The total cost of the pipeline project is estimated at almost $3.5 billion. ExxonMobil has a 40% interest and Chevron owns 25%. The remaining 35% is owned by Malaysia's Petroleum National Berhad (Petronas).

Algeria, in northwestern Africa, currently the largest gas supplier to Europe, both in the form of pipeline gas and LNG, should see considerable development and pipeline construction over the next five years. Petronas finalized a production sharing contract earlier this year with Sonatrach, its Algerian counterpart, to develop the onshore Ahnet field that holds potential recoverable gas reserves totaling 4.9 Tcf. Petronas, along with partners Sonatrach and Gaz de France, will invest $58 million over the next five years to develop the and construct a 380-km (236-mile) pipeline to connect Ahnet to the In-Salah field gas field being undertaken by Sonatrach and BP.

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Algeria finalized two contracts in April worth $161 million, with a U.S.-Algerian consortium and Russian company Stroitransgas to build the 822-km (511-mile) oil pipeline linking the Haud al Hamra-Azrew oil fields in the Sahara to the major refining terminal port of Arzew on the Mediterranean, where Algerian oil pipelines meet.

The first contract, valued at $83 million, was signed between state oil and gas company Sonatrach and a U.S.-Algerian consortium composed of state-run engineering and company Cosider and Sonatrach with an Algerian affiliate of U.S. contractor Kellogg Brown and Root Services.

The consortium will build the first 419-km (260-mile) section of the project to the City of Laghouat.

A second contract won by Stroitransgas, worth $158 million, was for construction of the 403-km (250-mile) sector from Arzel, near the City of Oran.

Another contract, valued at $32 million, for pumping facilities went to a consortium made up of the French Spie Capag engineering firm and Saipem, a subsidiary of Italy's ENI energy group.

Seven years after proposing the West African Gas (WAG) pipeline, Chevron is set to sign a contract with Takoradi International Power Company, a joint venture between CMS Energy and Ghana's Volta River Authority (VRA). The contract will finalize the supply of more than 100 MMcf/d of gas starting in July 2002. Chevron has been appointed as project manager of the 500-mile, $400 million WAG project to supply Nigerian natural gas to Ghana passing through the countries of Benin and Togo. Approximately 569-km (354 miles) involves new construction. The initial average daily throughput is expected to be about 100 MMcf, rising to 300 MMcf after 20 years. Partners on the WAG project include: Chevron, NNPC, Ghanaian National Petroleum Co., Societe Beninoise de Gaz, Societe Togolaise de Gaz, and Royal Dutch/Shell.

In South Africa, Worley Pipelines and Terminals won a contract from Sosal, a South African petrochemical company, for the basic design and engineering of a 900-km (560-mile) gas pipeline from the Temane fields in Mozambique to Secunda in South Africa. Worley began work on the project in January. The contract covers basic engineering and a number of procurement functions and project management that ranges from initial line pipe procurement to managing other contractors such as right-of-way clearing and third party inspection. Plans call for gas to be delivered into the Secunda refinery by the first quarter of 2004 and mainline pipeline construction to get under way by the third quarter of next year.

Also in South Africa, drilling has begun on a newly discovered natural gas field off the west coast that could yield 15 Tcf of gas. The Cape Times said exploration of the Ibhubesi field was being done by U.S.-based companies Forest Oil and Anschutz corporations. The first well reached a total depth of 3,430 feet and the field is already pumping 30 MMcf/d. Construction could include a 150 megawatt gas-fired power plant and a pipeline to link the gas field with Cape Town, Saldanha Bay port and the Mossgas liquid fuels synthesis plant in Mossel Bay on the south coast.

Western Europe & EU Countries

Although accounting for slightly less than 5,632 km (3,500 miles) of planned and new pipeline construction, a lot of activity is going on in Western Europe. To start, the natural gas industry is in transition. New competitive forces driven by European Union directives will soon reform traditional supply patterns. Rapid expansion of gas use in such regions as Spain, Italy and Portugal should increase near term infrastructure needs. Investment plans of some industry players should soon be accelerated as governments announce timetables for deregulation. Other catalysts for increased construction may come from growing trade opportunities (such as via the Interconnector pipelines between the U.K. and continental Europe) or from forces of abundant supply.

Meanwhile, first gas from the Corrib field off Ireland is expected by 2003. Currently, Ireland relies on offshore gas from Kinsale Head to meet about 50% of its demand, while the remainder is supplied Via the IC1 Interconnector from Scotland. Once on stream, production from Corrib will total 400 MMcf/d. A second interconnector from Scotland is scheduled to begin operations next winter with an initial capacity of 280 MMcf/d expandable to 1.06 Bcf/d. Manufacture of the pipe for the interconnector is already under way at ILVA's Tarranto pipe mill in southern Italy.

Also in the North Sea, Allseas Ltd. is installing a 260-mile natural gas pipeline for BP to enhance oil recovery from its Magnus field. Plans call for the line to transport gas from Schiehallion and Foinaven fields in the Atlantic Ocean, west of Shetland, to Sullom Voe in Shetland, where NGLs will be added. From there, the gas will be piped through existing systems to the Magnus field for re-injection. Project completion is set next month.

Line pipe should begin arriving at coating yards next month for Norsk Hydro's Crane field. The 235-km (146-mile) pipeline for the development will be built by European Marine ContractOr of London. The contract includes the laying of a 50-km (31 mile), 18-inch gas pipeline between Heimdal and Crane platforms and a 204-km (126-mile), 28-inch pipeline between the Crane plant and the landfall tunnel at Hjartoy in Oygarden, north of Bergen. EMC will begin installing the pipeline next year.

A proposal to increase capacity in the planned gas pipeline from Statoil's Kvitebjorn development has been submitted to the Ministry of Petroleum and Energy. The 146-km (90.5-mile), 30-inch diameter natural gas pipeline would run into Statoil's Kollsnes gas treatment plant near Bergen, which already handles gas from the Troll field. Statoil estimates that this part of the Norwegian North Sea contains some 200 Bcm of unsold gas, but available capacity in the existing transport system is limited. Construction is expected to begin in 2003.

On behalf of partners in the Ormen Lange gas field, Norsk Hydro is considering possible landfall alternatives that would bring the line ashore along the More coastline in northwest Norway. Located about 100 km (62 miles) off the mid-Norwegian coast, the deepwater field will be one of the most challenging developed to date. Of particular focus is the water temperature, which is below 0 [degrees] C in the first 300-400 meters above the seabed. This will make special demands on the multiphase pipeline flow technology. The project is not expected to be on production until 2007.

Elsewhere in Europe, Poland's PGNiG (Polish Oil and Gas Company), Denmark's DONG, and Norway's Statoil have signed a protocol on the joint implementation of a Danish and Norwegian gas supply project. Under the accord, DONG and PGNiG would arrange a consortium to build the 230 km (150 mile) BalticPipe project, a natural gas pipeline linking Denmark and Norwegian North Sea gas fields with Poland. Gas will be transported from Denmark to a terminal in Niechorz in northwestern Poland.

Poland's past reliance on Russia for natural gas is forcing the government to reconsider ways to diversify its gas supplies. Officials reportedly are unhappy that Gazprom made a secret deal with Western partners to construct a second arm of the Yamal pipeline to run through Poland without first consulting the host country. In addition, news that Gazprom is preparing to make commercial use of a high-capacity fiber-optic cable that is part of the existing Yamal pipeline in Poland has led ministers to charge that Gazprom's moves pose a threat to its sovereignty.

Poland would be allowed to take up to 14 Bcm from the pipeline annually. This will comprise 30-45% of domestic demand by 2010, considerably less than the 70% of demand now met by Russia. That figure would be in line with European Union (EU) energy-safeguard standards, which stipulate that no more than 30-40% of supplies should come from any one source. Poland is seeking alternative suppliers.

Anticipating large increases in natural gas demand by 2020, and dependent on imports to meet demand, Poland is also negotiating with The Netherlands and Germany for gas supplies.

Canada

Although new and planned pipelines in this region total only 7,597 km (4,721 miles), several major projects are under study. Currently, much of the country's natural gas market growth involves the U.S. Five major natural gas pipeline projects were recently completed that dramatically increased trade between the two countries. The newly built pipelines primarily provide access to supplies in western Canada and offshore Atlantic Sable Island fields.

As to work in progress, Corridor Pipeline Ltd.'s focus is the 455-km (283-mile) Corridor Pipeline. In January 2000, the company awarded a $100CD-million contract to Midwest Management of Edmonton, Alberta, Canada, to build a 450-km (280 mile) spread. Approximately 130 km (81 miles) were completed during the winter of 2000/2001 and 75 km (46.6 miles) during the summer of 2000. Nearly 40% of the project is complete. This summer, crews will focus on facilities construction. The firms awarded the contracts are: Midwest Management Ltd., IPSCO Inc., Camrose Pipe Co., Prudential Steel Ltd./Hallmark Tubulars Ltd., and Shaw Pipe Protection Ltd. Scheduled to begin operation in April 2002, the pipeline will connect major spreads of the Althabasca Oils Sands Project being built by Shell Canada, Chevron Canada Resources and Western Oil Sands Inc. The entire pipeline system connects the Muskeg River Mine, north of Fort McMurray to the Scotford Upgrader, which will be built adjacent to Shell's Scotford refinery, near Fort Saskatchewan. Construction will conclude just before scheduled start-up next year.

Gas Metropolitan and Company Ltd. Partnership and Enbridge Inc. are proposing a pipeline to supply natural gas from offshore Nova Scotia to markets in New Brunswick, Quebec and Ontario. Plans calls for a new $228 million, 262-km (175-mile) pipeline in Quebec called the Cartier Pipeline. The pipeline would be constructed and owned by Maritimes & Northeast Pipeline. Gaz Metropolitan and Enbridge have a development coordination agreement with Maritimes & Northeast Pipeline, and are working with that company to develop plans for the New Brunswick portion. Both pipelines are subject to regulatory review and approval. Filing for applications is expected in spring of 2002 with startup slated in 2004.

Although Imperial Oil Ltd. has regulatory approval from the AEB to construct the Thicksilver pipeline, which calls for construction of a 251-km (156-mile), 36-inch line to transport blended bitumen from Cold Lake to Hardisty, and a 251 km (156-mile), 12-inch line to transport lighter hydrocarbon liquids from Hardisty to Cold Lake, the project is now on hold pending further marketing studies. If constructed, both lines will be built parallel to an existing right-of-way for most of the route, and transport 330,000 bpd and 64,000 bpd of crude, respectively. Two 100,000-barrel storage tanks at Cold Lake and a 14-mile pipeline will provide Amoco Canada's Primrose and Wolf Lake production sites access to the main line. A booster pump station to maintain pipeline pressure will be built near Lindbergh.

Central & South America

In these two regions, South American countries have 3,855 km (2,396 miles) of new pipelines planned and under construction, while Mexico accounts for just over 1,609 km (1,000 miles). Both regions have considerable crude reserves that could be developed, however, much of the area remains unexplored for gas. Nevertheless, both are areas of rapid gas development. As noted in the Energy Information Administration's International Energy Outlook 2001, gas market activity is occurring in Brazil, Argentina, Paraguay and Uruguay, with Chile and Bolivia. Brazil already accounts for two existing international pipelines, with several more planned for construction. The first links Brazil and Boliva and the second runs from Parana, Argentina to Uruguaiana, Brazil. A Brazilian extension from Uruguaiana to Porte Alegre is currently under construction. Transporadora sul Brasileira de Gas is the operator of the extension, which is expected to be in service early next year.

With U.S. gas demand growing, Mexico is in a good position to increase exports and pipeline capacity. Pipeline capacity between Mexico and the U.S. has increased 70% since 1998, growing from 1,150 to 1,970 Bcf/d. A number of U.S.-Mexico projects are proposed, provided increased trade between the two countries continues. New President Vicente Fox is expected to encourage upstream competition so that Mexico's natural gas resources can be developed at a more rapid pace. State owned Pemex also announced plans to increase gas production and reduce imports to zero by 2004.

As to major projects, Confab and Techint completed work on two 25-km (15.5-mile) spreads at opposite ends of a 565-km (351-mile) pipeline being constructed from Argentina to Brazil. The first spread in Paso De Los Libres will deliver 2.8 million cubic meters of gas per day to the Termo Eletreica electric generation plant owned by AES. The other 25-km spread in Porto Alegre supplies gas from the Bolivia-Brazil pipeline to the Triunfo petrochemical plant. No bids have been awarded for the remaining spreads, which are expected to be under construction later this year. When the pipeline is completed, Trasportadora Su Brasileira (TSD) will operate it. Gas Petro owns TSD and has seven partners including Ipiranga in Brazil; YPF in Argentina; Total in France; Nova in Canada; Techint in Argentina; and Compania General Combustibles CBC.

Enron is considering a pipeline that will originate in Colombia's northern offshore gas fields near Cartagena and be routed 528 km (328 miles) to Colon, Panama. The Colombia-Panama pipeline would supply natural gas for a planned thermal power plant near Colon. The Colombian government has approved the project. Cost is estimated at $400 million. Enron hopes the pipeline will eventually extend into other countries, thus enhancing the system for future loops and extensions.

In Peru, the Camisea gas project has been placed on hold by the government pending additional potential bidders. The $2 billion project involves two 603-km (375-mile) pipelines delivering natural gas and condensate from the Camisea offshore gas fields to Lima. Government selection of the successful bidding consortium will have to be announced soon if Peru hopes to meet a 2004 deadline for delivering gas to Lima. Port of Pisco will have a fractionation plant built to handle the incoming gas.

Mexico's Pemex Exploration and Production awarded Global Offshore Mexico S. de R.L. de C.V., a subsidiary of Global Industries, Ltd., a contract for two large-diameter pipeline projects in Bay of Campeche, valued at $40 million. Global is utilizing the 400-foot long pipelay/derrick barge Shawnee to support pipeline construction and diving services on both projects, located off the coast of Ciudad del Carmen, Campeche, Mexico.

Under the first contract, which began in May, 330 feet of 36-inch diameter oil pipeline was repaired at three crossing locations in the Cantarell field. Saturation and surface gas\air diving will be used to support the operation in water depths of up to 155 feet.

The second contract, which also began in May, involved the installation of two 24-inch gas pipelines and topside construction on three platforms, respectively.

Under a contract agreement with Pemex Exploration y Produccion, Horizon Offshore recently installed, hooked up and commissioned seven pipelines in Mexico's offshore Cantarell field. The pipe diameters installed ranged from two to 24 inches. Contract terms also call for the company to provide platform hook-up, subsea tie-ins and pipeline riser installations at the site.

Asia Pacific

Despite setbacks resulting from Asia s financial crisis in 1998, this region is poised for massive energy development. Asia, (both industrialized and developing) is a vast region, accounting for 54% of the world's population in 2000. Gas demand will help drive future developments here, growing an average of 5% per year through 2020. Countries with significant development of gas resources for domestic use include Australia, China, Malaysia, Pakistan, the Philippines and Thailand.

The region currently accounts for 27,579 km (17,147 miles) of new and planned pipeline construction and major players are jockeying for position to supply natural gas to this rapidly growing market.

One operator already active in the region is Conoco Indonesia. Indonesian President Abdurrahman Wahid and Singaporean Prime Minister Goh Chok Tong jointly officiated a multibillion-dollar project to deliver natural gas supply from West Natuna Sea to Singapore. The first i gas delivery to Jurong Island was through the 656 km (408-mile) subsea West Natuna Transportation System (WTNS) that gathers gas from 17 separate fields. Early completion of the WTNS, by a subsidiary of J. Ray McDermott, SA, allowed the pipeline owner, the West Natuna Group, to complete `gas up' more than six months ahead of its gas sales contract start date. The West Natuna Group is made up of Conoco Indonesia Inc. Ltd. (operator), Premier Oil Natuna Ltd. and Gulf Indonesia Resources. Ltd. Under the contract, Indonesia will make available 325 MMcf/d of natural gas to Singapore throughout a period of 22 years. The first delivery was made January 3, 2000.

Indonesia has been one of the world's largest producers of natural gas over the past 10 years, with known gas reserves that exceed 100 Tcf. The lack of a suitable domestic market, combined with the lack of a gas export pipeline system, prevented most of the gas from being developed, according to Rob McKee, Conoco executive vice president, worldwide exploration and production.

With completion of the West Natuna to Singapore pipeline system, Singapore has signed up for additional gas deliveries from Sumatra in Indonesia. Indonesia's Minister for Energy Resources signed a contract to supply natural gas to Singapore by July 2003. The gas will come from three fields in Sumatra, operated by a consortium of Pertamina's production sharing partners including Gulf Indonesia Resources Ltd. and Santa Fe Energy Resources (Jubung) Ltd. The new WMTS provides a second physical link for a future pipeline grid connecting South East Asian countries. The pipeline will be operated by PT PGN, which plans to invest $400 million in its construction. Part of the project involves looping of the existing Grissik to Duri pipeline for 140 km (87 miles) from Grissik to Sakernan, where the pipeline to Singapore will take off. The Grissik to Duri pipeline was recently built to replace a line used to generate steam to steamflood in Caltex's Duri oil field.

Work began in June on the Malampaya project for Shell Philippines Exploration bv. The project involves building a 505 km (314-mile), 24-inch diameter pipeline for gas export from an offshore production platform to Batangas on the island of Luzon in the Philippines. Other work involves building two 19-mile, 16-inch diameter pipelines from a deepwater subsea production manifold to an offshore production platform. A two-mile, 24-inch diameter pipeline will be built from the offshore production platform.

Although a sagging global economy is blamed for delaying the construction of the Trans-Thailand-Malaysia (TTM) pipeline project for at least a year, don't look for this project to go away. Plans include two gas separation plants in the southern Sokhla province, plus construction of a 360-km (234-mile) pipeline to move gas from the offshore Malaysian-Thai Joint Development Area.

Construction plans were first finalized in October 1999 when Malaysian Prime Minister YAB Dato' Seri Dr Mahathir Mohamad and his Thai counterpart H.E. Chuan Leekpai inked a 20-year gas purchase deal starting in 2002, with a second phase by 2005. Plans call for offshore gas to be transported via the proposed TTM pipeline and landed for processing at planned gas separation plants at Chana, near Songkhla in Thailand. Recent press coverage indicates Petronas faces the possibility of a penalty if it can't deliver the gas by July 2002. Petronas reportedly will use an alternative route from its existing infrastructure.

In other news, Petronas executives reportedly visited the Philippines to conduct preliminary talks about linking the two countries via a South China Sea gas pipeline known as Camago-Malampaya. The talks focused on the possibility of an offshore pipeline between the eastern Malaysian state of Sabah and the western Philippine island of Palawan to deliver 350 to 400 MMcf/d of natural gas. The proposed Sabah-Palawan link would become feasible after the Malampaya natural gas field off Palawan comes on stream in October. Malampaya gas will be fed to three power-generating plants in the province of Batangas on the southern part of the main Philippine island of Luzon.

Industry watchers are particularly interested in China's 4,000-km (2,485-mile) West-to-East gas pipeline. ExxonMobil Corporation's subsidiary, ExxonMobil China Gas Pipeline Ltd., in cooperation with CLP, has been short-listed as a foreign participant by PetroChina Limited. Project plans call for transporting gas from fields in the Tarim Basin in the Xinjiang region of Western China and from the Ordos Basin in Central China. The planned pipeline will transport gas from these fields to the emerging gas markets in and around Shanghai in Eastern China.

Petronas is also taking part in the bid for China's West-East gas project. A construction start has been tentatively slated for this October, with completion in 2005.

Early last year, BP formed a gas marketing venture with PetroChina to supply rapidly growing energy markets in eastern China. The two plan to cooperate in the construction of infrastructure, including an LNG terminal and to supply domestic gas to the regions around Shanghai and the Yangtze River Delta. Gas currently meets just 2% of China's energy needs, accounting for only 20 Bcm per year. This is projected to increase to 8% by 2010, a rise in annual consumption to over 100 Bcm.

The alliance also gave BP right to participate in the West-East China gas pipeline and, longer term, the potential to market gas from East Siberia where BP has an interest in the Kovyktinskoye field. Both options are subject to feasibility studies and appropriate approvals.

Also planned in this region is a $900 million pipeline to link Bangladesh and India. Unocal Corporation and its subsidiaries in Bangladesh are planning the gas export pipeline that will extend from northeastern Bangladesh to the markets in the Delhi area. Unocal plans to submit a detailed development plan for the project this year.

The planned route of the 1,350-km (850-mile), 30-inch diameter pipeline begins in the Habiganj District in Bangladesh and ends at an interconnection with the HBJ Pipeline in the Delhi area. Approximately 350 km (220 miles) of the pipeline would be located in Bangladesh and 1,000 km (630 miles) in India. The pipeline would carry an initial volume of 5 Bcm of natural gas per year.

India's Indian Oil Corporation has several pipeline proposals on tap, including a crude oil line from Salaya to Mathura, that will extend the Mathura line from the Jalandhar pipeline to Udhampur, plus two additional pipelines that are associated with development of the Koyali project.

In Vietnam, a move by the government to provide guarantees to foreign investors in the country's Lan Tay offshore gas development could see the Nam Con Son Basin field come onstream by next year. The gas will be transported to shore through a 360km (225-mile) pipeline to a landfall southeast of Ho Chi Minh City. The field is expected to yield 2.7 Bcm annually at peak.

ONGC is also a partner in Lan Tay, while Statoil of Norway and BP are the only foreign interests in the pipeline.

Australia

Australia is one of the hotspots in the Asia Pacific region. Deregulation occurred almost 10 years ago and the area is now considered a high priority market for international players. Near term investments are projected to reach $10 billion to develop new fields and further advance the country's LNG and gas utilization sectors.

One of the country's most significant infrastructure projects is the 2,000-km (1,243-mile) Darwin-Moomba pipeline and enhancements to existing infrastructure on the Moomba to Adelaide Pipeline. The project, planned by Epic Energy, will ultimately provide competitively priced Timor Sea gas to South Australia. First deliveries are targeted for 2004 and it is estimated that between 1,400 and 1,600 full time workers will be employed during the construction phase.

Australian National Power, Origin Energy and SAMAG have entered into an agreement to construct a 660-km (410-mile) gas pipeline from Victoria to Adelaide. Gas for the project will be sourced from Victorian gas fields, which could include the Otway Basin region, Bass Basin or Gippsland. Deliveries are scheduled to begin by December 2003.

Duke Energy International is considering building a 416-mile natural gas pipeline between the Australian states of Victoria and South Australia at an estimated cost of $132 million. The pipeline would deliver gas from BHP Ltd.'s Miverva field, off the coast of western Victoria, to South Australian power markets. Early plans call for the line to run from Ionia, Victoria, to Adelaide, South Australia. Completion is set in 2003.

Phillips Petroleum Company and affiliated companies have signed a letter of intent with a subsidiary of El Paso Corporation which is intended to result in the delivery of 4.9 million tons per annul of LNG from a new LNG plant in Darwin. The cost of the project, including the development of the Greater Sunrise field (operated by Woodside) and the Bayu Iudan field (operated by Phillips), an offshore 500-km (310-mile) pipeline, LNG plant and the Methanex methanol project, is nearly $10 billion. Deliveries are projected to commence as early as 2005 for a period of 20 years.

An ambitious pipeline proposal to link gas transmission systems supplying the Northern Territory, Queensland, South Australia, New South Wales and Victoria was recently announced by Jim MacDonald, CEO of the Australian Pipeline Trust. If constructed, the system would mean gas consumers across eastern Australia would be able to access natural gas supplies from all the major gas basins east of the Western Australian border, including both the Timor Sea and the PNG Gas projects.

Talks are reportedly under way with interested parties at both the supply and demand ends of the chain as well as with State, Territory and Commonwealth Governments.

Tasmania

Duke Energy International is on track to begin construction in December on the 735-km 457-mile) on and offshore Tasmanian gas pipeline. The $350 million project features 430 km (267 miles of onshore line, a 305-km (186-mile) pipeline across Bass Strait and conversion of the Bell Bay Power Station to a gas-fired facility.

Although the onshore contractor has not been announced, Duke spokesperson Deborah Witmer said Swiss-based Allseas Construction Contractors S.A. was awarded the offshore portion of the contract. OneSteel, working under a $100 million, is supplying the pipe for Australia's longest subsea pipeline project. OneSteel will provide 452 km of high grade line pipe from its Oil and Gas Kembla Grange (Wollongong) plant, and will contract the remaining 303 km of thicker wall pipe to Itochu Pipe Management Australia for supply from Japanese Mills.

OneSteel manufactured pipe will be coated by Bredero Shaw Australia Pty Ltd., under subcontract to OneSteel.

The planned route of the pipeline starts at Longford in Victoria and enters Bass Strait near Seaspray. The pipeline will be laid on the seabed of Bass Strait, entering Tasmania in the Bell Bay region and underground in trenches up to two meters deep.

Near Bell Bay, it will cross under the Tamar River and continue to Rosevale, near Launceston. Here the pipeline splits into two: the northern pipeline extension to Port Latta on Tasmania's northwest coast, and the southern pipeline extension to Hobart.

DEI plans to complete construction and testing in June 2002 and flow gas into Tasmania soon after.

According to DEl, this is one of the most complex projects undertaken in Tasmania in decades. Projects of this nature generally take several years to develop because of their complexity. However, DEl has proven its capabilities in fast-tracking significant infrastructure developments demonstrated by the company's 795 km (494 miles) Eastern Gas Pipeline between Melbourne and Sydney which began operation in August.
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Author:Tubb, Maretta
Publication:Underground Construction
Date:Aug 1, 2001
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