volume 19 number 9 - september 2019...hydraulic conversion kit. our new 583r-mmc kit replaces the...
TRANSCRIPT
®
Volume 19 Number 9 - September 2019
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CONTENTSCONTENTS
Copyright© Palladian Publications Ltd 2019. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the copyright owner. All views expressed in this journal are those of the respective contributors and are not necessarily the opinions of the publisher, neither do the publishers endorse any of the claims made in the articles or the advertisements. Printed in the UK.
System88:Improving Logistics Safety
®
Volume 19 Number 9 - September 2019
WORLD PIPELINES | VOLUME 19 | NUMBER 9 | SEPTEMBER 2019
Dhatec specialises in developing and manufacturing products that maintain pipe quality during all logistics. On the front cover, pipes
are safely loaded on a truckbed on Dhatec’s System88, a fl exible transportation system to use on trucks and trains for coated and
uncoated pipes. The product is easily adjustable for different pipe diameters, with an application range between 8 - 80 in. With this
product line, Dhatec contributes to improving logistics safety.www.dhatec.nl
03. CommentTo buy, or not to buy.
05. Pipeline newsUpdates on the Mountain Valley pipeline, the Baltic Pipe Program, activities in the Permian Basin, and more.
PAGE
12
Fiesta time!Fiesta time!
Gordon Cope takes a look at some of
the upheavals and rejuvenations taking
place in Latin America’s oil and gas
sector, as it experiences a period of
increased investment and development.
While most of the world’s attention is focused on North America (with its shale-led production boom), and the Middle East (with its never-ending strife), Latin America is
going through its own upheavals, rejuvenations and success stories. The consequences have the potential to shift the global oil and gas sector as drastically as other, more familiar jurisdictions.
Mexico
Although Mexico’s crude production has fallen from a high of 3.25 million bpd in 2006 to 1.62 million bpd in 2019, prospects are starting to look up. Since the elimination of Pemex’s monopoly, international oil companies have successfully invested billions of dollars in exploration, drilling, midstream and downstream. ENI’s Mizton discovery in Mexico’s Bay of Campeche brings the Italian company’s reserves to over
12 13
21 35 56
REGIONAL REPORTS: SOUTH AMERICA12. Fiesta time!Gordon Cope takes a look at some of the upheavals and rejuvenations taking place in Latin America’s oil and gas sector, as it experiences a period of increased investment and development.
17. A land of plentyEric Han, US EIA, explores the prospects for development in Argentina’s Vaca Muerta shale formation.
WELD INSPECTION21. One fount of all knowledgeLauren Wiseman McCulloch and Richard Milligan, Intertek, USA.
COVER STORY24. Transport from A to BBas Coenen, Dhatec b.v., the Netherlands.
BEVELLING AND CUTTING31. No fixed addressNadia Reicher, CEO, Protem GmbH.
35. A clean cutMichael Weymann, DWT GmbH, Germany.
COATING TECHNOLOGIES39. Just scratching the surfaceFrits Doddema and Sander Hofstee, MONTI, Germany.
43. The inside storyMaurice Batallas, Shawcor Ltd, Canada.
49. Featuring ENTEGRA and T.D. Williamson
&PIGGING
SUBSEA PRE-COMMISSIONING53. Deep sea conversationsTheo Priestley, WFS Technologies, UK.
PIPELAYING OPERATIONS56. Reeling in the catchGeorgina Hay, ACE Winches, UK.
FLOW EQUIPMENT63. Why wireless?Sandro Esposito, SignalFire, USA.
69. In case of emergencyLiam Jones, Rotork, UK.
PIPELINE INTEGRITY72. One system, many hatsRichard Fish, Metegrity Inc., Canada.
PIPELINE MACHINERY REVIEW77. Featuring Dillinger and Westermans International Ltd.
80. Getting to know... Dr. Jun Zhang, Atmos International.
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Applicable only to USA & Canada:World Pipelines (ISSN No: 1472-7390, USPS No: 020-988) is published monthly by Palladian Publications Ltd, GBR and distributed in the USA by Asendia USA, 17B S Middlesex Ave, Monroe NJ 08831. Periodicals postage paid New Brunswick, NJ and additional mailing offices. POSTMASTER: send address changes to World Pipelines, 701C Ashland Ave, Folcroft PA 19032
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COMMENTCOMMENT
Shared to his 63.7 million followers (and essentially the rest of the world), the image recently tweeted by President Trump sparked
considerable controversy and signified the literalness of his desire to purchase Greenland, an autonomous region of Denmark. The image was of a statuesque gold tower emblazoned with the word ‘TRUMP’, at odds with the crystalline rocks that are characteristic of Greenland and the colourful wooden houses of its residents. Whilst Trump explained he would not construct a tower on the island, the image is symbolic of his general intentions.
Greenland holds a bounty of resources, with untapped trade passages and mineral wealth becoming exposed as climate change causes ice to melt and glaciers to retreat. It has been estimated by the US Geological Survey that 22% of the Earth’s undiscovered, recoverable resources can be found in the Arctic region. The quantity of natural gas and oil that will be revealed as the ice melts is no doubt being viewed across the world by policymakers with dollar signs in their eyes, particularly since the Arctic Ocean is predicted to become ice-free during the summer months by 2050.
The opportunities that Greenland and the wider Arctic can offer are acknowledged by the US. Several months prior to the President’s vocalising of his idea to purchase Greenland, US Secretary of State Mike Pompeo said how “…the Arctic is at the forefront of opportunity and abundance.” Melting ice will completely alter the Arctic from its current state – physically changing the environment and influencing economic and social factors through new shipping routes, international trade, and sources of energy.
The US is not new to the purchasing of other territories, with motives of resource gain and strategic military advantage. The purchase of Alaska from Russia in 1867 for the sum of US$7.2 million (approximately US$0.02/acre) has been the source of many successes, the most notable being the Klondike gold rush, with the state continuing to be a top gold producer for the US. Buying Greenland is not a novel
2019 offer from the US, since the country, under President Harry Truman, was also previously refused its purchase proposal in 1946. This offer came soon after the US had constructed an air base on the island to establish its military presence.
Rich in oil, gas, coal, zinc, copper and iron ore, all in unclassified quantities, it would not be surprising if Denmark was soon awash with similar purchase offers or increased international investment. The latter is already occurring, as China also has its eyes on this Danish territory, with its goal to build a ‘Polar Silk Road’ potentially hampering Trump’s conquest of the island. A
fleet of icebreakers and investment in Russian gas projects are evidence of China’s development of shipping routes, with hopes that marine transit times will be cut by a fortnight between Asian ports and foreign markets. China considers itself a ‘near
Arctic state’, meaning that whilst no territorial sovereignty in the region exists, it does have multiple rights, including the laying of pipelines in the Arctic’s waters and rights to resource exploration and exploitation.1 Norway and Russia are also heavily investing in the Arctic, through the construction of oil and gas infrastructure and deepwater ports.
The common theme amongst the nations at play in the Arctic is that territory is not the aim; instead it is the abundance of resources that lie under a rapidly thinning mass of ice.
Whilst waiting for climate change – a global threat that is being addressed and counteracted with policies, frameworks and taxes – to melt the ice and expose rich fossil fuels, other locations that are easier to currently access could be further utilised. The regional report on p.17 explores one of the world’s alleged largest shale formations, the Vaca Muerta Basin in Argentina, where investment is limited and the basin is underdeveloped.
From the barren terrains of the Arctic to humid rainforests in South America, the resources deep underground are unlikely to stay hidden for long. 1. China’s Arctic Policy. The State Council Information
Office of the People’s Republic of China. January 2018.
ASSISTANT EDITORLydia [email protected]
GREENLAND HOLDS GREENLAND HOLDS A BOUNTY OF A BOUNTY OF
RESOURCES, WITH RESOURCES, WITH UNTAPPED TRADE UNTAPPED TRADE
PASSAGES AND PASSAGES AND MINERAL WEALTH MINERAL WEALTH
BECOMING EXPOSEDBECOMING EXPOSED
TO BUY, OR NOT TO BUY
A Division of STANLEY Oil & Gas I STANLEYInspection.com
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SEPTMEBER 2019 / World Pipelines 5
WORLD NEWSWORLD NEWS
Inter Pipeline announces pipeline connection project in Canada
Inter Pipeline Ltd has announced that it has received commercial support for the construction of a CAN$100 million pipeline connection between its Bow River and central Alberta pipeline systems. The new pipeline, called the Viking Connector, will link various grades of light crude oil from the Viking and Mannville formations in east-central Alberta to the Edmonton market hub in Canada.
“The Viking Connector enables us to cost-effectively leverage our extensive regional pipeline network and provide customers with superior market access,” said Christian Bayle, President and Chief Executive Officer of Inter Pipeline. “Producers in the Alberta Viking and surrounding plays are currently limited to pipeline services to the Hardisty hub or costly trucking alternatives. This connection will provide economical access to the Edmonton market hub which historically has been a premium market for Alberta light oil products, a clear benefit for producers.”
The CAN$100 million investment is the second phase of a multi-phased development programme for the central Alberta pipeline system. This phase includes the construction of 75 km of 8 in. diameter pipeline that will connect Inter Pipeline’s Throne Station on the Bow River pipeline system to the central
Alberta pipeline system in the Stettler area. In addition, Inter Pipeline will complete upgrades to the Throne Station, which includes reconfiguring existing tank storage and expanding truck offloading capacity. Construction will begin immediately and is expected to be completed in the first half of 2020.
When completed, Inter Pipeline forecasts throughput volume of 10 000 - 15 000 bpd on the Viking Connector, with approximately one-third of forecast shipments currently secured for a 10-year term. Additional term transportation agreements are under negotiation and contracted commitment levels may rise by the in-service date.
Phase one of the central Alberta development programme, which commenced in late 2017, includes the conversion of the pipeline system to multi-product batch operation, and construction of additional truck offloading and tank storage capacity at the Stettler Station. Batch operations began in mid-2018 and an additional 10 000 bpd of truck unloading capacity is expected to enter service in autumn 2019. Two new 130 000 bbls storage tanks, the final component of phase one, are expected to be complete by the spring of 2020. Further phases may be required over the next several years to support additional production growth.
EPIC announces initial crude delivery into Corpus Christi
EPIC Crude Holdings, LP (EPIC) has announced that interim crude service on the 24 in. EPIC Y-Grade pipeline has begun, delivering crude from Crane, Texas, to various terminals in Corpus Christi and Ingleside, Texas. During interim crude service, EPIC will have the ability to deliver up to 400 000 bpd of oil to multiple terminals and refiners in the Corpus Christi area. EPIC will reserve 10% of the pipeline’s capacity for walk-up shippers during interim service.
“Providing interim service adds much-needed takeaway capacity in the Permian Basin, which supports continued development and highlights the strategic value of our assets,” said Phillip Mezey, Chief Executive Officer of EPIC. “I would like to thank our employees, customers and contractors that enabled EPIC to provide this service to our shippers and the basin.”
Construction of EPIC’s 30 in. permanent crude line (Crude Oil Pipeline) is well underway, with an overall completion rate of over 50%. The project remains on budget and the mainline is still expected to be complete in January 2020. The Crude Oil Pipeline will have an initial capacity of 600 000 bpd, with throughput anticipated to begin ramping during 1Q20. Upon commencing operations on the Crude Oil Pipeline, EPIC will transition the Y-Grade pipeline back to NGL service in 1Q20.
Additionally, the first EPIC crude export dock is scheduled to be in service before the end of the year and will be capable of loading Aframax-sized vessels. EPIC’s second crude export dock is also under construction and has a targeted in-service date during the 2Q20. Once the second dock is complete, EPIC will have the capability to load a Suezmax vessel from its waterborne terminal.
New Permian pipeline delivers first crude
Trafigura Trading LLC, (Trafigura) and Buckeye Partners, L.P. have announced that Trafigura has received its first delivery of Permian crude oil from Plains All American’s Cactus II pipeline at the Buckeye Texas Partners terminal in Corpus Christi, Texas (US). Trafigura and Buckeye have worked together to achieve early service commissioning and receipts, prior to full Cactus II operations, through connected infrastructure in the Eagle Ford basin. Further direct connections and interconnectivity, providing enhanced service capabilities, will be completed at Buckeye Texas Partners in Corpus Christi once the Cactus II pipeline is fully operational.
This initial receipt by Trafigura into Buckeye assets represents the first deliveries from over 3 million bpd of new pipeline capacity being built into the broader Corpus Christi market. Trafigura, which offers customers a full chain logistics solution, and Buckeye, which has established an unparalleled Corpus Christi infrastructure position, are together helping provide market solutions to rapidly growing domestic production.
“Trafigura has a significant long-term volume commitment to move crude oil from the Permian Basin via Cactus II,” said Corey Prologo, Director of Trafigura Trading LLC, North America. “Today further builds our position as the leading exporter of US crude oil and refined products as we utilise our global customer base and marketing skills to place barrels with end customers across the world.”
“Buckeye continues to be at the forefront of developing critical last-mile infrastructure to support growing US crude oil and petroleum product exports. Upon completion of the first phase of development across our South Texas facilities, we will be able to provide customers with access to broader domestic and international markets via our premier outlets offering over 1 million bpd of export services. We are working closely with our customers, our joint venture partners, key stakeholders and regulatory bodies, to provide safe, efficient and cost-effective export solutions,” said Khalid Muslih, President of Global Marine Terminals for Buckeye.
6 World Pipelines / SEPTEMBER 2019
WORLD NEWSWORLD NEWSIN BRIEF
NIGERChina National Petroleum Corporation (CNPC) has signed the Niger-Benin Pipeline Construction and Operation Agreement with the Republic of Benin. The more than 1900 km pipeline, including 687 km in Benin, is the largest cross-border crude pipeline invested by CNPC in Africa.
USACaliber Midstream Holdings, L.P. has acquired the North Dakota assets previously owned by American Midstream Partners, LP. The acquisition expands Caliber’s crude oil gathering and transportation service lines and widens Caliber’s area of operations within McKenzie County, North Dakota.
MEDITERRANEANThe consortium of Eni, Rosneft, BP, and Mubadala Petroleum together with Egyptian oil and gas companies are continuing the successful implementation of the Zohr gas project. 11 production wells, three offshore pipelines, an offshore management platform, and eight production trains of the gas treatment plant have been commissioned.
SWEDENThe last Nord Stream 2 pipe stored within the premises of the port of Karlshamn left the storage area in August. Nearly 39 000 pipes have transited through the port since 7 October 2017.
USACrusoe Energy Systems is reducing the flaring of natural gas by using oilfield data centres in North Dakota, Wyoming and Colorado. Across its existing projects, it has already eliminated more than 25 million ft3 of natural gas flaring, significantly reducing air emissions for local communities as well as regulatory challenges faced by oil and gas companies.
SSI RM signs agreement with IPLOCA
SSI RM has signed a five-year Alliance Agreement with IPLOCA, becoming an Allied Institution in conjunction with sitting on the IPLOCA HSE committee.
IPLOCA is an association made up of over 250 members that provides a platform to share ideas, network and build business relationships within the pipeline construction industry. SSI RM is a specialist security and risk management consultancy that delivers high level security and risk mitigation services to the offshore and onshore industries. The Alliance Agreement enables SSI RM to continue to develop its presence in the international pipeline sector as well as contribute specialist insights to all IPLOCA members.
SSI RM will provide a range of different services to the association including bespoke country briefs and city reports, that provide detailed data regarding the security and risk profile of over 70 locations. In addition, SSI RM will provide post-incident reports as well as host an IPLOCA Portal where a complete library of SSI RM country briefs can be accessed. Furthermore, SSI RM’s sister company SSI Energy will provide medical risk management advice and services to IPLOCA members.
Director Jules Rawles described the partnership as “exciting, considering SSI Group’s recent successes in the provision of security and medical services to construction projects in high risk territories”. Rawles explained that “SSI RM’s mission behind the Alliance is to support all IPLOCA members in their objective to improve the safety of personnel working in higher risk regions of the world as well as contribute subject matter expertise in medical and risk management requirements.”
Elevate Midstream Partners expands midstream capabilities
Elevate Midstream Partners, LLC (Elevate), a full-service midstream company headquartered in Houston, Texas, has announced that it has entered into an eight-year gas gathering and treating agreement with Sabine Oil and Gas Corporation (Sabine), a major Haynesville producer in Harrison and Panola Counties, Texas. The transaction was completed in partnership with Elevate’s financial sponsor, Tailwater Capital, an energy-focused private equity firm based in Dallas.
Elevate will build approximately 19 miles of 16 in. gas gathering pipelines plus associated laterals, including amine, dehydration and compression facilities in the Carthage area with interconnections to downstream takeaway markets. The system adds to Elevate’s existing asset base in the area and is designed to support both this agreement and aid other
producers in moving gas to more attractive markets at the Carthage hub.
“We are pleased to announce the execution of this agreement with Sabine and commencement of this project,” said Roger Fox, Chief Executive Officer of Elevate. “With our existing assets strategically located in the core of the Haynesville and Cotton Valley formations, this new pipeline will both expand our footprint and provide access to the competitive Carthage hub markets for our customers. We are delighted that Sabine, our anchor customer, has entrusted us to build our pipeline and continue to service their ambitious needs. We will be looking to similarly assist other customers in the region to connect, via our pipeline, to more favourable markets that ultimately will access the increasing Gulf Coast demand.”
Qatar Investment Authority acquires stake in Oryx Midstream Services
Oryx Midstream Services (Oryx), the largest privately-held midstream crude operator in the Permian Basin, has announced that an affiliate of Qatar Investment Authority (QIA) has acquired a significant stake in Oryx from an affiliate of Stonepeak Infrastructure Partners (Stonepeak). In addition, QIA has committed to invest in the development of Oryx alongside Stonepeak. The total QIA investment in Oryx will be approximately US$550 million.
Since its founding in 2013, Oryx has established itself as one of the leading midstream operators in the Permian Basin in the Southwest US. The Oryx system transports crude oil to market hubs for ultimate delivery to the Gulf Coast. The system helps supply domestic refineries and the growing US export market. Upon completion of the remaining part of the system under construction, Oryx’s total transportation capacity will exceed 900 000 bpd and access multiple takeaway options, providing customers the differentiated service flexibility they need to maximise the value of the company’s production. The Oryx team is committed to a high standard of safety and environmental responsibility as it provides consistent, reliable service for its customers.
The partnership is the latest in a series of investments undertaken by QIA across the US, where QIA aims to increase investment to US$45 billion in the coming years.
mindfulness of tomorrow. As an enterprise with generations of success behind it, we are aware of the responsibility that goes hand-in-hand with the world-wide transport of oil, gas and water. Mannesmann stands for tubes in a quality that ensures maximum reliability: for the environment and for our customers as well. Looking closely, you can see Mannesmann tubes and pipes employed in service to humanity. Everywhere. For 130 years.
is
8 World Pipelines / SEPTEMBER 2019
WORLD NEWSWORLD NEWSEVENTS DIARY
Follow us on LinkedIn to read more about the articleslinkedin.com/showcase/worldpipelines
THE MIDSTREAM UPDATE
• Nord Stream pipeline has fulfi lled all nominations since 2012
• TurkStream receiving terminal construction reaches 95%
• North Sea oilfi elds cut downtime by 32% in four years
• Kinder Morgan agrees to sell US portion of Cochin Pipeline
17 - 19 September 2019
GASTECH 2019
Houston, USAhttps://www.gastechevent.com/
30 September - 4 October 2019
IPLOCA Convention
Bangkok, Thailandhttp://www.iploca.com
8 - 9 October 2019
Field Joint Coating 2019
London, UKhttps://www.ami.international/events/event?Code=C1013
22 - 23 October 2019
CWC Basra Megaprojects - Oil, Gas &
Environment
Istanbul, Turkeyhttps://www.cwcbasraoilgas.com/
29 October 2019
Catalysts 2019
An online conference from Hydrocarbon Engineeringhttps://hydrocarbonengineering.com/catalysts
5 November 2019
Pipeline Construction Equipment
2019
An online conference from World Pipelineshttps://www.worldpipelines.com/pce19/
11 - 14 November 2019
ADIPEC
Abu Dhabi, UAEhttps://www.adipec.com/
11 - 14 November 2019
FABTECH
Chicago, USAhttps://www.fabtechexpo.com/
US funding for pipeline safety programmes
The US Secretary of Transportation Elaine L. Chao has announced that the Department’s Pipeline and Hazardous Materials Safety Administration (PHMSA) is awarding US$60.3 million in formula grants to support pipeline and underground natural gas storage (UNGS) safety programmes at the state level.
“PHMSA’s state partners are a critical ally towards advancing the safety of our nation’s energy infrastructure,” said PHMSA Administrator Skip Elliott.
Pipeline Safety State Base Grants reimburse up to 80% of a state’s annual operating costs based on state estimates and each state’s most recent programme performance scores. PHMSA-certified state pipeline safety programmes inspect more than 80% of the nation’s 2.8 million miles of gas and liquid pipelines.
In 2018, PHMSA began awarding grants designed to support state inspection and enforcement of applicable UNGS regulations. Like the State Base Grants, UNGS grants reimburse up to 80% of total actual costs related to personnel, equipment, and essential activities to participating states.
Ryder Geotechnical expands with new headquarters
Ryder Geotechnical, part of Tekmar Group plc, has announced the opening of its new office in central Newcastle, UK. The office will serve as headquarters for Ryder Geotechnical who currently have a team of five but have the space to double over the coming year.
Fraser Gibson, Director of Ryder, said: “Opening this office in central Newcastle gives us much-needed space to grow the team over the coming months. We are following the plan outlined as part of the acquisition process and are delighted that the response from our clients and the wider industry has given us full confidence in this move.”
In March 2019, Ryder Geotechnical was acquired by AgileTek Engineering as part of Tekmar Group’s strategy to acquire offshore energy businesses which have a clear technology focus, have complementary customer bases and can leverage Group support to accelerate growth. With the move, additional space will also be made available for AgileTek Engineering and other Tekmar Group companies to add capacity.
Steven Rossiter, Managing Director of AgileTek Engineering, added: “The new office also provides shared working space for the Tekmar Group companies within the city, as a key hub in the offshore energy market that also gives us direct access to the excellent talent pool in the centre of Newcastle.”
DEQ issues stop work on two-mile section of Mountain Valley pipeline
The Virginia Department of Environmental Quality (DEQ) has issued a stop work instruction to Mountain Valley Pipeline, LLC (MVP). The instruction is based on issues identified during DEQ inspections that cite insufficient erosion and sediment controls on approximately a two-mile section of the project in Spread H in Montgomery County, Maryland, US.
Based on a DEQ inspection conducted on Thursday 1 August, the agency has determined that an imminent and substantial adverse impact to water quality is likely to occur as a result of land-disturbing activities. Specifically, MVP has failed to construct and maintain erosion and sediment control or pollution prevention measures in accordance with approved site-specific plans and/or the erosion and sediment control measures that have been installed are not functioning effectively and MVP has not proposed any corrective action.
Work in this section will be suspended until these corrective actions are installed and approved by DEQ through field inspection and verification. MVP must stop all land-disturbing activities in this area including clearing, grading and trenching activities in the designated area. The only activity currently authorised in this area is work necessary to install and maintain erosion control devices as required by the approved site-specific erosion and sediment control plans, and the annual standards and specifications.
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10 World Pipelines / SEPTEMBER 2019
CONTRACT NEWSCONTRACT NEWS
GIC enters into pipeline infrastructure investment agreement with ADNOC
The Abu Dhabi National Oil Company has announced that it has entered into a further follow-on pipeline infrastructure investment agreement with GIC, Singapore’s sovereign wealth fund. GIC will invest US$600 million in select ADNOC crude pipeline infrastructure, following BlackRock, KKR and the Abu Dhabi Retirement Pensions and Benefits Fund (ADRPBF), who earlier this year signed agreements to invest US$4.3 billion in these assets. This takes the combined lease-based investment of GIC, ADRPBF, KKR and BlackRock to US$4.9 billion.
This follow-on investment agreement will see GIC acquire a 6% stake in a newly formed entity, ADNOC Oil Pipelines LLC, with BlackRock and KKR together holding 40%, ADRPBF 3% and ADNOC the remaining 51%. Sovereignty over the pipelines and management of pipeline operations remain with ADNOC. The transaction is expected to close before the end of 2019, subject to customary closing conditions and all regulatory approvals.
The leasing investment structure has seen GIC and other top-tier global and domestic institutional investors deploy long-term capital into ADNOC’s key infrastructure assets.
Commenting on the transaction, Ahmed Jasim Al Zaabi, Group Director Finance and Investment at ADNOC, said: “We are delighted that GIC, one of the world’s most renowned sovereign wealth funds and a leading long-term global investor, has joined KKR, BlackRock and the Abu Dhabi Pensions Fund in this pioneering investment in select ADNOC oil pipelines. With nearly US$5 billion of total investment, the overall agreement is testimony to the global investment community’s positive view on the attractiveness of both the UAE’s long-term potential, as well as the quality of ADNOC’s substantial infrastructure asset base.”
Over the last two years, ADNOC has significantly expanded its strategic partnership and co-investment model and created new investment opportunities across all areas of its value chain, while at the same time, more proactively managing its portfolio of assets and capital.
First contract signed for investor deliveries under the Baltic Pipe Program
On 14 August 2019, GAZ-SYSTEM and Solar Turbines, a US company, signed the contract for the delivery and service of the complete set of compressor units for the three compressor stations constituting a part of the Baltic Pipe Program. The total contract value amounts to over PLN 550 million.
“The Baltic Pipe Project is important not only for Poland but also for all of the EU as it creates possibilities for the emergence of a competitive gas market in this part of Europe. The contract we have signed today with the American company for the supply of compressor units for three Polish compressor stations under the Baltic Pipe Program is one of the elements of gas sourcing diversification strategy being implemented by the Polish government. This way we are building energy independence of our country,” said Piotr Naimski, the Secretary of State at the Chancellery of the Prime Minister, the Governmental Plenipotentiary for Critical Energy Infrastructure.
“The contract with the American supplier of key machinery for the three compressor stations located in Poland constitutes yet another milestone achieved by GAZ-SYSTEM under the Baltic Pipe Program. The contracted equipment will provide sufficient capacity enabling efficient distribution of increased gas volumes imported to Poland through the President Lech Kaczynski LNG Terminal, Baltic Pipe and, in the future, the FSRU (floating storage and regasification unit) located in the Bay of Gdańsk. The strategy consistently implemented by GAZ-SYSTEM aimed at changing the direction of gas supply in Poland becomes the fact,” emphasised Tomasz Stepien, the President of GAZ-SYSTEM.
The contract with Solar Turbines for the purchase of compressor units is the first contract for investor deliveries under the Baltic Pipe Program and one of the largest contracts of this type in the history of the Polish gas industry.
The delivery includes the total of ten compressor units with the capacity between 5 - 10 MW. Three of them will be installed at the Goleniów Compressor Station, three in Gustorzyn and four in Odolanów. The delivery will take place within 18 - 20 months from the conclusion of the contract.
Together with the compressor supply, GAZ-SYSTEM secured a long-term (10 year) service contract enabling efficient operation of the compressor units, safe compressor station operation and continuous gas transmission.
The purchase of the compressors is a part of the investor deliveries, and the procurement process had been implemented in the form of competitive dialogue which made it possible for GAZ-SYSTEM to gather information on the global market of compressor suppliers. It also ensured flexibility in creating tender documentation which took into account high technological standards, manufacturers’ specificity and the requirements set by the Company which included operational characteristics, configuration and optimisation of the acceptance and delivery process.
In the territory of Poland, the investment will include the gas pipeline connecting Baltic Pipe with the national gas transmission network and the Goleniów-Lwówek pipeline. Moreover, the Goleniów and Odolanów compressor stations will be expanded and a new one will be built in Gustorzyn.
Subsea Innovation announces contract win with TechnipFMC
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Fiesta time!FiesFiesttaa time!time!
Gordon Cope takes a look at some of
the upheavals and rejuvenations taking
place in Latin America’s oil and gas
sector, as it experiences a period of
increased investment and development.
While most of the world’s attention is focused on North America (with its shale-led production boom), and the Middle East (with its never-ending strife), Latin America is
going through its own upheavals, rejuvenations and success stories. The consequences have the potential to shift the global oil and gas sector as drastically as other, more familiar jurisdictions.
Mexico
Although Mexico’s crude production has fallen from a high of 3.25 million bpd in 2006 to 1.62 million bpd in 2019, prospects are starting to look up. Since the elimination of Pemex’s monopoly, international oil companies have successfully invested billions of dollars in exploration, drilling, midstream and downstream. ENI’s Mizton discovery in Mexico’s Bay of Campeche brings the Italian company’s reserves to over
12
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2 billion bbls, primarily light crude. ENI is on track to produce 90 000 bpd by the end of 2021.
Mexico faces several more immediate challenges, however. The six major Pemex refineries, with a nameplate capacity of 1.6 million bpd, are running at 40% efficiency due to years of neglect and budget constraints. The nation must import over 800 000 bpd of gasoline and other refined fuels just to meet its domestic needs.
A second issue is corruption and larceny. Thieves have been digging up fuel lines, siphoning gas and selling it on the black market. When the new administration of Andrés Manuel López Obrador (AMLO) closed several fuel lines in December 2018 and sent out the army to protect refineries, fuel storage and distribution facilities, the number of illegal taps dropped significantly.
A third problem is natural gas availability. Mexico consumes 8.1 billion ft3/d but produces only 2.75 billion ft3/d. In early 2019, Pemex was obliged to ask industrial users to cut back by 25% to avoid electricity outages. Pemex attributed the temporary shortage to problems associated with its distribution network in Veracruz, but industry observers note that major investments and maintenance in ageing gas processing facilities will be needed in order to avoid future problems.
The issue is being partially addressed through an extensive new network of pipelines that will import gas, primarily from the Texas Permian basin. There are now 20 lines in service between Texas and the Mexican border, with a total capacity of over 11 billion ft3/d.
Within Mexico, several pipelines were completed in 2018, including the El Encino Topolobampo to deliver gas to the Pacific coast, and El Encino-La Laguna, which will connect to the Villa de Reyes-Aguascalientes-Guadalajara network to deliver gas to the densely populated region of central Mexico.
TC Energy (formerly TransCanada) has largely completed the Sur de Texas natural gas pipeline running from Texas to a port on the Gulf of Mexico. The 800 km line, capable of carrying 2.6 billion ft3/d, is mostly underwater. The gas will be delivered inland to the Mexico City region. In all, a total of 9.8 billion ft3/d of new capacity is expected to be commissioned in 2019.
Mexico, however, is plagued with opposition to pipelines. In 2016, dissention regarding the building of Sempra Energy’s 510 million ft3/d Guaymas El Oro natural gas pipeline through traditional Yaqui territory in western Mexico resulted in a battle between pro and anti-pipeline factions that left one dead. When a court order to stop construction was ignored, Yaqui members dug up a section of the pipe. The line was eventually completed in 2017, but start-up has been pushed back to 2019. TC Energy has paused construction on two other pipelines in Central Mexico due to similar concerns. While the federal government has a duty to consult with indigenous Mexicans, the department is understaffed and faces a backlog that is adding more than a year of delay to the development of pipeline projects.
AMLO also recently spoke out against existing pipeline contracts, saying that the deals were not in the best interest
of Mexico and should be renegotiated. CFE has stated that it will have to pay US$840 million to operators of seven pipelines in 2019, even though they are not operational due to community opposition. In July 2019, CFE filed requests for arbitration in the London Court of International Arbitration and the International Court of Arbitration in Paris. Both operators and CFE hope that resolutions to the contracts can be reached outside of legal action.
In spite of the hurdles, the future for Mexican oil and gas bodes well. In June 2019, the National Hydrocarbons Commission (CNH) approved Shell’s plans to explore five deepwater areas in Mexico’s maritime border south of the US. The supermajor will invest at least US$397 million over the next four years to drill prospects in the prolific Perdido Fold Basin. If successful, it intends to invest several billion more to produce discoveries.
Brazil
Brazil is blessed with huge amounts of conventional crude that sit beneath a layer of salt in the deepwater Santos Basin adjacent to Rio de Janeiro. Estimates place recoverable reserves in the presalt play as high as 100 billion bbls. The Mero field (originally called the Lula field), produces 880 000 bpd, almost one-third of the country’s 2.7 million bpd production. Early in 2019, Petrobras commenced operations at the Lula North presalt field using an FPSO platform capable of handling 150 000 bpd and 180 million ft3/d. Several other FPSOs are scheduled for deployment this year; OPEC predicts that the country will exceed 3 million bpd by 2020.
Brazil’s oil and gas sector is hampered by Petrobras’s huge debt, however, which stands at US$88 billion. Efforts to reduce the debt have been partially hindered by uncertainty as to whether the state-controlled company can sell assets without first obtaining approval from Congress. The Supreme Court of Brazil recently announced that the company could indeed sell assets without authorisation. In June 2019, Petrobras released its latest five-year investment programme, in which it plans to invest a total of US$105 billion and sell assets worth US$35 billion. The first asset is likely to be its TAG pipeline unit, which Petrobras had previously agreed to sell to France-based Engie for US$8.6 billion.
In the meantime, international companies are taking on a much bigger role. In 2018, Total took control of the presalt 100 000 bpd Lapa field by purchasing a 35% share, making it the first international presalt operator, with partners Shell and Repsol. Total and partners are also expected to play a significant role in the Mero field (which may hold up to 12 billion bbls of oil), when the Mero 1, a new, 150 000 bpd FPSO, is commissioned.
Argentina
Argentina’s oil and gas sector moves from strength to strength with the development of its unconventional shales. The Vaca Muerta basin in the interior of the country holds over 300 trillion ft3 of gas and 16 billion bbls of technically recoverable oil. State-controlled YPF has lined up international JV partners to harness the resource. Shell has announced plans
14 World Pipelines / SEPTEMBER 2019
to drill over 300 wells, build a processing plant, and construct roads, power lines and pipelines in order to move up to 40 000 boe/d by 2021. Petronas, Malaysia’s state-owned oil company, has promised US$2.3 billion over the next five years. Currently, companies are investing approximately US$5 billion annually in the play, enough, says consultancy Wood Mackenzie, to increase current production of 250 000 boe/d to over 1 million by 2024. YPF hopes to cut development costs from US$11/bbl to US$8/bbl in the next five years.
Gas being produced from the Vaca Muerta is already supplying domestic needs as well as international exports. The Atlantic port terminal of Bahia Blanca, located 400 miles south of Buenos Aires, has been importing LNG for the last decade. In 2019, it took delivery of a floating LNG plant (FLNG), capable of producing 500 million tpy of liquid gas for export. YPF announced that the first cargo had been loaded in June 2019.
Colombia
Colombia produces approximately 850 000 bpd, half of which is consumed for domestic needs, and the other half exported. Due to the downturn in world prices and a lack of investment, reserves had dropped to 1.6 billion bbls, approximately five years of supply. In recent years, however, the Andean country has been turning its oil and gas sector around. In an effort to increase reserves to a 10 year level, it began offering more flexible contract terms and increased access to exploration areas.
In the last four years, operators, including US-based Anadarko and Colombia’s Ecopetrol, have made discoveries in the country’s deepwater Gulf of Mexico region. Anadarko’s Gorgon-1 discovery in 2017 encountered a significant gas deposit at a depth exceeding 3600 m. Numerous other discoveries have been made nearby in structural targets with four-way closure. In March 2019, Colombia signed two offshore exploration contracts with Royal Dutch Shell. The company agreed to make initial investments of US$100 million. Petrobras and Ecopetrol also recently agreed to US$400 million in offshore exploration. Onshore, Occidental and Amerisur Resources are partnering to explore four blocks adjacent to Colombia’s southern border with Ecuador. They are located in the Putumayo jungle region, an area with great oil potential. So far, the regulatory changes that have spurred exploration have helped boost Colombia’s reserves to almost 2 billion bbls.
Anti-government groups, including the National Liberation Army (ELN), Revolutionary Armed Forces of Colombia (FARC), and criminal gangs associated with cocaine production, continue to attack pipelines. State-run Ecopetrol noted that there were 16 incidents in 2018. In early 2019, a bomb attack damaged the Transandino pipeline near the border with Ecuador. The 300 km pipeline transports 85 000 bpd from fields in Putumayo province to the Pacific port of Tumaco for export.
Guyana
Guyana, an impoverished nation on the northeast coast of South America, is about to enter the oil and gas big
leagues. For the last decade, ExxonMobil and partners have been exploring in the country’s deepwater regions in the Atlantic Ocean in the 6.6 million acre Stabroek block. In the last several years, they have made more than a dozen discoveries in both the Liza area and the Turbot area. Exxon and partners now have approximately 5.5 billion boe/d in proven reserves.
Production drilling and construction is well underway at the Liza Phase 1 development. Topside modules are being installed on the Liza Destiny, a 120 000 bpd FPSO vessel being built in Singapore; the ship is expected to arrive on-site in late 2019, with first production expected in 2020. Exxon estimates that there is potential for at least five FPSO vessels producing more than 750 000 bpd.
Venezuela
US sanctions are hitting Venezuela hard. From April to May, Venezuela’s exports of crude and refined products dropped 17% to 874 000 bpd, as US refiners turned to alternate sources. In an ongoing struggle for control of the country, Congress, under Juan Guaidó, wants to eliminate exports to Cuba, but state-run PDVSA, controlled by allies of President Nicolás Maduro, has almost doubled deliveries to 91 000 bpd. US sanctions against fuel sales have also caused imports to drop from approximately 200 000 bpd to under 138 000 bpd. Rosneft, India’s Reliance Industries and PetroChina are still supplying gasoline, diesel and jet fuel.
Starting in March 2019, a prolonged electricity blackout that affected most of the country also crippled the oil and gas sector. Refineries, upgraders and export terminals, including the main port of Jose, were all idled. President Maduro accused US-backed terrorists for the blackout; the opposition and most Venezuelans blamed government incompetence and a lack of investment in infrastructure maintenance. In the meantime, Venezuelan citizens face protracted periods of starvation as food disappears from shelves, and several million have fled to adjacent jurisdictions.
The future
Much of what plays out in Latin America’s oil and gas sector over the course of the coming year will be dependent on the price of oil. OPEC and Russia’s production curtailment agreement has kept benchmarks well above US$50 for the last year, and talks are underway to extend agreements to the end of the year.
Clearly, there is much that can be done to assure the long-term health of the oil and gas sector. Brazil has managed to reassure international investors by dealing with its ‘lava jato’ (car wash) scandal and liberalising investing and operating rules. Colombia is reinvigorating its sector with much of the latter. But the current presidential administration of Mexico is flirting with returning control of the sector to state-run Pemex, and Venezuela is on the path to complete ruin. Good governance, transparency, reliable regulatory and judicial oversight are important to the oil and gas sector in any jurisdiction; in Latin America, they are critical.
16 World Pipelines / SEPTEMBER 2019
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