P&GJ's construction overview

Pipeline & Gas Journal, August, 2004

There is a high level of international activity to add pipelines to meet the growing demand for natural gas, particularly for electric generation in industrialized nations. Following is a discussion of many of the major projects planned and under construction in six basic region groupings.

Asia-Pacific Region

The Asia-Pacific Region is poised for massive energy development. At this time, the region's 22,114 miles of new and planned pipelines is the highest in the world and major international players are anxious to supply crude and natural gas to meet the region's growing demand.

China has embarked on a major expansion of its gas infrastructure and increases in domestic production are projected, along with increased imports both by pipeline and in the form of LNG. Work is winding down on the $5.6 billion, 2,500-mile West-East Pipeline to transport 1.93 Bcf/d of gas from Xinjiang's Tarim Basin in NW China to Shanghai with subsequent connections to Beijing through a 200-mile link. The project, a joint venture of Royal Dutch/Shell, PetroChina and Sinopec, is slated for completion early next year.

Also significant is PetroChina's 835-mile Zhongxian-Wuhan Gas Pipeline being built to link China's Sichuan-Chongquing gas fields with Hubei and Hunan provinces. The 3 Bcm/yr capacity pipeline is scheduled to be fully operational in mid-2005.

In India, the state-owned Oil & Natural Gas Corporation selected Hyundai as the EPC contractor for its Mumbai-Uran trunkline that involves two 126-mile pipelines--one 30-inch diameter oil line and the other a 28-inch diameter gas line. The new pipelines will replace an existing and aging subsea system. Completion is scheduled for May.

Petronet India is in discussions to participate in the 895-mile Kandla-Bathinda Petroleum Products Pipeline. The company is also involved in a joint venture to build the 1,091-mile Central India Pipeline to transport products. Bids on the latter have reportedly been received from three companies and awards are expected next month.

Bharat Petroleum has expressed interest in a $2.2 billion products pipeline from the Bay of Bengal to India. The Gas Authority of India (GML) has held discussions with Reliance Industries on an 895-mile pipeline linking Lalomada to Goa and a 1,500-mile pipeline linking the cities of Jamnagar, Bhopal and Cuttack.

With a goal of building a pipeline from East Kalimantan to Java, Indonesia's state-owned gas company PT Perusahaan Gas Negara (PT PGN) received a $650,000 grant from the U.S. Department of Trade to conduct a feasibility study for the 1,100-mile, $1.6 billion project.

Another proposal by PT PGN is for a South Sumatra--West Java Gas Pipeline from Grissik to Pagardewa and Cilegon, and a distribution pipeline in West Java. The distance of the transmission pipeline is 627 miles, while the distribution line calls for 155 miles of pipe in West Java.

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Australia

Australia is well-positioned for strong near-term pipeline construction activity as infrastructure is developed to market more of its natural gas reserves. While showing strong potential for new projects, ongoing tension between pipeline contractors and regulators could discourage investors.

Work by Clough Engineering is winding down on behalf of Origin Energy in the Yolla Field off the Tasmanian coastline to provide natural gas to Victoria. Clough's contract covers engineering, procurement, construction, installation and commissioning of an offshore production platform, 91 miles of subsea pipeline; 20 miles of onshore pipeline and associated smaller pipelines, and an onshore gas plant. Onshore construction began last year and offshore work began this year.

Woodside Energy Ltd. awarded Allseas a contract to lay the 70-mile subsea pipelines for its Otway Gas Project. The project includes an offshore platform in the Thylacine Field and gas plant to be built by Technip near Port Campbell. Construction will begin shortly with production beginning in mid-2006. Still in planning is Epic Energy's Darwin-to-Moomba project calling for a 1,364-mile gas pipeline. Completion of the $885 million project is not scheduled until late 2006.

Almost due north in Papua New Guinea, controversy continues to surround Oil Search Ltd.'s Highlands Gas Project. As proposed, the project would tap vast quantities of natural gas in its Southern Highlands and deliver it through a main processing facility for LPG extraction before transporting dry gas via a 1,674-mile pipeline to Australia.

In June, Oil Search reported that it had queried the Australian Stock Exchange to request a trading halt for its shares. This request came alter an Australian newspaper article suggested Oil Search and its partners planned to advance the project to the front end engineering and design (FEED) phase. The main developers of the PNG pipeline are Oil Search (45%), ExxonMobil (39%), and ChevronTexaco (10%). If constructed, the pipeline will be the longest in the Southern Hemisphere. The total cost is expected to be between A$6-7 billion.