-AN OVERVIEW OF WORLD

Transmission and Transnational Gas

Pipelines

Why ‘Transnational’ Pipelines Exist?

Natural Gas as Upcoming Fuel Advantages of Pipeline

The Clean Fuel of 21st Century Mainly used in Power Sector; but also

in Refining Industry and Domestic Consumption

Key to Economic growth Not enough gas reserves are available

in all parts of country Main source of Natural Gas?

Russian Part of Asia- 27% of world’s reserves

Over 70% gas reserves are in Northern Central Asia and the Gulf Countries

First Pipeline? Constructed by Soviet Union in 1970 Supply Natural Gas to West Germany

& Parts of Western Europe

Cheapest Mode Out of 3 available ways (LNG; Deep Sea

Pipeline; Gas Pipelines on Land), its is the cheapest

Doesn’t entail any loss of energy in conversion

Increase Stability in Region Transit countries which have internal

insurgency problem; will benefit as it’ll guarantee a source of income

Effect on Economic Relations Widen and Deepen Economic Relations in

other parts of World Overcome Security Risks

Bind through close economic ties Security risk minimized by gains of

economic prosperity

Basis of Existence

Risk Involved

Security Risk On shore pipelines are insecure (can be blown by militants) Given the history of Indo-Pak relations; the Vision of Friendship is a

Gamble Gas Supplying Nations (Iran, Turkmenistan, etc..) are not stable

democracies.Political Tools

Energy Rich countries are using TransNational Pipelines as Political Leverage

To forge Political Alliances, Extract Concessions High Economic Cost

Energy rich countries demand a higher cost for supply of gas. Eg: ‘IPI’ is unable to proceed due to Iran’s high demand for price.

-AN OVERVIEW

Major Gas Pipelines OF WORLD

Major Pipelines

Major 6 Pipelines of World:

1. Langeled Pipeline

2. Medgaz Pipeline

3. Russia to Europe Pipeline

4. Turkmenistan-Afghanistan-Pakistan-India (TAPI)

5. Power of Siberia Pipeline

6. Iran-Pakistan-India (IPI)

A SUBSEA NATURAL GAS PIPELINE BETWEEN NORWAY AND BRITAIN

Langeled

Location

Country: Norway and UK Direction: East-South-WestFrom: Nyhamna, Norway To: Easington, UK Through: Sleipner Riser Platform

Country: Norway Region: North Sea Operator: StatOil (Norwegian Multinational Oil and Gas) Discovery: 1974

Overview The pipeline construction began in

2004, and it was opened in two stages : Southern Part

Sleipner Riser Platform to Easington Started : October 1, 2006

Northern Part Area : Nyhamna to Sleipner Rise Started : October, 2007

TECH SPECS

Total Length: 1166 km

Maximum Discharge: 25.5 bcm/year

Project Cost: 1.7 billion pounds

Funding by: ABN AMRO, Barclay’s Bank,

RBS, Defoe Fournier

PROJECT HANDLING

Owner: Gassled Tech Service Provider: StatOil Operator: Gassco Partner:

Petoro (Petro company multinational Oil & Gas Co.)

StatOil Norkse Shell (Anglo Dutch multinational Oil

& Gas Co.) DONG Energy (Denmark’s Energy Co.)

(Dansk Olie og Naturgas) Exxon Mobile (American Multinational Oil &

Gas Co.) Conoco Philips (American Multinational

Energy Coorporation) Gassco (Norwegian state owned company of

Petroleum Industry)

Easington Terminal of Langeled

A SUBMARINE NATURAL GAS PIPELINE

BETWEEN ALGERIA AND SPAIN

Medgaz

Location

Country: Algeria and Spain

General Direction: South to North

From: Hassi R’mel, Algeria

To: Almeria, Spain

Passing Through: Mediterranean Sea

Overview

HISTORY

Idea arose in 1970 ; but couldn’t be implemented due to technical limitations.

Preparation started in 2001 Feasibility study carried out in

2002-2003 Construction :

Started – March 7, 2008 Started at – Almeria Ended in – December, 2008

Inaugurated on March 1, 2011

TECH SPECS

Total Length: 757km On Shore: 547km Off Shore: 210km

Diameter of Pipeline: On Shore: 48 inch Off Shore: 24 inch

Maximum Discharge: 8 bcm/year

Total Cost: 900 million euro On Shore: 270 million euro Off Shore: 630 million euro

Project Handling

Partner Companies with Share %

Sonatrach- 43% State owned Algerian Oil & Gas Company

CEPSA- 42% International Petroleum investment company

Gas Natural Fenosa- 15%

43%

42%

15%

SonaTrach

CEPSA

THE TRANSNATIONAL YAMAL – EUROPE GAS PIPELINE RUNS ACROSS FOUR COUNTRIES: RUSSIA, BELARUS, POLAND AND GERMANY.

Russia – EuropePipeline

Tech Specs

CAPACITY: 33 billion cubic meters per annum. DIAMETER: 1,420 millimetres (56 in). This new export corridor increased flexibility and reliability of Russian gas

supply to Western Europe. The gas pipeline construction started in 1994 and finished in 2006.

Economics of Yamal-Europe pipeline Russia offering discounted price on natural gas in lieu of full control of natural

gas pipeline to Europe. Poland’s apprehension of being heavily dependent on Russia.

Future Plans Yamal – Europe-2

Ownership Gazprom:

Russian section(402 kms) and Belarusian section(575 kms) of the pipeline is owned and operated by Gazprom.

EuRoPolGaz: A joint venture of Gazprom and

Polish PGNiG owns the Polish section of the pipeline which is about 683 km long.

WINGAZ: A joint venture of Gazprom and

Wintershall Holding GmbH owns and operates the German section of the pipeline.

NORD Stream Pipeline Nord Stream (North Trans Gas and

North European Gas Pipeline) Offshore natural gas pipeline from Vyborg in the

Russian federation to Greifswald in Germany.

It is owned and operated by Nord stream AG.

CAPACITY: 55 billion cubic meters per annum.

DIAMETER: 1,220 mm(48in)

The project includes two parallel lines. 1. First line of the pipeline was laid by

May 2011 and was inaugurated on 8 November 2011.

2. The second line was laid in 2011–2012 and was inaugurated on 8 October 2012.

AnalysisCosting According to Gazprom the costs of the

onshore pipelines in Russia and Germany are around €6 billion.

The offshore section of the project is expected to cost €8.8 billion.

Political aspects Move by Russia to bypass traditional

transit nations. To exert political influence on some of the

transit countries. Europe could dangerously depend on

Russia for its gas supply.

Security and military aspects Security threat to Sweden. Espionage.

Economic Aspects Economic Savings in transits. But higher maintenance costs.

Environmental Aspects Sea-bed being disturbed. Baltic marine habitat being

disturbed.

Expansion Plan Two additional lines doubling the

capacity.

Northern Lights Pipeline

Northern Lights Pipeline(built in the Soviet Union from the 1960s to 1980s) is a natural gas pipeline system in Russia and Belarus.

It is one of the main pipelines supplying north-western Russia and is an important transit route for Russian gas to Europe.

The Northern Lights pipeline system was built in the Soviet Union from the 1960s to 1980s

The Northern Lights pipeline system has a total length of 7,377 kilometres.

Around 2,500 kilometres of 7,377 is used to transport Russian gas to Europe.

Owners Gazprom Beltransgaz

South Stream

South Stream pipeline is an abandoned pipeline project to transport natural gas of the Russian Federation.

ROUTES Through the Black Sea to Bulgaria and through Serbia, Hungary and Slovenia further to Austria. Diameter: Diameter of pipeline is 32 inches(810mm) Discharge: Designed discharge capacity of pipeline is 63 billion cubic meters per annum.

REASON FOR ABONDONING THE PROJECT Non-compliance with European Union’s condition. Russia’s focus on Asia and Turkish market. Lack of proper funds due to sanctions imposed. Legal problems.

IMPLICATION Conflict with Ukraine. Nabucco Pipeline Project.

T.A.P.ITurkmenistan – AFGHANISTAN –

PAKISTAN – INDIA

Route

Main Route The 1,735 kilometres (1,078 mi)-long pipeline will run from gas fields in

Turkmenistan through Afghanistan and Pakistan to India. Dauletabad Gas fiels while more recent reports indicate that it will start

from the lolatan(Galkynsh) gas field (Reserves of 16 trillion cubic feet). Afghanistan, TAPI pipeline will be constructed alongside the Kandahar-

Heart highways in western Afghanistan. Pakistan via Quetta and Multan in Pakistan.  India the Indian town of Fazilka, near the border between Pakistan and

India

Alternative Route Taskepri in Turkmenistan to Faryab followed by Balkh, Samangan, Kabul

and Nangarhar Province of Afghanistan, and from there to Peshawar, Nowshera, Attock, Islamabad and Lahore in Pakistan to India

Peace Pipeline Turkmenistan Perspective Reached out to Turkey, Japan, and

South Korea. To develop projects in Turkmenistan

for LNG, Gas-to-Liquids. The manufacture of fertilizers from

natural gas. Chance to market its gas to deficit

south Asian countries.

Afghanistan Perspective Critical source of employment and

revenue spinner Contributing to the country's energy

security and thus boosting Afghan development

Pakistan Perspective Economic development Rising energy demand will be

catered to an extent. Improve relations with India &

Afghanistan Create pressure to Iran as it is an

alternative to IPI/

India Perspective A growing power crisis The steady drop in Krishna Godavari

basin (KG-D6) natural gas production

Lessen the dependence on petrol First joint pipeline between India-

Pakistan Economic development

OverviewHISTORY

MoU between the governments of Turkmenistan and Pakistan for a pipeline project was signed.

Chose CentGas- Unocal withdrew from the consortium .

Pakistan, India and Afghanistan signed a framework agreement to buy natural gas from Turkmenistan. 

India and Afghanistan failed to agree on transit fee for gas passing through Afghan territory & Pakistan.

GAIL to sign the Gas Sale and Purchase Agreement (GSPA) with TurkmenGaz, Turkmenistan’s national oil company.

TECH SPECS

Total Capacity:1,078 millimetres pipeline Working pressure :100 standard atmospheres

(10,000 kPa).

Initial capacity: 27 billion cubic metres (950 billion cubic feet) of natural gas per year. Afghanistan: 2 billion cubic metres

(71 billion cubic feet) Pakistan:12.5 billion cubic metres

(440 billion cubic feet) India: 12.5 billion cubic metres(440 billion

cubic feet)

Future Development: 33 billion cubic metres (1.2 trillion cubic feet). Six compressor stations would be

constructed along the pipeline. The pipeline was expected to be operational

by 2014.

Challenges

Key Challenges

The seller’s willingness to sell gas at a price feasible for the ultimate buyer.

Volume off-take assurance by end-consumers.

Funding of the pipeline.

Geopolitical risks associated with the construction and operation of the 1,735km long pipeline.

Commercial Challenges

Cost Implication- Inability to find financing.

Selection of commercial consortium.

Geopolitical Challenges

Security Issues in Afghanistan

Tribal areas in Pakistan

Issues between Washington, Iran and Pakistan

India has concerns regarding project security after the 2014 withdrawal of US forces from Afghanistan.

Iran keen on alternative to TAPI- (IPI)

Iran-American & Russian American factors

China factor

AnalysisSize of TAPI Pipeline Length : 1735 km

Turkmenistan: 200 Km Afghanistan : 735 km Pakistan- India : 800 km

Diameter : 1420 mm (56 inch)

Capital Spending $7-$10 billion Asian Development Bank is the Transaction

Advisor for the project.

Start & End of the Project Proposed Project : In 1990s (almost 20

years ago) Original Project Start Date : 15th

March 1995 (Turkmenistan-Pakistan) TAPI Agreement Date : 24th April 2008 Implementation Start Date:

December 2015 (Tentatively) Project End Year : 2018 (Tentatively)

Owners of the Pipeline Land Ownership : Turkmenistan Leader of Consortium: To be

decided in September 2015 Contenders : Total S.A &

PETRONAS

Financing of the Project Total S.A to be consortium leader

constructing the pipeline. (Tentatively)

Companies with Equal Stake Turkmengaz Afghan Gas Enterprise Inter State Gas Systems (Private)

Limited GAIL (India) Limited

Risks

Geopolitical Risk India-Pakistan Relations Security Issues

Environmental Risk Displacement of communities and individuals Devastation of traditional livelihoods from pollution Environmental accidents. The lack of transparency in the dissemination of the findings of environmental

impact assessments (EIAs) is of major concern.

Commercial Risk Expected price of Natural gas will 10-12 millimeters/unit which is very high for

energy companies.

A NATURAL GAS PIPELINE BETWEEN RUSSIA AND CHINA

Power of Siberia

Tech Specs Technical Specifications Length – about 4,000 kilometers

(Yakutat – Khabarovsk – Vladivostok – 3,200kms)

(Irkutsk Region – Yakutat – nearly 800kms)

Working pressure – 9.8 MPa (100 Ata); Annual output – 38 billion cubic meters.

30 billion cubic meters from  Kovyktin 8 billion cubic meters from Chayandin

Size and Capacity Diameter – 1,420 mm or 55.9 inches 68 billion cubic meters annually

Owners and the Users Gazprom (Owned by Russian Government) CNPC (China National Petroleum Corporation)

Beijing-Tianjin-Hebei metropolitan area in the north of China

Yangtze River Delta in the east.

Time Period 30 years (2018-2047)

Geo Political Implications

For Russia

The deal provides alternative market for Russian gas

Russian gas supplies as a result will be least affected by diversification of European gas supplies

Russia hardened its stand in Ukraine Ukraine as a result has the highest

gas prices in Europe The deal paves the way for Russia in

the Asian markets of the “pivot to Asia” initiative

The current pipeline will also facilitate

For China

Provides the Chinese players an entry in the Russian gas industry

Reduces the reliability of China’s demands on U.S LNG imports

China will rely comparatively less on U.S dominated sea routes

Gas supplied will also nullify the pollution tensions which may result in political instability

Both Russia and China coupled could challenge U.S supremacy

Strategic & Commercial Implications Gas deal viewed as a facet of maturing

economic ties between China and Russia 30 commercial deals signed between two

countries Included long term strategic implications like:

Currency Swaps Partnering on rail, power and port projects Joint development of a wide body long haul

passenger aircraft Chinese automotive assembly in Russia A Maturing Energy Partnership Doublilng of oil exports from Rosneft since July

2014 Yamal LNG Project Rosneft-CNPC deal Shanjhai Chemical Industry Park Tainjin Oil refinery Acquisition of technology from China for shale

gas Extraction

For China East Siberian gas can only be

developed with china as a customer China would pay around $10/mbtu

For Russia The size of the entire deal is estimated

to be $400 billion Russia can leverage this liquidity in a

time when it is sighting sanctions from European markets

This would enable Russia to be a “Swing Supplier”

This will be Gazprom’s most profitable endeavor

Analysis

FINANCIAL ANALYSIS Russia to invest a pre-payment capital of $50

billion

China to invest a pre-payment capital of $25

billion

Proposal to finance the pipeline through an

equity stake of CNPC in Gazprom

Laying of the pipeline to cost around $

5billion which will be bared by gazprom

This increses the capital spending by Russia

to $55 billlion

RISK ANALYSIS

Technical Corrosion (both internal and external) Pressure handling capacity Maintenance Other environmental factors which

could affect the

Financial Pricing

• Formula based on the basket of crude oil products

• Take-or-pay contractual obligation

-PRELIMINARY AGREEMENT

BETWEEN IRAN AND PAKISTAN 1995

AND BETWEEN IRAN AND INDIA IN 1998

Iran-Pakistan-India Pipeline

(IPI)

Tech Specs

• Type of pipeline - Natural gas

• Route – from Asaluyeh in Iran to Multan and Karachi in Pakistan to Delhi in India

• Length – 2700 km

• Diameter – 42 inch

• Capacity – 110 million cubic metres of gas a day

• Maximum discharge – 40 billion cubic metres per year

Challenges Risks Sanctions on Iran by the U.S and

other world powers Pressure of U.S on Pakistan and

to abandon the project due to its political relations

Disagreement between pricing Security reasons – the social

unrest in Iran and political unrest

Financial constraints for Pakistan

Unrest in Baluchistan Weak Transit negotiations

resulting in high transit fees to Pakistan

China bagging the project if over India due to failing negotiations

More Analysis

Financial Implications

Total cost-$ 7.5 billion Pipeline in Iran costs $700mPipeline in Pakistan -$2.5billionIran’s loan to Pakistan -$500mRussia’s aid to PakistanChina’s aid to Pakistan to build Pakistan side of

pipeline costing $2billion

Uses of Pipeline

Fulfilment of domestic gas needs Generation of revenue for Iran as an exporter and

Pakistan as a transit countryIncrease Investment opportunities Indirect benefits like employment avalibility of clean

fuel and industrial growthBuilding of cooperation and peace for the affected

countriesShift towards gas driven and environment friendly

economies

-AN INDIAN PERSPECTIVE

Natural Gas Pipelines in India

Gas Pipeline Network in India

There are presently three major pipeline entities in gas transportation across the country i.e. GAIL, RGTIL and GSPCL

Reason for under utilization: Acute domestic gas shortage Improvement solution : Government proposal on national gas

grid. Problem :

Not economically viable Lack of Funding.

Transporter (in KM) (in %)1 GAIL 10841 70.67% 2 RGTIL 1469 9.57% 3 GSPL 1874 12.22%

Challenges

Following are the main Challenges of pipeline transport:

1. It is not flexible, i.e., it can be used only for a few fixed points.

2. Its capacity cannot be increased once it is laid.

3. It is difficult to make security arrangements for pipelines.

4. Underground pipelines cannot be easily repaired and detection of leakage is also difficult.

Financing

• Finance comes from the project sponsors (which fund directly, or fully guarantee the debt), through project finance, or (most often) through a combination of the two.

• Finance is such a crucial element that the pipeline project needs to be structured from the beginning with the ultimate financing mechanism in mind.

• Pipeline fees: • Should be set to match the currency of funding

• Throughput reliability: • The shipping agreements should be with strong companies, and be of a longer term

than the project loans

• Supply risk: • A key risk to a pipeline financing is that there are either insufficient supplies to take up

the pipeline’s capacity, or inadequate infrastructure to bring the gas to the pipeline’s entry point. 

GAIL India

• GAIL (India) Limited is the largest state-owned natural gas processing and distribution company in India

• GAIL (India) Limited was incorporated in August 1984 as a Central Public Sector Undertaking (PSU) under the Ministry of Petroleum & Natural Gas (MoP&NG)

• It has following business segments: Natural Gas, Liquid Hydrocarbon, Liquified Petroleum Gas , Transmission, Petrochemical, City Gas Distribution, Exploration and Production, GAILTEL and Electricity Generation

• GAIL commissioned Hazira-Vijaipur-Jagdishpur (HVJ) pipeline in 1991

• It was one of the largest cross-country natural gas pipeline projects in the world. This 1800-kilometre-long pipeline was built at a cost of INR 17 billion and it laid the foundation for development of market for natural gas in India

Challenges of GAIL

2012-13 2016-17 2021-22 2026-27 2031-320

200400600800

100012001400

DemandSupply

1. There is a great potential in the market but supply of natural gas is not meeting the demand.

2. Gail should search for more alternatives ie is more than Ras gas3. Land Accusation

Gail Plans to buy US shale Asset for Rs 9500 crore • We are searching for an asset that can produce about 3 million tones per annum. That

will help cover the pricing risk of about 50 % of LNG we have contracted to buy

GSPL

GSPL a GSPC group company in in developing energy transportation infrastructure and connecting natural gas supply basin and energy terminals to growing markets .

• It is the second largest gas transporter in the country

• GSPL plans to connect all 25 districts of Gujarat with 2200 km of high pressure gas pipe line.

• It is the only pipeline infrastructure company operating on an open access basis.

• Currently , GSPL operates a medium to high pressure gas transmission grid comprising approximately 1666 km of natural gas pipeline .

• GSPL has won the bid for two cross country pipelines Mallavaram – Bhillwara (1600 km) , Mehasana – Bhatinda (1670 km)

GSPL Finance

Gujarat State Petronet Ltd (GSPL) is likely to see better performance over the next two years.

First, its city gas distribution (CGD) business is expected to be merged with four companies of Gujarat State Petroleum Corporation (GSPC), a sister company. The merged entity will be named GSPC Distribution Networks (GDNL). The merger, likely to be completed in the June quarter, will boost GSPL's consolidated earnings per share (EPS) in 2015-16. The combined entity will be India's largest CGD company

Second, the company management expects the Petroleum and Natural Gas Regulatory Board (PNGRB) to raise rates by 8-10 per cent. 

Third, softening LNG prices and higher offtake from Essar Steel, Essar Oil and ONGC Petro additions Ltd, among others, could boost transmission volumes