June 2020, Vol. 247, No. 6
Projects
Projects
Kazakhstan Pipeline Work Continues Despite Tengiz Slowdown
Kazakhstan’s biggest oil producer Tengizchevroil (TCO) cut back on work at its $45 billion expansion project in the west of the country due to the coronavirus (COVID-19) outbreak.
A Chevron spokeswoman, however, said critical work on the project, including construction of pipelines in Kazakhstan and equipment in South Korea, will continue as planned.
“We are fully committed to the project’s expansion,’’ she said.
Chevron holds a 50% stake in TCO, with the rest divided among Exxon Mobil, Russia’s LUKOIL and Kazakh’s state energy firm KazMunayGaz
“As a result of the confirmed COVID-19 cases among our contractor and subcontractor workforce ... TCO will reduce activities and personnel to ensure their safety and to minimize the impact of the pandemic on our operations and construction activities,’’ the company said in a statement.
Magellan Midstream Diesel Flows Fall, Projects Continue
Magellan Midstream Partners said diesel volumes on its pipelines have fallen as drilling in the Permian slowed due to declining prices.
The company said it does not plan to defer any of its expansion projects because most are near completion and backed up by long-term agreements. Expansion of the Saddlehorn pipeline is in process, with an incremental 100,000 bpd of capacity expected to be available in late 2020.
Additionally, construction for Magellan’s West Texas refined products pipeline expansion and new Midland, Texas, terminal is in the final stages, with both projects expected to begin operations in the early third quarter.
Volumes on the company’s BridgeTex pipeline from Midland and Colorado City, Texas, to East Houston, Texas, fell to 407,000 bpd, from about 419,000 bpd a year earlier, Magellan said.
“We do not anticipate spot barrels or any other uncommitted barrels on either BridgeTex or Saddlehorn for the remainder of the year, just given current differentials and the production outlook for the rest of the year,’’ Chief Financial Officer Jeff Holman said during a quarterly conference call.
Rig counts in the Permian, which spans Texas and New Mexico, are expected to decline by 50%, up from the company’s previous estimate of a drop of 30%, Chief Executive Michael Mears said during Magellan’s quarterly earnings call with analysts.
The oil industry was the fastest-growing customer for middle distillates like diesel between 2009 and 2014, according to the U.S. Energy Information Administration (EIA), accounting for 20% of the total increase in diesel consumption during the five-year drilling boom, according to Reuters.
Greek-Italian Joint Venture Seeks Contractors for EastMed Gas Pipeline
A joint venture between Greek utility DEPA and Italy’s Edison are on the shortlist of contractors to build part of a natural gas pipeline from the eastern Mediterranean’s rapidly developing gas fields to Europe.
Last year, European governments and Israel agreed to go ahead with the $7 billion EastMed project, expected initially to carry 353 Bcf (10 Bcm) of gas per year from Israeli and Cypriot waters to the island of Crete, the Greek mainland and Europe’s gas network via Italy.
Greece, Cyprus and Israel signed a deal in January to build the 1,180-mile (1,900-km) subsea pipeline. A final investment decision is expected by 2022, with the pipeline set for completion by 2025.
The contractors will design and build four offshore legs of the pipeline, DEPA said. The total cost of the four 910-mile (1,470-km) legs will be $3.3 billion (3 billion euros), DEPA added.
DEPA signed a letter of intent with gas producer Energean to buy 71 Bcf (2 Bcm) of gas annually via the planned pipeline from Energean’s gas fields off the coast of Israel.
TC Energy Boosts 2020 Capex to Build Keystone XL Pipeline
TC Energy Corp beat quarterly profit estimates on higher demand for its natural gas pipelines in the United States and Canada and raised its capital spending budget for the year to build its Keystone XL pipeline.
Capital expenditures (capex) for 2020 are now expected to be about $7.14 billion (C$10 billion), higher than an earlier projection of $5.67 billion (C$8 billion), as the company spends more on its contentious Keystone XL project.
However, TC Energy could face up to a one-year delay building the Keystone XL oil pipeline after a U.S. legal setback and is looking at options to keep work progressing, a company executive said.
A U.S. court in mid-April ruled against the U.S. Army Corps of Engineers’ use of a permit that allows new energy pipelines to cross water bodies, in the latest setback to Keystone XL. The ruling does not affect current work on a span of the $8 billion pipeline across the Canada-U.S. border, but it raises questions about securing water-crossing permits for the rest of the route.
“The long-term potential delay with any of these very omnibus filings or motions to vacate a permit that broad could have up to a year delay on the ultimate project,’’ Bevin Wirzba, senior vice president of Liquids Pipelines, said on a quarterly call with analysts.
The Keystone XL has been delayed for more than a decade by opposition from landowners, environmental groups and tribes.
CPC Pipeline Expansion in Doubt After Leadership Shakeup
The Caspian Pipeline Consortium (CPC) pipeline, essential to shipping 1.4 MMbpd of light Caspian to the Mediterranean markets, is facing a shareholder standoff after its board was dissolved, potentially hitting further expansion plans, three sources told Reuters.
The CPC, the largest privately operated route connecting oil fields in Kazakhstan and Russia with the Black Sea, is co-owned by a number of shareholders.
Disagreements between Russia’s oil pipeline monopoly Transneft, Kazakhstan and other shareholders have capped expansion plans in the past. CPC needs to add another 150,000 bpd by 2024 to accommodate growing oil output in the region.
In early March, Transneft blocked election of the new board of directors, after failing to win support from other shareholders for its proposal to change a marine support company in the CPC terminal near Novorossiisk, sources familiar with the details said.
Transneft, which owns a 7% stake in CPC, proposed to replace a long-serving Smit Lamnalco marine operator with its own unit, Transneft-Service, which other shareholders believed lacked the proper experience, the sources said.
“The main concern was that Transneft-Service doesn’t have proper qualifications and vessels to serve the CPC terminal,’’ one of the sources said.
Russia also holds another 24% stake in CPC via its state property management agency, Rosimushestvo, which together with Transneft’s stake makes Moscow the pipeline’s biggest shareholder with a combined 31% stake.
CPC operations, including expansion, are financed by its shareholders, among which are U.S. oil majors Chevron and ExxonMobil, Russia’s Rosneft and Lukoil, Italy’s Eni and some others.
Reversed Capline Pipeline Set to Begin Light Crude Service in 2021
MPLX said the reversal of the Capline pipeline remains on schedule, with the line expected to begin light crude service in mid-2021 and heavy crude service in 2022. Once the reversal is complete, the Capline will increase the flow of Canadian and Mid-Continent crude to the St. James, Louisiana, market.
During the fourth quarter, MPLX completed the purge of the mainline, a process during which contaminants are removed from the piping.
The Wink-to-Webster Permian crude oil project is 15% owned by the company. The 1.5-MMbpd pipeline system is expected to be in service in early 2021, with all the contractable capacity covered by minimum volume commitments, MPLX said.
Overall, the pace of new projects has slowed as production growth is expected to ease due to an expected reduction in new drilling for a second year in a row in 2020.
Williams Places Phase II of Hillabee Expansion in Service
Williams said placed Phase II of the Hillabee expansion project in service, adding natural gas capacity to the Transco system and direct access to Florida’s rapidly growing power generation market.
This incremental expansion of Williams’ existing Transco pipeline provides firm capacity to Sabal Trail Transmission via a capacity lease arrangement.
The Hillabee expansion includes construction of eight new pipe sections (loops) and a new compressor facility in Choctaw County, Ala., as well as making modifications to other existing compressor stations and valve sites. The pipeline loops vary in length and parallel the existing Transco pipeline, adjacent to the existing utility corridor.
Phase I of the Hillabee expansion project was placed in service in July 2017. Phase II of the project included the construction of approximately 11 miles of pipeline looping, a new compressor at Station 95, and modifications to a compressor at Station 100.
The Phase II expansion increases Transco system capacity by 206,660 Dth per day of natural gas. Together, Phases I and II increased the capacity of Transco’s system by more than 1 million Dth per day.
The 10,000-mile pipeline system is a major provider of natural gas services that reach U.S. markets in 12 Southeastern and Atlantic Seaboard states, including major metropolitan areas in New York, New Jersey and Pennsylvania.
Poland’s Gaz-System Reaches $306 Million Pipeline Deal with Saipem
Polish gas grid operator Gaz-System signed a $306 million (280 million euro) contract with Italian oil services group Saipem to build a section of the Baltic Pipe between Denmark and Poland.
Warsaw views the planned link as a way to diversify its gas supply, most of which is imported from Russia under a long-term contract with Gazprom that expires in 2022.
The contract, signed with Saipem’s British subsidiary, includes the construction of a concrete-coated pipeline between Denmark and Poland, micro-tunneling and civil works, the company said.
The capacity of the Baltic Pipe, which is expected to connect Poland with Norwegian gas fields via the Baltic Sea and Denmark in October 2022, will be 10 Bcm a year.
‘‘We have already contracted all major contractors and suppliers necessary to start the construction of the gas pipeline connecting the coasts of Denmark and Poland,’’ the head of Gaz-System Tomasz Stepien, said in a separate statement.
Elsewhere in the Baltic, a special pipelaying vessel that could be used by Russia to complete construction of the Nord Stream 2 gas pipeline to Germany has arrived in the Baltic Sea, a Reuters witness said.
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