Enhancing export opportunities, addressing energy security concerns and providing alternative supply sources; GlobalData examines the annual global planned pipelines outlook.

A total of 145,004km (90,101 miles) of new-built oil and gas pipeline length is planned for construction across various regions of the world by 2018. The EMEA region is the major contributor to this with estimated planned pipeline length additions of 58,982km (36,650 miles) during the 2014-18 period, accounting for 40.7% of the total global planned pipeline length additions.

The North, South and Central America (Americas) region will contribute 32.2% of the total global planned pipeline length addition by 2018. The Asia-Pacific region, with a planned length addition of 39,321km (24,433 miles), accounts for a 27.1% share of the planned pipeline length additions worldwide during this period. See Figure 1 for the global yearly planned pipeline length additions by regions during the 2014-18 period.

Key trends and issues

Pipelines are a cost-effective means for the transportation of crude oil, refined products and natural gas from producing areas to consumers, meaning that they are regularly extended. Investment in planned oil and gas pipeline length additions are driven by different regional factors across the world. Currently, investment in the Americas is primarily driven by unprecedented growth in oil and gas output from unconventional sources such as shales and oil sands. In EMEA, investment is driven primarily by planned diversification of gas sources by key consuming countries. In the Asia-Pacific, investment is driven by the need for energy security by developing economies with rapidly growing energy consumption.

Rapid development of unconventional oil and gas resources has necessitated the construction of new pipelines in the Americas. Shale gas production in the US has grown at an average annual growth rate (AAGR) of about 45.5% over the 2007-11 period. Similarly, production from oil sands in Canada has grown at an AAGR of 7.2% during the same period. Such rapid growth in production has led to construction of new pipelines for the transmission of the oil and gas produced.

Canada exports most of its crude oil to the US. However, with the expected growth in production from oil sands in the future, the current pipeline capacity is likely to prove insufficient; necessitating the construction of new pipeline infrastructure. Domestic crude oil production in the US has been growing rapidly over the past few years, due to production growth from liquid-rich shale plays such as Bakken in North Dakota and Eagle Ford in Texas. Growing domestic oil production in the US poses a risk to Canada’s oil exports plans, prompting it to investigate ways of diversifying its oil exports to other regions, particularly to Asia. If Canada were to begin exporting oil to Asia, it would be required to make substantial investment in new pipeline infrastructure on its Pacific coast.

In EMEA, European countries plan to avoid over-dependence on Russian gas supplies, which has triggered plans for several new pipeline projects in the EMEA region with an aim to provide access to natural gas from the Caspian Sea and Central Asia to the key European consumers of gas.

Progress of planned pipeline projects is often affected by environmental and geopolitical issues. Such issues have resulted in delays in a number of projects in the Americas, Asia-Pacific and EMEA.

In the Americas, plans for new pipelines meant to transport tar sands containing bitumen from Canada have been facing opposition from various environmental groups. Some of the planned pipelines affected by such opposition are Kinder Morgan’s Trans Mountain pipeline, Enbridge’s Northern Gateway pipeline and Keystone XL pipeline. According to the opposing groups, these pipelines could cause significant damage to the local ecosystem in the case of any oil spill or rupture. Kinder Morgan’s Trans Mountain pipeline expansion will transport heavy crude containing bitumen from Alberta to Vancouver, British Columbia, passing through many communities and is expected to increase the number of tankers passing through the Vancouver harbour. The environmentalists fear that a single oil spill by these tankers would have serious consequences for the ecosystem in British Columbia. Campaigners also expect that the planned Trans Mountain pipeline expansion will increase crude oil transportation from Alberta by 590 thousand barrels a day (mbd), triggering increased mining activities and resulting in increased carbon dioxide emissions.

Focus on Asia-Pacific

The Asia-Pacific region has planned pipeline length additions of 39,321km (24,432.9 miles) during the 2014-18 period. Out of the total planned pipeline length additions for the period, 30.8% is estimated to be added in 2014. In 2015, another 28.2% is scheduled to be constructed.

See Figure 2 for the yearly planned pipeline length addition scheduled in Asia-Pacific during the 2014-2018 period.

Natural gas pipelines will dominate the additions with a share of 87.0%, equating to a pipeline length of 34,217km (21,262 miles). The majority of these planned natural gas pipelines will be constructed in India, Georgia, China and Australia. Planned crude oil pipelines and planned petroleum product pipelines account for an estimated 9.7% and 3.3%, respectively.

Myanmar-China oil pipeline

The Myanmar-China oil pipeline (also known as the Sino-Burmese pipeline) is a planned onshore oil pipeline that will transport crude oil from Kyaukphyu, Myanmar to a new refinery in Kunming, China. The pipeline will be 2,380km long (1,478.8 miles) and will be able to transport 158.40 million barrels of crude oil annually or 0.43 million barrels a day.

China National Petroleum Corporation (CNPC) is the operator of this planned pipeline and has an equity interest of 50.9% in the project. Myanmar Oil and Gas Enterprise (MOGE) has 49.1% stake in the project. The capital expenditure for the planned pipeline is $1.5 billion.

The Myanmar-China oil pipeline will supply the oil demand of industrial customers and consumers in the Yunnan and western provinces of China. Once the pipeline begins operations, crude oil from countries in the Middle East and Africa will be transported to the Myanmar coast by tankers, where it will be fed into the pipeline for transport to China. The pipeline will have the added benefit of reducing traffic congestion in the Strait of Malacca, an important transit point that connects the crude oil suppliers of the Persian Gulf with the Asian markets, through which more than 50,000 vessels pass every year. An estimated 77% of China’s crude oil imports traverse this passage, a major drawback of this transit point is that it is prone to pirate attacks.

This project is not without controversy, in 2013, people in Kunming, China, staged protests against construction of the refinery, which is intended to process the crude oil carried through the planned pipeline, and its associated petrochemical plant. The protestors demanded to see the environmental impact statements and other supporting documents for the refinery and construction of the refinery is currently on hold. At the time of the protests, the pipeline was almost complete, but the delay to construction of the oil refinery means that the oil pipeline cannot become operational. It is expected that the oil pipeline will become operational in 2014.

West-East gas pipeline III

West-East gas pipeline III is a planned natural gas pipeline that will be built beginning in Horgos, China, and ending in Fuzhou, China. The planned length and capacity of the pipeline are 5,220km (3243.6 miles) and 1,059 billion cubic feet (bcf) or 2.9 billion cubic feet a day (bcfd), respectively.

The pipeline is operated by PetroChina with a 52% equity interest and Baoshan Iron & Steel hold a 16% stake in the project. The pipeline is expected to become operational in 2015. This natural gas pipeline is expected to increase the supply of natural gas to the consuming regions of China by transporting it from the Tarim Basin, a major producing area. Tarim Basin natural gas production increased to 1.74bcfd in 2012 from 1.55bcfd in 2011. This pipeline project will also transport the coal gas produced in the Xinjiang province.

Kochi-Coimbatore liquefied petroleum gas pipeline

The Kochi-Coimbatore liquefied petroleum gas (LPG) pipeline will be built from Kochi, India, to Coimbatore, India. It will be 229km (142.3 miles) long when completed. The pipeline will be able to carry about 7.5 million barrels of oil equivalent LPG annually or 20,500 barrels of oil equivalent a day (mboed). The planned pipeline will be operated by Bharat Petroleum Corporation (BPC). The Kochi-Coimbatore LPG pipeline will supply LPG from the BPC refinery in Kochi to bottling plants located in Palakkad and Coimbatore. This pipeline will eliminate the need for road transportation of LPG to these bottling plants. The LPG pipeline project is a part of an integrated project that includes the expansion and modernisation of the company’s Kochi refinery. The integrated project will help increase the refinery’s LPG production capacity from 0.5 million tons a year (mmty) to an estimated 1.26mmty.