The battle between China and India in shoring up gas reserves in the region emerges as a major theme of recent times, while in countries such as Bangladesh, Vietnam and Indonesia, the pipeline boom has underpinned moves to secure domestic energy independence.
In the case of the former, development of the Turkmenistan – China gas pipeline has commenced with China National Petroleum Corporation (CNPC) having establishing a working group for the development of the pipeline, which will transport 30 Bcm/a of gas for 30 years.
Following this landmark agreement, China secured a transit route through Kazakhstan. CNPC is also exploring the potential for the pipeline to traverse Uzbekistan. In May, the company agreed to build a gas pipeline between the two countries.
“It would be 530 km long and have a throughput capacity of 30 Bcm/a. The project includes a plan to bring two compressor stations on stream,” said a statement from the Uzbek government.
China’s attempt to court its neighbours in Central Asia comes hot on the heels of major Indian gas firm, Gas Authority of India Limited (GAIL) signing a major deal with the state-owned gas company Uzbekneftgaz over a gas trunkline and distribution network development. The move was widely analysed to be India’s attempt to get a foothold in the Central Asian energy sector, amidst China’s expanding presence in Kazakhstan and Turkmenistan.
However, over the last month, China has thoroughly expanded its presence in the region, with an agreement with Kazakhstan to extend the first phase of an oil trunkline connecting the two neighbours. The pipeline will involve a 700 km extension westward to link it to Kazakh oil and gas reserves in the Caspian Sea.
China has also staved off competition from India, Thailand, South Korea and Japan for Myanmar’s lucrative gas resources. In February, CNPC and the Myanmar Oil and Gas Company launched a feasibility study on the construction of the gas pipeline connecting the two countries.
The pipeline will follow the route of the proposed 1,440 km oil pipeline that will link Myanmar’s western port of Sittwe to the city of Kunming, the capital of Yunnan province in southwest China.
CNPC is currently conducting a survey on the feasibility of using Myanmar’s Yanbyai Island as an oil terminal to supply the oil pipeline.
The oil pipeline is being developed in order to provide an alternative route for China’s crude imports from the Middle East and Africa, and will help reduce its dependence on traffic through the Straits of Malacca. Analysts have suggested that the oil pipeline is likely to cost up to $US3 billion and may have a capacity of up to 40 MMt/a.
China has also taken the battle with India over gas resources in its own backyard, signalling its interest in extension of the Iran – Pakistan – India pipeline to China.
State-owned Russian firm Gazprom has supported the proposal, however the final negotiations over the gas pipeline have not included this option.
In July this year, Iran, India and Pakistan came to an agreement on the price of gas that will be transported through the proposed $US7.4 billion tri-nation pipeline, finalising one of the key issues that has delayed completion of the final agreement.
India and Pakistan agreed on the price formula that Iran had proposed, which would price the gas at $US4.93 per MMBtu. However, Iranian officials have raised a last-second amendment that would revise the pricing formula every three years based on global fuel prices and energy mix, rather than the previously agreed seven.
Separately, India and Pakistan have agreed on a structure for the development of a transportation tariff for the pipeline, although officials from the two countries failed to reach a decision on the transit fee.
Iran has reported that it has completed 18 per cent of the work for the pipeline in its own territory and hopes to start supplying gas to Iran and Pakistan by 2011.
Meanwhile, progress has been made on the development of the Turkmenistan – Afghanistan – Pakistan (TAP) pipeline, with the Pakistani government awarding a $US10 billion contract to lay the pipeline to an unidentified US-based oil company.
As part of the $US10 billion contract, the company will build the 2,200 km pipeline in three years along with two oil refineries and four thermal powerhouses.
With a capacity of 2 MMbbl/a of oil and 4 Bcf/a of gas, the 56-inch pipeline will transport gas from the Dovetabat gas deposit in Turkmenistan to the Indian town of Fazilka, near the border between Pakistan and India.
India has also fast-tracked construction of major pipelines and city gas distribution networks linking domestic resources to demand in its major industrial zones.
A prime example of this is Reliance Natural Resources’ plans for the development of a Rs. 14,000 crore ($US3.5 billion) gas pipeline.
The 1,600 km pipeline will connect Kakinada, the landfall point of the gas from the D6 block in the Krishna Godavari Basin, to Hyderabad and onwards to Nagpur, Bhopal, Delhi and Dadri, where the company is setting up a 7,480 MW power project.
“This will be the longest pipeline in the country and would require an investment of over Rs. 14,000 crore,” said Reliance Natural Resources’ Chief Executive Officer Anil Ambani.
Mr Ambani also said that the company has applied for permission from India’s Petroleum and Natural Gas Ministry to develop city gas distribution networks in Mumbai, Delhi, and the National Capital Region, comprising of towns such as Noida, Ghaziabad, Gurgaon and Faridabad. The pipeline network will span a further 1,400 km.
Similarly, China has started a feasibility study on the second West East gas pipeline project.
The gas pipeline is expected to run from Horgas in the Xinjiang region through twelve provinces covering China’s central and southern regions, the Pearl River Delta and the Yangtze River Delta to reach Guangzhou and Shanghai on the east coast.
The project will involve construction of 7,700 km of pipelines with an annual capacity of 30 Bcm and will cost 102.1 billion yuan ($US13.3 billion).
CNPC reportedly plans to begin construction in December 2008 and complete a section from Zhongwei city in the Ningxia region to Guangzhou by December 2010.
Despite China and India dominating the headlines over major projects, a number of key gas pipelines elsewhere in Asia have mad major advances.
In March, Chevron officially inaugurated the Bibiyana natural gas field and associated pipelines, located in the northeast of Bangladesh.
The project involved development of 12 wells, a gas plant, a natural gas pipeline and a condensate pipeline. The company has signed a gas purchase and sales agreement with Petrobangla, the state owned oil and gas company.
The Bibiyana field is one of the country’s largest gas fields and is expected to initially produce 200 MMcf/d of natural gas, reaching maximum total production of 500 MMcf/d by 2010.
First gas has also been delivered through the PM3 – Ca Mau pipeline in southern Vietnam.
The pipeline connects the Bunga Raya “˜B’ platform, located on block PM3 in the Commercial Arrangement Area of the Gulf of Thailand, to the landfall station in the Ca Mau province of Vietnam
Talisman Energy said that gas has begun flowing at a rate of 20 MMcf/d and is expected to increase by 46 MMcf/d by September this year. Designed to transport approximately 2 Bcm/a of gas, the pipeline comprises an 18 inch 298 km offshore section and a 27 km onshore section.
Hot off the heels of this development, PetroVietnam announced plans to invest $US780 million in a pipeline that will transport gas from an offshore field in the Mekong Delta to Can Tho City.
The pipeline will run from Block B, which is located about 140 km southwest of Ca Mau province, to Can Tho City, which is about 200 km west of Ho Chi Minh City.
“PetroVietnam will invest in building the pipeline with a running capacity of 4.6Bcm/a, for operations by the end of 2010,” said a statement from the company.
Meanwhile, US-based American Technologies Inc Petroleum (ATIP) has made a gas discovery at the Yen Tu field off Vietnam’s north coast, which will see the company develop a pipeline with PetroVietnam.
The gas block, called Thai Binh, is located 70 km off the port city of Hai Phong, and is expected to start commercial production by 2009. The pipeline will deliver the gas from the field to power plants in northern Vietnam.
Two major developments in Southeast Asia have also received government approval over the last three months.
Malaysia’s plan to build a $US7billion pipeline that will process and transport Middle Eastern oil across the Malaysian peninsula moved a step closer to reality following the signing of deals between Malaysian, Indonesian and Saudi Arabian firms.
The 320 km pipeline will connect Malaysia’s northwestern state of Kedah to northeastern Kelantan and would allow Middle Eastern oil shipments to reach the South China Sea without travelling through the Malacca Strait.
Malaysia’s Trans-Peninsula Petroleum said it signed an agreement with Malaysia’s Ranhill Engineers and Constructors and Indonesia’s PT Tripatra to build the pipeline. Trans-Peninsula Petroleum also signed separate Memoranda of Understanding with Indonesia’s PT Bakrie and Brothers to supply pipes, with Saudi Arabia’s Al-Banader International Group agreeing to provide the oil.
“When the entire project is completed in 2014, Trans-Peninsula Petroleum pipeline will divert about 20 per cent of oil transiting through Straits of Malacca, proportionately easing the congestion in the Straits,” Trans-Peninsula said in a statement.
The company said that the first phase of the oil pipeline project is slated to begin in 2008 after land acquisition and environmental and social impact assessments. The current plans are to build a 48 of 2 MMbbl/d and storage capacity of 60 MMbbl. The first phase, expected to cost about $US2.3 billion, would be operational by 2011.
Finally, Indonesia’s downstream regulatory watchdog BPH Migas has approved development of the East Kalimantan – Java pipeline.
BPH Migas Chairman Tubagus Haryono said that the project would go ahead in line with the original schedule as there were no longer doubts over the gas supply for the country’s longest pipeline project.
The pipeline will be constructed in two phases, with the first phase involving the development of a pipeline between Central and South Kalimantan. The second phase involves the construction of a 600 km offshore pipeline between Takisung and Surabaya (East Java). PGN plans to complete the project by 2011.
Critics of the $US1.26 billion gas pipeline have questioned whether it is the best option in the long term to supply gas to East Java. However, according to the Indonesian government’s latest gas balance figures, the East Kalimantan region will have a gas surplus of 1.6 Bcf/d by 2011 as demand is expected to drop to 1.4Bcf/d while the supply will stand at 3.0 Bcf/d. Up until to 2009, most of the gas produced in the province will be used to supply LNG exports to Japan and South Korea.
Pipelines in all their forms, from the massive international trunklines to the domestic gas pipelines and city gas distribution networks, are emerging as Asia’s economic lifelines. Not only do they link existing trade corridors, but in this region they are forging new ones in Southern and Central Asia in particular, but also eastwards to Myanmar. With the rate of industrialisation steadily increasing, combined with expanding demand for energy and gas in particular, Asia’s pipeline boom is likely to continue at unprecedented rates.