Plethora of Pipeline Proposals Pushing African Prospects
Africa is expanding its oil and gas pipeline network as countries in the region move to entrench distribution of the commodities in the domestic market and transport more to regional and international markets.
Algeria, Uganda, Kenya, Tanzania, Mozambique and Ghana are at various stages of oil and gas pipeline construction projects to monetize their oil and gas finds despite predictions that the massive production of shale in the U.S. and falling global crude prices could impact on the performance of these pipeline projects.
Algeria has partnered with Italy in the construction of the 560-mile Trans Saharan Gas Pipeline project to transport an estimated 8 billion cubic meters of natural gas annually to Italy. The $2.5-billion project, expected on stream in 2018, entails constructing the gas pipeline along the Mediterranean Sea bed at depths of 2,885 m, from the coast of Algeria to Porto Botte in southern Sardinia. From Porto Botte a land-built stretch will link to Olbia, also in Sardinia, with an underwater stretch from Olbia to Piombino in Tuscany.
According to Italy’s energy company Edison, the project, also known as Galsi (Gasdotto Algeria - Sardegna Italia) will enable Italy to “create a natural gas hub by creating a new gas supply route which is more competitive and shorter to import gas from Algeria and from there to North Europe.”
Galsi SpA., is a joint venture consisting of the companies Sonatrach, Edison, Enel, Wintershall, Hera and the Sardinian company Sfirs.
J P Kenny, a subsidiary of international energy services company John Wood Group PLC, was involved in the pre-FEED study of the Galsi undertaking while D'Appolonia SpA (the operational arm of Italy’s RINA) and Netherlands Furgo NV were the contractors for the environmental impact study and marine surveys respectively. Another gas export pipeline is on the radar in Algeria to be developed by London-based international oil and gas services provider Petrofac, which was awarded the 36-month contract last year.
The $970-million contract also entails engineering, procurement, construction, commissioning and start-up of the gas treatment plant, gathering system of the Reggane North Development Project in the Reggane basin about 1,500 km southwest of Algiers, according to a Petrofac project brief.
The project is being developed by Groupement Reggane, a partnership comprising Algerian state-owned company Sonatrach (40%), Spain’s Repsol (29.25%), Germany’s RWE Dea AG (19.5%) and Edison of Italy (11.25%).
The Reggane project will bring on stream 26 wells from the fields of Reggane, Kahlouche, Kahlouche South and Azrafil South East. No design details have been provided for the Reggane export pipeline.
In West Africa, Ghana is putting final touches on its Western Corridor Gas Infrastructure Development project under a contract by China’s Sinopec International. The $850-million project involves the construction of a gas-processing plant with a capacity of 150 million standard cubic feet per day, an onshore pipeline and a natural gas liquids export system by Sinopec.
About 45 km of shallow-water offshore pipeline has been installed linking the Jubilee gas fields, operated by partners Tullow Plc, Kosmos, Anadarko, PetroSA and the Ghana National Petroleum Corporation, to a gas-processing plant at the coastal town of Atuabo that Ghana’s President John Mahama said on January 26 is at the commissioning phase. A 111-km main onshore pipeline also has been laid from Atuabo to Aboadaze, while Sinopec is also working on the 75-km onshore lateral pipeline to link Essiama to Prestea, both towns in Ghana's Western Region.
Los Angeles-based professional technical and management support services firm AECOM has been the consulting engineer and construction management supervisor and technical trainer during the project’s implementation under a $15.6-million contract awarded in 2013. The contract is renewable annually. Sinopec and the project developer Ghana National Gas Co. could not immediately respond to requests for the technical design details of the three gas pipeline components.
Mozambique has also launched feasibility of the viability of constructing a 2100-km pipeline from Cabo Delgado to the country’s capital Maputo. Mozambique’s state-owned ENH has signed an agreement with South Africa clean energy developer Gigajoule International Ltd for the study after the latter completed pre-feasibility study in 2013.
The $5-billion gas pipeline, according to ENH, is to increase domestic consumption of the estimated 150 trillion cu ft in the Rovuma basin, where U.S. energy company Anadarko and Italy’s Eni are the main players.
“We have substantial natural gas discoveries and the idea is to see if it is possible to bring this gas to the south of the country and develop other industries, which could support the construction of the pipeline,” ENH chairman Nelson Ocuane said previously.
“We estimate that Mozambique would need to dedicate less than 7% of the already proven gas reserves to make a project like this (pipeline) economically viable,” said Johan de Vos, Gigajoule managing director.
Elsewhere in East Africa, Kenya, Uganda and Rwanda are in the final phase of picking a consultant for the feasibility study and design of the construction of the 1,300-km crude pipeline from Hoima in Uganda’s Albertine basin, where an estimated 6.5 billion bbl of crude reserves have been discovered, to the Kenyan coast. The pipeline will be constructed in two sections, the first from Hoima to the Uganda/Kenya border and the second from the border point through Lokichar basin in northwest Kenya, where UK’s Tullow Oil Plc and Canada’s Africa Oil have discovered 600 million barrels, to Kenya’s coastal town of Lamu. A 9-km pipeline will be constructed from a tank terminal at Lamu to offshore mooring buoys.
A joint statement by the three governments said late last year they have opted for a single consultant to ensure consistency in quality of the pipeline.
The countries have also revived the 352-km multiproduct fuel pipeline extension project for the existing Western Kenya pipeline, which transports fuel products from the port city of Mombasa to markets in Uganda, Rwanda, Burundi and eastern Democratic Republic of Congo.
The pipeline will be extended from Eldoret in western Kenya to Uganda’s capital Kampala with an extension to Rwanda’s capital of Kigali.
The 784-km-long 12-in.-dia Eldoret-Kampala-Kigali pipeline will replace road tankers as the main means of transporting fuel products to Uganda, Kigali, Burundi and DRC. The countries have advertised for expression of interest from potential contractors after the initial 2007 contract to Libya’s Tamoil was terminated in 2012 for alleged nonperformance of the contract.
“While it is critical that a crude-oil pipeline is constructed as one of the options of monetizing Uganda and Kenya’s discovered hydrocarbons, it is not yet very clear what impact the falling crude oil prices, waxy nature of the crude oil, an uncertain taxation environment and potential right of way issues would have on its viability,” said Denis Kakembo, Senior Tax Manager Deloitte East Africa.
He said the waxy nature of the crude oil means “the pipeline has got to be heated, which would increase the initial construction costs and subsequent maintenance and operational costs.”
“An uncertain taxation environment for pipelines in East Africa, unresolved transit fees that Kenya will seek to levy on oil passing through its territory as well as the anticipated challenges in obtaining the right-of-way for the pipeline heighten the risks associated with this project,” he said.
“These risks, unless mitigated, will build into the cost of capital, meaning the pipeline investor would require a significantly high return to justify investment in the pipeline project.”
He said East Africa region faces the challenge of lack of the required technical skills to construct the planned 1,300-km pipeline unless the countries respond by training “local masons, welders and fabricators who will be required for this project if local content initiatives will prove meaningful and not a stumbling block to the project.”
The pipeline projects, says Mahandra Rooplall a member of the energy consulting team of South Africa-based firm ARRUP, must also overcome the risks of securing land for the pipeline as well as delays in permitting approvals, because many of the project involve more than one province or country with varying approval procedures.
