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2016: A challenging year? (Part 2)

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The East Route gas pipeline

The East Route gas pipeline’s construction is well underway. Set for operation by 2018, the largest joint undertaking of China and Russia is part of their US$400 billion contract of 2014, to develop Russia’s east Siberian gas fields in Irkutsk and Yakutia in order to feed China with 38 billion m3/y of Russian gas for 30 years through two separate pipeline systems.

As a joint venture of CNPC and Gazprom, Russia’s Power of Siberia gas transmission pipeline system is being built along the eastern Siberia-Pacific Ocean oil pipeline’s route to connect the mentioned gas production centres to the Russian port of Vladivostok. Planned to go online in late 2017, construction of its first leg began on 1 September 2014 in Yakutsk. This is to be followed by its second leg on a yet to be announced date.

Starting on 30 June 2015 , CNPC is constructing the East Route gas pipeline’s Chinese system. With northern, southern and central sections, it consists of a 3170 km pipeline, auxiliary underground gas storages and an existing 1800 km pipeline that passes through six Chinese provinces, the Inner Mongolia Autonomous region, Tianjin and Shanghai.

According to Gazprom, the pipeline’s construction had two major milestones. On 25 June, Alexey Miller (Chairman of Gazprom’s Management Committee) and Wang Yilin (Chairman of CNPC’s Board of Directors) signed a Memorandum of Understanding in Beijing on constructing underground gas storage and gas-fired power generation facilities followed by their 4 September signing of an EPC contract for the crossing under the Amur River within the cross-border section of the Power of Siberia pipeline.

The Central Asian gas pipeline system

The Central Asian gas pipeline system is Central Asia’s largest pipeline system, consisting of four lines. Its two parallel lines, Lines A and B, became operational in December 2009 and October 2010, respectively. Crossing the Kazakh-Chinese border, they link Turkmenistan’s gas fields to southern Kazakhstan through Uzbekistan. Line C became operational in May 2014 to add 25 billion m3/y to the pipeline’s capacity. Starting on the Turkmenistan-Uzbekistan border, the pipeline runs through Kazakhstan and ends in Xinjiang.

Line D’s construction began in September 2014 in Tajikistan’s Roudaki district, to link Turkmenistan’s gas centres across Uzbekistan, Tajikistan and Kyrgyzstan to China. However, the construction of its Uzbek and Kyrgyz sections have been delayed with no specified reason. This has made its scheduled completion in 2016 unrealistic.

The West Route gas pipeline

Also known as the Power of Siberia II, the fate of Gazprom’s 30 billion m3/y West Route gas pipeline is unknown. Originally scheduled to start in 2015 and go online in 2019, its construction is pending a Chinese-Russian agreement. China’s lowering economic growth rate has decreased its projected future gas demand to question the need for the pipeline. However, the two sides have continued negotiations for its construction.

Iran-Oman gas pipeline

The plan for the Iran-Oman pipeline is finally on track. Following Iran’s nuclear deal of last year, Iran and Oman announced in September 2015 the project’s planned operational date of late 2017. They signed a contract in 2013 for exporting 28 million m3/d of gas to Oman for 25 years for a total value of US$60 billion.

Almost a third of Iranian gas will be liquefied in Oman’s Qalhat plant for Iran’s LNG exports, leaving the rest for Oman’s domestic consumption. In August, Oman’s Minister of Oil and Gas, Mohammed bin Hamad al-Rumhy, announced his country’s agreement with Iran for changing the route and design of the 176 km pipeline as a necessity to ensure it avoids UAE waters and plunging the pipeline from the agreed roughly 300 m to nearly 1000 m below the seabed. Apart from allowing Iranian LNG exports when its own liquefaction project has been delayed, the project’s importance lies in signifying Iran removing sanction-generated barriers, opening the gate for realising other stalled projects, such as the Iran-Pakistan gas pipeline.


Nord Stream 2

Nord Stream 2 seems to be moving forward, despite strong opposition from the EU and the US for strategic reasons and cooling ties with Russia over a range of issues, particularly regarding Ukraine and Syria. The EU’s opposition to increasing its membership’s dependence on Russia for energy imports and the opposition of 10 EU countries in November 2015 have failed to stop the project.

Nord Stream 2 surfaced on 4 September 2015 when OMV, E.ON, BASF/Wintershall, ENGIE and Royal Dutch Shell signed an agreement with Gazprom to double the pipeline’s capacity (55 billion m3/y) by 2019 through constructing a new pipeline system.

Gazprom expects the pipeline’s commissioning before late 2019, as reflected in its 18 May announcement regarding the geophysical surveys’ completion for Nord Stream 2’s subsea section and the continuity of the required “geotechnical investigations.”

The project mirrors the existing Nord Stream. Therefore, it will export 55 billion m3/y of Russian gas to Germany via twin offshore pipelines buried under the Baltic Sea’s seabed. The pipeline’s mentioned specifics aside, the significance of Nord Stream 2 is its continuity with the heavyweight EU countries ignoring Brussels’ opposition in favour of their national interests, while helping Russia consolidate its supplying role to the EU.

Trans Adriatic pipeline

Construction of the Trans Adriatic pipeline (TAP) has continued uninterrupted since it began in Greece on 19 May. It emerged in the previous decade as a separate pipeline for transferring Azerbaijan’s Shah Deniz 2 gas to Europe. However, it was eventually developed into a competing project as there was no market for both pipelines due to the EU’s declining gas demand. The pipeline will help meet the EU’s gas requirements, diversify its suppliers and decrease its reliance on Russian gas.

The connecting Trans Anatolian pipeline will feed TAP with 10 billion m3/y of Shah Deniz 2 gas. Its remaining gas will be consumed in Turkey. The pipeline’s initial annual capacity could be increased to 20 billion m3 by adding two compressor stations, provided the availability of supply and demand while the pipeline’s ‘physical reverse flow’ feature will allow gas from Italy to be diverted to south east Europe, if necessary.

The TAP consists of onshore and offshore segments that cross northern Greece, Albania and the Adriatic Sea to come ashore in southern Italy. Its onshore section starts near Kipoi on the Turkish-Greek border, which is its connecting point with the Trans Anatolian pipeline. TAP will continue onshore and cross northern Greece, to extend east to west through Albania, to the Adriatic coast. Its Greek, Albanian and Italian parts are 550 km, 215 km and 8 km, respectively. Its offshore section begins near Fier (Albania) to cross the Adriatic Sea and link with Italy’s gas transportation network in its Puglia region.

Part 3 coming soon!

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