While most of the attention in international gas markets is currently focused on liquefied natural gas (LNG), we shouldn’t forget that it is still the world’s major pipelines that transport the bulk of the gas across international borders, and almost exclusively within countries. Gazprom’s Russian pipeline exports to Europe alone were almost 180 billion m3 (bcm) in 2016 - the equivalent of more than half the world’s traded LNG of around 250 million tonnes (345bcm).
Pipelines are, however, much more subject to geopolitical considerations than LNG, especially when transit through unreliable or unfriendly countries is concerned. Ukraine has clearly been an issue for Russian exports to Europe – prompting Gazprom’s development of alternative routes. And the Trans-Saharan pipeline, for example, that was to have brought gas from equatorial Africa to Mediterranean markets, has not yet taken off for a variety of transit reasons, primarily related to security. Similarly, plans to pipe gas from Iran to India via Pakistan have been frustrated by poor bilateral relations.
What’s more, pipeline exports have a single destination, so are reliant on continued demand in the destination country. The future of the Dolphin line, for example, which transports over 2 billion ft3 per day (20bcm/year) of gas from Qatar to customers in the UAE and Oman, is currently looking less certain. It is still flowing despite the UAE’s participation in the ongoing blockade of Qatar, although the UAE has now announced its intention to develop its own sour gas reserves, rather than remain reliant on the Qataris.
Outside North America and Europe most pipelines are considered strategic assets and are owned by state companies. The biggest include pipelines that transport gas from fields in Siberia to customers in Europe. Owned by state pipeline company Transneft, some of these were among the first large international lines to be built, and helped supply the Soviet Union’s Warsaw Pact allies with cheap energy and heat in the 1960s and ‘70s.
The 32 bcm/year West-Siberian Pipeline marked the start of a more commercial approach in Russia. Begun in July 1981, it targeted more lucrative west European markets, and although it was still Soviet times, was built with finance from German, French and Japanese banks. The pipeline, which has 42 compressor stations, brings gas from Siberia's Yamal peninsular to western Ukraine. Together with the Soyuz and Progres pipelines, it forms the western transit corridor in Ukraine into Europe, which Ukraine used to extract transit fees and gas from its Russian neighbour over recent years – and which Nord Stream I and II are designed to bypass.
Gazprom still has the sole right to export gas from Russia via pipelines, which may be behind its failure to achieve the Russian state’s objectives of becoming a force in the global LNG market. This has encouraged and made way for Novatek and Rosneft to break Gazprom’s gas export dominance with their own LNG sales.
Further reform could be on its way, with Rosneft and possibly Surgutneftegaz, vying for a piece of Russia’s 38 bcm/year, $400bn gas deal with China, and potential access to the planned $55bn Power of Siberia pipeline that will supply the east Siberian gas to China. Gazprom has fought for full control of the line, but the other two companies both have major source fields in the region.
Within China, as part of the country’s dramatic industrialisation, the first of its east-west pipelines was built only 13 years ago, to transport gas from Turkmenistan, Uzbekistan and China’s own western provinces to its energy hungry consumers on the eastern seaboard. Construction of the second pipeline was completed in 2012, and the third line last year. Now, state owned CNPC, which owns the three lines, says up to 77 bcm will flow across the country annually, with the project acting as a spine for the country’s entire gas transportation system.
The biggest network of all is, of course, within the US, and for shear density of pipeline network, nowhere is more tightly packed than in and around the Gulf coast, particularly Texas and Mississippi. The dispersed nature of shale gas production has meant a recent rapid expansion in collection networks, along with new pipes to bring gas from developing shale provinces, and towards consumption centres, as well as the Mexican border and other export outlets. So, expansion of the sector is continuing apace.
US gas pipeline map
Lines to look for now and in future include the expansion of capacity into Mexico from the US, which is making Mexico ever more dependent on cheap US gas – an irony considering how Mexico used to accuse the Americans of plundering its oil resources.
A pipeline too far?
Perhaps the most notorious pipeline of all, which has still not been built, is the Trans-Afghanistan pipeline, which was designed to bring central Asian gas to market avoiding a Russian transit route. In the nineties, Unocal was involved, and negotiations between Taliban leaders then in power included visits and entertainment in Houston, all of which came to a sudden end with rise of Al Qaeda attacks at the end of the nineties, and the Taliban’s support for them.
The plan has since been revived, with some pipeline construction in Turkmenistan and a gas sales agreements signed, but the latest unrest in Afghanistan has resulted in the suspension of works. While LNG is not an option for central Asian gas, LNG’s flexibility means it is becoming increasingly attractive in an uncertain world, especially with the rise of cheaper technology.