PIPELINE INTEGRITY programmes carry with them inherent legal issues and exposures. A meaningful integrity programme will – by its very nature – be self-critical, and the processes involved in evaluating pipeline systems may not only result in the positive outcome of increasing pipeline safety, but also may result in creation of data and documentation that, if misused or viewed with the wisdom critics find in hindsight, could provide a roadmap for plaintiff attorneys or government investigators to question an operator’s decisions in the event of an accident. These issues are all the more problematic when it is also recognized that there is a need for involving third parties in consulting arrangements and contracts for internal inspections, thus making data and documentation control more challenging. Also, management of documents that are provided to the government on integrity issues are subject to release to the public, raising security issues as well as putting information at increased risk of being misconstrued or taken out of context.
The paper by Chris Paul, of Tulsa’s Joyce and Paul, published in this issue, builds upon his presentation from last year’s Pipeline Pigging and Integrity Management Conference [published in Vol 6, no 1 in March, 2007], where a broad discussion was held regarding legal issues involved in pipeline integrity programmes. The new paper in this issue reviews the legal aspects and demands that pipeline integrity programmes place upon operators: these include data integration and records’ retention requirements, including a discussion of how these issues and demands may result in misinterpretation and misuse of data and documents. The bases for management and company exposure are discussed, as are the criteria used by the [US] government for determining whether or not information within the knowledge of the company might result not only in simple liability, but also the possibility of criminal exposure.
Further, as discussed last year, the paper goes on to review how companies are dealing with improved ILI tools which provide tremendous amounts of data that must be captured and integrated with other information involving the operator’s pipeline systems. The author emphasizes that while companies want to do the right thing, they need to understand the legal risks involved so that they can do the right thing in the right way. Companies that are legitimately and thoroughly trying to identify, qualify, quantify, and manage risks must understand how to handle documentation associated with their integrity programmes to minimize the potential for data and information to be taken out of context and used to imply deficiencies in programmes, whether this is done by government agencies or by private plaintiffs.
While this subject may seem thoroughly depressing to the uninitiated reader, and to provide an overwhelming burden to any pipeline operator, there are solutions available. Chris Paul discusses these, as well as focussing on the specific language that should be used in the drafting of consulting and ILI contracts, and provides his suggestions on how to manage documents that are made available to the government regarding integrity issues. (On the issue of language: why does the industry persist in using the word ‘defect’ when applied to metal-loss indications, etc.? This, to any but the initiated, immediately implies that something is wrong. Would ‘anomaly’ or ‘feature’ not be the best default description?)
Chris Paul hopes to present the third of this three-paper series at the next above-referenced conference in Houston next February, and we hope to publish it as soon as possible thereafter. The subject is of considerable and increasing importance, and while it may not be the first one that comes to mind when the term ‘pipeline integrity’ is mentioned, it is certainly one that may have some of the greatest negative consequences if not handled wisely.
Gazprom “winning pipeline war with EU”
GAZPROM HAS come a step closer to controlling the entire European gas supply chain after buying a 50% stake in a pivotal storage and transit route. The half share in the Central European Gas Hub was sold by Austria’s OMV Group, which also leads the Nabucco pipeline project, which is being financed by the EU to rival Gazprom’s South Stream. OMV now refuses to rule out Gazprom taking a share in Nabucco as well.
The Austrian hub is seen as playing a high-stakes game with Gazprom. OMV will get the annual three billion cubic meters of gas it wants in order to overtake Belgium within two years as the continent’s biggest trading platform. However, a leaked transcript shows the US is so worried about Gazprom’s power that it has held a top-level meeting to warn top Serb officials against the sale of their oil monopoly to Russia. The US side is understood to have questioned whether Serbia took into consideration possible economic dependency and political control. They were especially concerned with Bulgaria’s decision to join Gazprom, because it undermines attempts to diversify European gas supplies.
By contrast, the very existence of the US’ rival Nabucco pipeline is in doubt. Gazprom chief Aleksey Miller claims Nabucco has “no resources, and no gas reserves either”. Meanwhile, Nabucco operator OMV claimed it did have a future, but admitted that may now lie with Gazprom. OMV chief executive Dr Wolfgang Ruttenstorfer says there are huge quantities of gas available to Europe from both the Middle East and the Caspian area. “As soon as the South Stream project is developed as far as the Nabucco project, it will be very natural that the two projects are discussed and if there are any synergies - we are not against using any of them,” Dr Ruttenstorfer said.
Gazprom says Nabucco is not that attractive at the moment, but hinted it could step in with supplies if offered the right terms. “We have been in discussion in respect of if [there is sense for Russia] to join Nabucco. Maybe for Nabucco [this makes] sense; we still don’t see any sense for us, but we will continue this discussion,” Aleksander Medvedev, deputy CEO of Gazprom said.
Chief strategist at Uralsib Bank Chris Weafer says the current situation is a “pipeline war”, and it looks set to get even worse for Gazprom’s opponents. As testimony to this, Qatar’s Energy Minister Abdullah Al-Attiyah recently announced that the world’s leading gas-producing nations will meet in Moscow in June to discuss an OPEC-style cartel.
White Stream project makes good progress
A FURTHER component of the interesting mix of pipeline interests that that is becoming of increasing significance to Europe’s power supplies, and the export-earning capacity for Central Asian economies, is the White Stream pipeline. UK-based GUEU-White Stream Pipeline Co Ltd (GUEU), who has for some time been working on the implementation of a major new gas connection across the Black Sea from Georgia to Ukraine and Romania, is carrying out engineering and marketing studies which clearly indicate the strategic importance and commercial viability of the project. GUEU says that, currently, the preferred option is a state-of-the-art ultra-deep 26-in diameter pipeline across the Black Sea to be laid in approximately 2,000m water depth.
The pipeline will make it possible to deliver more gas, initially from Azerbaijan and later potentially from other abundant Caspian Sea resources, via Georgia directly to Ukraine, and then onwards to Romania and markets in Eastern and Central Europe. The White Stream project, a continuation of the East-West Energy Corridor from Azerbaijan, will provide strong synergy and mutually-reinforcing effect with the Nabucco project by boosting upstream investment in the Caspian region. Branching from the SCP pipeline in Western Georgia, White Stream will also secure a complementary transportation route for diversified access to consumer markets.
The White Stream Pipeline will significantly contribute to encourage investment in gas exploration and production in the Caspian region, and will provide additional security of supply to European gas consumers. The availability of more than one gas transportation option from the Caspian to European gas markets will mitigate transportation risks, an important consideration for upstream investors.
GUEU is continuing to gain increasing international support from the interested countries and from the European Union for this prestigious project. In early February the Ukraine Prime Minister Yulia Tymoshenko strongly supported the pipeline project at a joint press conference with European Commissioner for External Relations and European Neighbourhood Policy, Benita Ferrero-Waldner in Brussels: “We suggest [to] the Commission joint implementation of White Stream project … via the territory of Ukraine to Europe” ms Tymoshenko said. “We would like the European Union and Ukraine to be partners in implementation of the project.” The EU Co-ordinator for the Caspian Sea – Middle East – European Union gas route, Jozias Van Aartsen, is now also in charge of co-ordinating the White Stream development, an appointment which the GUEU project team has welcomed.
The planned GUEU pipeline would branch off from the SCP near Tbilisi and run for approximately 100km to the Supsa area on Georgia’s Black Sea coast, from where it would continue subsea for 650km to Feodosia in the Crimea in Ukraine, and then onshore for 200km to link up with Ukraine’s gas transit mainlines exporting gas to Poland. The Crimea section could be sized at 20in, although the anticipated diameter of the Georgian section is 42in, and for the subsea section is 26in.
The GUEU project is based on using the Ukrainian transit network’s spare capacity to deliver Caspian gas to Poland and onwards westwards. The Ukrainian network already has spare capacity, and will have more after 2010 when Russia is expected to switch some export volumes from Ukrainian pipelines into the new North Stream Russia-Germany pipeline. However, in the event that Russia took control of the Ukrainian network, the GUEU project would be rerouted across the Black Sea to reach EU territory landfall in Romania at a point north of Constanta.
Regardless of the final subsea route, the GUEU pipeline would have to cross the existing Blue Stream pipeline at considerable depth on the Black Sea’s seabed. The project therefore envisages constructing a pipeline overbridge in very deep water, which will be technically quite challenging.
Investment for the project’s first phase is estimated at $2bn over a five-year period, based on a throughput of 8bn cum/yr of gas. The second phase would add another 8bn cum/yr of gas, either from Shah Deniz or from Kazakhstan by the trans-Caspian pipeline; this expansion would require a parallel 24-in diameter pipeline on the seabed from Georgia to the Crimea. A third phase would add another 16bn cum/yr of gas from Turkmenistan, based on the expectation that trans-Caspian links would be in place by that time. In that relatively-optimistic event, GUEU could carry a total 32bn cum/yr of Caspian gas to the EU. The GUEU project is seen as one of the politically-safest and shortest export routes for Caspian gas to the EU.