Natural Gas PipelineEconomics

byWidodo W. Purwanto

Departemen Teknik Kimia

Type of natural gas transportation

How to bring natural gas from the fields to potential gas markets?

GASSUPPLY

GASMARKETS

Pipeline

Liquefied Natural Gas (LNG)

Compressed Natural Gas (CNG)

Physical transportation : pipeline, LNG, CNG, GTHChemical conversion : GTL, GTC, GTW

GASSUPPLY

GASMARKETS

Compressed Natural Gas (CNG)

Gas to Liquids (GTL)

Gas to Chemicals (GTC)

Gas to Wire (GTW)

Gas to hydrate (GTH)

Concept map natural gastransportation

Source: Hetland

The European Gas Pipeline

NATUNA SEA

SUMATRA

Batam

MALAYSIAKerteh

Singapore

Kuala Lumpur

Duri

“The Sumatran GasHub”

1. Corridor Block to Duri 540 Km 1999

2. Corridor Block to Singapore 530 Km 2003

3. Corridor Block to PLN Jkt 606 Km 2006

J A V A S E A

J A V A

Jakarta

SouthJambiB PSC Corridor PSC

3. Corridor Block to PLN Jkt 606 Km 2006

------------1676 Km======

600 Kms

© PEUI -2007

West Java Gas Market

26”-12km

KRAKATAUSTEEL*

SEMENPALIMANAN

LPG MUNDU

PGNJAKARTA

CIKARANGLISTRINDO*

EXOR-I

ASAHIMAS CHEMICALSCHANDRA ASRIOTHER PETCHEM

MUARAKARANG

TANJUNGPRIOK MUARA

TAWAR

24

CILAMAYA

TEGALGEDE

Gas Consumer

Comp. Station

City

Existing Pipeline

Power Plant

W E S T J A V A

LEGEND

CIREBON

14”-59km

LPGSDK

18”-45km

24”-45km

CITEUREUP

CIMANGGIS

SERPONG

24”-27km

10”-27km

18”-59km

BITUNG

8”-25km

10”-12km

16”

24”-51km

12”24”-74km

WALAHAR

Gas Processing Facility

CIKAMPEK

PUPUKKUJANG

SEMENPALIMANAN

SUNYARAGI

PGN BOGOR

PGN CIREBON

JAKARTA

SEMENCIBINONGBOGOR

LPG SDKCurrent Users

Potential Users

* Not taking gas/taking minimal amounts currently

© PEUI -2007

Nautical mile =1.85 km

© PEUI -2007

Engineering YardsticksGas velocity: 5 – 15 m/secPressures at consumers: 20-30 barTransmission pipeline pressure: 60 bar-100 barCompressor: interval of 150-200 kmOnshore pipeline CAPEX: ~20,000 US$/in-kmAnnual operating cost of pipeline 0.5 -1.5% of thetotal investment costAnnual operating cost of compressor 4-5% ofthe total investment cost

Offshore gas velocity: up to 30 m/secOffshore pipeline pressure: 100-130 barOffshore pipeline CAPEX: ~40,000 US$/in-km

Gas velocity: 5 – 15 m/secPressures at consumers: 20-30 barTransmission pipeline pressure: 60 bar-100 barCompressor: interval of 150-200 kmOnshore pipeline CAPEX: ~20,000 US$/in-kmAnnual operating cost of pipeline 0.5 -1.5% of thetotal investment costAnnual operating cost of compressor 4-5% ofthe total investment cost

Offshore gas velocity: up to 30 m/secOffshore pipeline pressure: 100-130 barOffshore pipeline CAPEX: ~40,000 US$/in-km

© PEUI -2007

Pipeline cost formula

Cost (in millions US$/mile) = 563,000 +35,600 x DD: pipeline diameter in inches

Cost (in millions US$/km) = 350,000 + 871,000 x dd: pipeline diameter in meters

Cost (in millions US$/mile) = 563,000 +35,600 x DD: pipeline diameter in inches

Cost (in millions US$/km) = 350,000 + 871,000 x dd: pipeline diameter in meters

Source: Seddon, 2006

Pipeline Cost

Source: Mohitpour© PEUI -2007

Steel price

$450

$800

$850

$900

$0 $200 $400 $600 $800 $1,000

2003

2004

2005

2006

Steel Plate Price per Net Ton

© PEUI -2007

$450

$800

$850

$900

$0 $200 $400 $600 $800 $1,000

2003

2004

2005

2006

Compressor cost formula

Cost (in millions US$) = 2,970,000 +1,120 x PP: compressor power in hp

Cost (in millions US) = 2,970,000 + 1,500 x pp: compressor power in kW

Cost (in millions US$) = 2,970,000 +1,120 x PP: compressor power in hp

Cost (in millions US) = 2,970,000 + 1,500 x pp: compressor power in kW

Source: Seddon, 2006

Rule of thumb: Pressure drop,Power & Fuel consumption

50 km pipeline, 24 in, 200 PJ/y (500mmscfd) dP=10 bar ~1.8 MW

Fuel consumption on annual basis31.5 GJ/kW ~ 22.3 mmbtu/hp

50-60 km, fuel consumption 3%of thegas transmitted

50 km pipeline, 24 in, 200 PJ/y (500mmscfd) dP=10 bar ~1.8 MW

Fuel consumption on annual basis31.5 GJ/kW ~ 22.3 mmbtu/hp

50-60 km, fuel consumption 3%of thegas transmitted

Source: Seddon, 2006

Engineering Yardsticks for GasTransport

Principal working assumptionsfor pipeline and LNG cost study

© PEUI -2007

© PEUI -2007

PT Perusahaan Gas Negarafor the South Sumatra to West Java Phase II Gas Pipeline Project

Transmission tariff (toll fee)

1000 km, 200 PJ/y

Estimating pipeline tariff =Cost of the pipeline/(Total volume ofgas carried over the line’s lifetime inMscf) x 3.35

1000 km, 200 PJ/y

Estimating pipeline tariff =Cost of the pipeline/(Total volume ofgas carried over the line’s lifetime inMscf) x 3.35

Source: Seddon, 2006© PEUI -2007

No. Name of Project Loan Condition

1 W. Java Transmission System

2 Gas Distribution (Jakarta, Bogor, Medan) I = 12 %, grace period = 5 years, loan period = 15 years

3 Gas Distribution (Surabaya) i = 13 %, grace period = 5 years, loan period = 15 years

… financing pipeline project

3 Gas Distribution (Surabaya) i = 13 %, grace period = 5 years, loan period = 15 years

4 Grissik - Duri i = 15 %, grace period = 4 years, loan period = 20 years

5 Grissik – Batam - Singapore i = 15 %, grace period = 4 years, loan period = 20 years

6 S.Sumatra - W.Java i = 0.95 % and 0.75%, grace period = 10 years, loan period = 40 years

7 W. Java Trans & Distribution Expansion i = %, grace period = years, loan period = years

8 Cirebon - Semarang

9 Semarang - Gresik

10 E. Kalimantan – Central Java

© PEUI -2007

$ (MM)1W. Java Transmission System 1978 200+ 28 120 Pertamina Pertamina2Gas Distribution (Jakarta, Bogor, Medan) 1986 34 IBRD PGN3Gas Distribution (Surabaya) 1990 86 IBRD PGN4Grissik - Duri 1995 544 28 310 ADB, EIB PGN5Grissik – Batam - Singapore 2001 478 28 415 ADB, EIB PGN6S.Sumatra - W.Java 2004 520 28, 32 440 JBIC, PGN PGN7W. Java Trans & Distribution Expansion 2005 120 PGN, IBRD PGN8Cirebon - Semarang 230 Private Private9Semarang - Gresik 250 Private Private

10E. Kalimantan – Central Java 1,219 1,600  (est.) Private PrivateSource: Bappenas

D (inch) Funding OwnerNo.Name of Project Year L (km)

Financing the project: from public to private

$ (MM)1W. Java Transmission System 1978 200+ 28 120 Pertamina Pertamina2Gas Distribution (Jakarta, Bogor, Medan) 1986 34 IBRD PGN3Gas Distribution (Surabaya) 1990 86 IBRD PGN4Grissik - Duri 1995 544 28 310 ADB, EIB PGN5Grissik – Batam - Singapore 2001 478 28 415 ADB, EIB PGN6S.Sumatra - W.Java 2004 520 28, 32 440 JBIC, PGN PGN7W. Java Trans & Distribution Expansion 2005 120 PGN, IBRD PGN8Cirebon - Semarang 230 Private Private9Semarang - Gresik 250 Private Private

10E. Kalimantan – Central Java 1,219 1,600  (est.) Private PrivateSource: Bappenas

D (inch) Funding OwnerNo.Name of Project Year L (km)

© PEUI -2007