Oil and Gas Pipeline Watch

Economy hits Skanled pipeline

The global economic recession has caused the partners to the Skanled natural gas pipeline linking Sweden and Denmark to scrap the project.

Gassco AS, the Norwegian national pipeline company, said it was having difficulties moving ahead with plans for the pipeline amid the sagging international economy, the Oil and Gas Journal reports.

"Despite strong efforts by many stakeholders to succeed with the project, it is Gassco's view that the current economic environment and also subsequent uncertainties related to timing of new field developments on the Norwegian continental shelf have weakened the basis for the project," Gassco Executive Vice President Thor Otto Lohne said.

The economic crisis has spilled over to potential suppliers who were unable to reach agreements on gas purchases for the project.

Gassco added that the global recession put the future regional gas demand in doubt as a deadline for operational plans expired in April.

The $1.5 billion Skanled project was scheduled for a 2012 launch date to bring 847 million cubic feet of natural gas per year to Denmark and Sweden. Poland had also expressed interest in the project.

Gassco raised the possibility the project could be rescheduled, however, if the market improves.

"The project might be relaunched if the commercial conditions become more favorable in the future," Lohne said.

TransCanada weighs oil market

Canadian power and pipeline company TransCanada said it would weigh entering the crude oil market if economic conditions are favorable, officials said.

Hal Kvisle, chief executive of TransCanada, told reporters that if market conditions are right for venturing into the crude business, the company, known for its natural gas operations, would have few reservations, the Calgary Herald reports.

"If we were to grow to be larger in the crude oil business than the natural gas business, that would be OK," he said.

TransCanada is buffered from the economic recession through its pipeline operations, notably the planned Keystone Pipeline crude oil pipeline to the United States and a gas pipeline planned in the Alaska North Slope, but analysts say diversification still makes sense.

"While TransCanada's pipeline business is largely insulated from the economic downturn due to the effect of long-term contracts and regulated return, the power segment is exposed to reduced market pricing for electricity," said Chad Friess with UBS Investment Research.

TransCanada is vying for the Alaska natural gas pipeline against the Denali project from BP and ConocoPhillips.

In April, TransCanada took its first formal step for the 1,715-mile gas pipeline by submitting its plans to the U.S. Federal Energy Regulatory Commission.

Putin calls for Ukrainian gas monitoring

An international monitoring agency should intervene in Ukraine to supervise the natural gas pipeline network, Russian Prime Minister Vladimir Putin said.

Putin and his Ukrainian counterpart, Yulia Tymoshenko, agreed last week on a series of financial concessions that waive penalties from Ukrainian gas-contract violations and provide funding for a nuclear-energy facility.

Tymoshenko also invited Russian energy giant Gazprom to take part in planned upgrades to the crumbling Soviet-era gas transit system in Ukraine.

A January row over debts and contracts with Russia prompted Gazprom to disrupt the flow of natural gas to Ukraine. The disruption left many European countries starved for gas as 80 percent of all Russian gas bound for Europe travels through Ukrainian pipelines.

Europe came forward following the January dispute with a substantial financial package for pipeline upgrades. That move outraged Moscow, which said any deal in the Ukrainian energy sector should include the supplier nation.

In the wake of the Tymoshenko deal, Putin called for the introduction of an international consortium to monitor the Ukrainian gas transit system, the Interfax-Ukraine news agency reports.

"I believe that this matter still can and must be put on the agendas for our bilateral and multilateral relations, also bearing in mind the needs of European consumers," he said.

GAIL approves 544-mile pipeline

Work is set to begin on the 544-mile Jagdishpur-Haldia natural gas pipeline in India, the Gas Authority of India Ltd. said.

Jagdishpur-Haldia would bring 1.1 billion cubic feet of natural gas along an energy corridor from Uttar Pradesh, Bihar, Jharkhand and West Bengal, The Times of India reports.

GAIL officials said branch lines for the $13 billion pipeline would boost regional energy transmission for the industrial sector, notably the steel and fertilizer industries.

The pipeline originates from gas reserves in the lucrative offshore Krishna-Godavari basin in the Bay of Bengal.

The reserves there are estimated at 20 trillion cubic feet. GAIL expects supplies to commence by 2012.

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(dgraeber@upi.com)