Oil and Gas Pipelines '09

It's mid-January, and Russian natural gas is just now resuming its flow to Europe via Ukraine, following the New Year's Day cutoff. Such geopolitical wrangling is sure to mark the world of oil and gas pipeline projects and expansions in 2009.

Here are the top pipeline stories to look out for -- and which United Press International will cover -- this year:

1. NABUCCO

With the gas dispute between Ukraine and Russia heightening European concerns over the reliability of Russian gas imports, the proposed Nabucco pipeline from Caspian and Middle Eastern suppliers to markets in Europe through Turkey may make substantial headway in 2009 as the European Union intensifies its diversification strategy.

However, there are still competing projects, Russian maneuvering and a lack of committed feed, all of which could delay or derail the U.S.- and EU-backed $10.7 billion project.

Nabucco Gas Pipeline International may move as early as the first quarter of 2009 to secure agreements from host nations Bulgaria, Romania and Hungary to develop the 2,051-mile artery. Nabucco ultimately would link to Caspian suppliers via the Trans-Caspian and South Caucus networks and possibly Iran through the Iran-Turkey pipeline. Iraq is also a major source of untapped natural gas, but domestic politics and war have hampered hydrocarbons development.

European Energy Commissioner Andris Piebalgs said at the signing of a European energy policy in November that energy security included embracing regional infrastructure projects. He embarked on a tour of Nabucco supporters shortly after the signing.

About 60 percent of the planned route for Nabucco transits through Turkey, which is negotiating not only for higher transit fees than currently offered but also for the right to buy and sell gas from the pipeline.

Leaving aside fiscal and geographical considerations, unraveling such issues will preoccupy even the most ardent Nabucco supporters through much of 2009.

2. BAKU-TBILISI-CEYHAN

Flow through the 1,099-mile Baku-Tbilisi-Ceyhan oil pipeline, the second longest in the world, is set to increase in 2009 with Caspian suppliers transiting their resources through the artery as the regional infrastructure expands.

Kazakh oil from the Kashagan field in the Caspian Sea made its debut through BTC in November, with promises of 120 million barrels of oil per year. This marked the first time crude oil outside Azerbaijan transited to the pipeline.

Kazakh officials said major expansions needed to be made to the regional infrastructure in order to ferry resources across the Caspian Sea, however.

Planners hoped to ease European dependency on Russian energy through BTC. Russian energy giant Gazprom met with Caspian governments in 2008, however, securing several gas deals in the process, making the Caspian a major front in the East-West geopolitical dynamics of the energy sector.

With several projects planned for the energy-rich Caspian region, developments for a variety of BTC-linked arteries could be crucial in the geopolitics of energy infrastructure for 2009.

BTC is still vulnerable to regional strife, as witnessed last year by an explosion of undetermined origin, followed by a massive fire, as well as the stoppage during the Russian-Georgian conflict in August.

3. TURKMENISTAN-AFGHANISTAN-PAKISTAN-INDIA

The proposed $7.6 billion TAPI may receive renewed attention in 2009 as developments in the rival Iran-Pakistan-India pipeline continue to stagnate. Security concerns for the planned route through Afghanistan and Pakistan, however, make immediate developments here unlikely.

The United States supports the project as part of a broader containment strategy to deter the influence of Russia and Iran in the energy market. Partners for the IPI have tried to move the project along for decades, though progress there continued to limp along in 2008.

The Afghan government in June told Pakistan it would clear all land mines and Taliban strongholds from its leg of the gas pipeline within two years.

Turkmenistan may face difficulties as the primary supplier, however, with rival deals through existing pipeline arteries and other lines already under construction, notably the 4,350-mile Turkmen-China gas pipeline.

With IPI entering its second decade of negotiations, regional energy concerns and a sanction-contained Iran, the TAPI project could be renewed as a viable project in 2009.

4. IRAN-PAKISTAN-INDIA

Pakistan in 2008 pleaded for progress on the IPI gas pipeline as domestic supplies fell to near-emergency levels, though geopolitical conflicts may hamper developments in 2009.

Asim Hussain, a top adviser to Pakistani energy officials, traveled to Tehran following the Eid al-Adha holiday in December to discuss Iranian pricing and custody concerns on the $7.4 billion project. He later secured backing for the project from a steering committee, though he suggested the pricing mechanism was still being reviewed.

The IPI pipeline, also dubbed the "peace pipeline," would stretch from the Iranian South Pars gas condensate field in the Persian Gulf through Pakistan and on to India. China has expressed interest in the project as well. Initial capacity estimates approach 3.8 billion cubic feet of gas per day through the proposed 1,724-mile pipeline.

Indian External Affairs Minister Pranab Mukherjee on Nov. 3 made proposals for a trilateral steering committee to move forward on the project. Militants originating from Pakistan attacked several high-profile targets in India in late November, however, causing a shift in priorities between the two nuclear-armed nations.

Both India and Pakistan face a looming energy crisis. India, however, had secured deals with the United States in October to develop a civilian nuclear energy program. Pakistan, for its part, later proposed purchasing the Indian share of the pipeline as lawmakers in Islamabad continued to push hard for the project.

Though a portion of the pipeline is under construction in Iranian territory, the volatile geopolitical climate, a sagging economy and U.S. pressure on Iran may halt any significant development on IPI for 2009. That's if the countries involved can agree on the economic split of the project.

5. NORD STREAM

The project sending Russian gas to Germany faces many hurdles: a Baltic Sea route clogged with World War II munitions, other environmental concerns and, amid Europe's plans to diversify from Russian gas dependence, another Russian gas pipeline.

An early analysis suggests the route is safe and the EU also approves the project, suggesting development is likely to move forward in the coming year.

Pipeline consortium Nord Stream AG submitted applications to the German government in December for the construction of the gas pipeline. This marks the beginning of a second permitting process that will pave the way for the construction and operation of the pipeline.

Rolls-Royce announced in December in the midst of a disastrous economic climate that it was awarded a compressor contract for the pipeline.

The German government gave its approval for the Nord Stream project in 2008, and France in December said its GDF Suez wanted to join the project as a minority partner as a means to diversify European energy markets.

Former German Chancellor Gerhard Schroeder, the chair of the Nord Stream shareholders committee, and an independent board member of Russian TNK-BP said in meetings with Russian Prime Minister Vladimir Putin in early January the project was moving forward to pump gas across the Baltic Sea by 2011.

6. SOUTH STREAM

Moscow may face an uncertain future with plans for the South Stream gas pipeline to Europe in 2009 despite strong ties with host countries, as it is seen as a competitor with the Nabucco project.

The proposed South Stream pipeline would bring an estimated 1.1 trillion cubic feet of natural gas from Central Asia and Russia to Italy through the Balkans. Planners anticipate a launch date by 2013.

Plans to build portions of the pipeline through Bulgaria, Hungary and Serbia have been approved already by their respective governments. Banking analysts, however, said in October every year of delay on the project translates to a 5 percent increase to the $20 billion price tag. With several Russian energy majors seeking government-backed loans amid a precipitous decline in oil revenue, South Stream may face delay as Moscow steps back from major near-term expenses.

Russian Foreign Minister Sergei Lavrov has said South Stream would progress despite the economy. His sentiments were backed by the U.S. special envoy for Eurasian energy, C. Boyden Gray, who said South Stream may move more quickly than Nabucco because of the high cost of steel.

7. IRAN-ARMENIA GAS PIPELINE

Armenia will convert natural gas from an Iranian pipeline to electricity for exports back to the Islamic Republic, potentially establishing an initial route for Iranian exports in 2009.

Russian, Armenian and Iranian officials inaugurated a final stage of a natural gas pipeline from Iran Dec. 2. Armenian Energy Minister Armen Movsisyan said the pipeline also serves as an alternative supply source, should Russia disrupt energy transports through other routes.

The pipeline will bring 81 billion cubic feet of natural gas from Iran per year, about the same amount Armenia imports from Russia via Georgia.

With economic sanctions looming over Iran and Armenia struggling with soaring energy costs, this project may be the Iranian gateway to Western markets if Armenia can serve as a buffer.

8. THE TRANS-ALASKA PIPELINE SYSTEM

A project to tap Alaska's huge gas reserves and get them to market has long been a lightning rod in Alaskan and regional politics. It will stay that way this year.

A deal was nearly signed during the tenure of Gov. Frank Murkowski, despite complaints it was too generous to -- and he was too cozy with -- involved companies. When Sarah Palin defeated him in 2006, she started the process over again.

The state has awarded a license to TransCanada, but majors like BP and ConocoPhillips are planning a competitor. A gas pipeline -- currently planned to transit Canada before feeding demand in the lower 48 states -- would require certification by the Federal Energy Regulatory Commission. Then it would need to pass numerous state, local and national regulators.

And still, it must receive financial backing. With the current economic crisis and the depression of gas prices, the project still could be scuttled or postponed.

More of Alaskan gas must be found and developed to make the pipeline viable as well.

The $30 billion project will transport as much as 4.5 billion cubic feet of natural gas per day through a pipeline from the North Slope gas field to Chicago.