An Efficient and Reliable Route for the Transportation Of

AN EFFICIENT AND RELIABLE ROUTE FOR THE TRANSPORTATION OF

QATARI NATURAL GAS TO EUROPE

A Dissertation

Presented to

The Graduate Faculty of The University of Akron

In Partial Fulfillment

of the Requirements for the Degree

Doctor of Philosophy

Muneer Althaaly

December, 2016 AN EFFICIENT AND RELIABLE ROUTE FOR THE TRANSPORTATION OF

QATARI NATURAL GAS TO EUROPE

Muneer Althaaly

Dissertation

Approved: Accepted:

Advisor Department Chair Dr. Ping Yi Dr. Wieslaw K. Binienda

Committee Member Interim Dean of the College Dr. Yilmaz Sozer Dr. Donald J. Visco

Committee Member Executive Dean of the Graduate School Dr. Zhe Luo Dr. Chand Midha

Committee Member Date Dr. Ernian Pan

Committee Member Dr. Li Wang

ii ABSTRACT

Qatar is the world’s largest producer and exporter of liquefied natural gas

(LNG). Europe is dependent on natural gas as a main source its energy needs. This dissertation addresses the problem of the transportation of natural gas from Qatar to Euro- pean markets. Currently, LNG is transported from Qatar to Europe via LNG ocean- going vessels; the route used by these tankers passes through some of the world’s most dangerous and treacherous maritime areas. This dissertation proposes a new route, one which avoids these areas and which significantly reduces the transport time. A dual natural gas pipeline – originating in Ras Laffan Industrial City in Qatar and terminating in

Yanbu Industrial City in the Kingdom of Saudi Arabia – will avoid the straits of Hormuz

(entrance to the Arabian Gulf) and Bab-el-Mandeb (entrance to the Red Sea), areas known for geopolitical and piracy threats. An analysis of the costs involved in the construction of this dual pipeline, along with the requisite compressor stations and natural gas liquefaction plant in Yanbu, is presented. In addition, this dissertation discusses the potential geopolitical and environmental impacts that may result from the proposed project. The economic benefits to Qatar and to Saudi Arabia are discussed: new job creation, transit fees, efficient access to European markets, Saudi re-export of LNG. The geopolitical benefits of the proposed new route are the enhancement of relations between

GCC member states and enhancement of relations between GCC and Europe.

iii ACKNOWLEDGEMENTS

I would like to state my thanks and appreciation to all of those who have assisted me throughout my pursuit of this graduate degree: my parents and all of my family, for their continued support and encouragement; the late King Abdullah and the government of Saudi Arabia, for providing the opportunity for me to study here in the United States; my advisor, Dr. Ping Yi, for his guidance and encouragement throughout my pursuit; and, finally, to all of my friends and student colleagues for their friendship and compan- ionship.

iv TABLE OF CONTENTS

Page

LIST OF FIGURES…………………………………………………………………..…xii

LIST OF TABLES…………………………………………………………………….xvii

CHAPTER

I. INTRODUCTION AND BACKGROUND…………………………………………1

1.1 Introduction………………………………………………………………………...1

1.1.1 Problem Statement…………………………………...………………….....3

1.1.2 Research Objectives…………...…………………………………………...3

1.2 Background………………………………………………………………………...6

1.2.1 Pipeline history…………………………………..………………………...4

1.2.2 Natural Gas in Qatar…..………………………………………………...... 5

1.2.2.1 Natural gas transportation in Qatar…………...………………….8

1.2.2.2 The Dolphin project…..…………………………….....……...... 9

1.2.2.3 Some previously proposed Qatari Gas Pipelines………...……....9

1.2.2.3.1 The Qatar-Turkey Pipeline……………...... ….....10

v 1.2.2.3.2 The Qatar-Pakistan Pipeline…………...……………...10

1.2.2.3.3 The TransAsia Pipeline System (TAPS)…………...…11

1.2.2.3.4 Discussion………………...…………………………………..11

1.3 The Proposed Pipelines…………………………………………………………...12

1.3.1 Fleet Route…………………...…………………………………………...13

1.3.2 Proposed dual pipeline route…………...…………………………………15

1.3.3 New “Hybrid” (Pipeline and Maritime) Route…………...……………….16

1.4 Methodology……………………………………………………………………...17

1.4.1 Economic analysis and impact………………………...………………….17

1.4.2 Environmental Impact………………...…………………………………..17

1.4.3 Geopolitical impacts………………………..…………………………….18

II. ENGINEERING TECHNIQUES AND ECONOMIC IMPACTS………………..19

2.1 Introduction……………………………………………………………………….19

2.2 Natural gas pipeline construction…………………………………………………20

2.2.1 Onshore pipeline construction………………………………...…………..20

2.2.1.1.1 Construction Survey……………..…………………………...20

2.2.1.1.2 Trenching……………...………………………………………20

2.2.1.1.3 Hauling and stringing (placing of pipe)………..…………….20

2.2.1.1.4 Pipe bending……...…………………………………………...21

2.2.1.1.5 Pipe Welding…………………………………………...……..21

2.2.1.1.6 Pipe Coating…………………...……………………………...22

2.2.1.7 Lowering of Pipe into the trench…………...…………………...22

2.2.1.1.8 Pipe Tie-ins……………………...... ………………………….22

2.2.1.1.9 Trench Backfilling………………...…………………………..23

2.2.1.1.10 Final Testing and Internal Inspections……...……………….24

2.2.1.2 Natural gas pipeline compressor stations………………...……………..24

2.2.2 Offshore pipeline construction………………………...………………….25

2.3 Cost estimation for proposed pipelines…………………………………………...25

2.3.1 Materials costs………………...…………………………………………..26

2.3.2 Labor costs…………...…………………………………………………...30

2.3.3 Miscellaneous costs…………...…………………………………………..35

2.3.4 Right-of-way (ROW) and Damage…………………………...…………..39

2.3.5 The pipeline Total Cost (without Compressor Cost)…………………...…44

2.3.6 Compressor Cost…………...... …………………………………………..48

2.3.6.1 Capital Cost …………...………………………………………..48

2.3.6.2 Maintenance Cost………...…………………………………..…49

vii

2.3.6.3 Fuel Cost………………………………...………………………49

2.3.6.4 Compressor Cost Estimation………………………………...….49

2.4 Liquefied Natural Gas (LNG)………………………………………………….…52

2.4.1 LNG History……………………...…………………………………….…52

2.4.2 Composition of natural gas and LNG………………………...…………...54

2.4.3 LNG Value Chain………………………………...…………………….…55

2.4.4 Cost estimation and economics………………………………...…………57

2.4.4.1 Liquefaction Plant Costs………………………...……………...57

2.4.4.2 LNG Transportation Cost…………………...…………………..60

2.5 Results and Summary……………………………………………………………..63

2.5.1 Prediction of shipping cost savings utilizing proposed route…………...... 65

2.5.2 The Economic Benefits to Qatar and Saudi Arabia of the Proposed Transit Dual Gas Pipeline…………………………………………………...…………..67 2.5.2.1 Defining transit and cross-border pipelines……………...……...67

2.5.2.2 Benefits for Saudi Arabia………………………………...…..…68

2.5.2.2.1 The Transit Fee……………………...………………...68

2.5.2.2.2 LNG re-export……………...…………………………69

2.5.2.2.3 New Job Creation…………...………………………...69

2.5.2.2.4 Satisfy need for alternative fuel for electricity production...... 69 viii

2.5.2.3 Benefits for Qatar …………………...... …………………….…70

2.5.2.3.1 More efficient access of LNG to European markets.....70

2.5.2.3.2 Dangerous sea routes will be avoided………...... ……70

2.5.2.3.3 Saudi future demand for natural gas will be satisfied...71

III. ENVIRONMENTAL IMPACTS

3.1 Introduction……………………………………………………………………….72

3.2 A brief description of the Arabian Gulf Ecosystem………………………………72

3.2.1 Seagrass beds………………………………...……………………………73

3.2.2 Coral reefs…………………………...……………………………………73

3.2.3 Mangrove swamps………………………...... ……………………………74

3.2.4 Mudflats…………………………...………………………………………74

3.3 Environmental impact of the offshore construction phase………………………..74

3.4 Environmental impact of the onshore and offshore operation phase……………..75

3.4.1 The nature of natural gas…………………...……………………………..75

3.4.2 Methane as a greenhouse gas………………………………...…………...76

3.4.3 Methane emission in the natural gas industry………...... ………………..78

3.4.4 Emissions in the proposed dual pipeline project…………...……………..79

3.4.5 Emission of methane and other GHGs into the atmosphere………...... …79

3.4.6 Storage…………………………...... ……………………………………..80

3.4.7 Possible emission during loading and unloading……………………...….80

3.4.8 Flaring…………………………………...………………………………..80

3.4.9 Shipping………………...…………………………………………………81

3.4.10 Fate of released methane in the marine environment………………...... 82

3.5 Summary………………………………………………………………………….83

IV. GEOPOLITICAL IMPACTS………………………………………………….…84

4.1 Introduction…………………………………………………………………….…84

4.2 Natural gas routes and geopolitical conflicts…………………………………..…85

4.2.1 Current geopolitical problems affecting trade routes for LNG...…………85

4.2.2 The Strait of Hormuz………………...……………………………………86

4.2.3 The Strait of Bab el-Mandeb……………………………...………………88

4.3 The Gulf Cooperation Council (GCC)……………………………………………89

4.3.1 The effect of the proposed new route on the political relationships of GCC members……....………………………………..………………………………..89 4.3.2 The effect of the proposed new route on the political relationships between GCC members and European countries…………………………...…………..…90 4.4 European Geopolitics of Natural Gas……………………………………………...91

4.4.1 Europe’s current reliance on Russian gas……………...…………………..91

4.4.2 Europe’s new options for gas supplies……………………...……………...93

4.5 Summary……………………………………………………………………….….97

V. Conclusion and Recommendations for the Future………...... ………………....….99

BIBLIOGRAPHY………………………………………………………………………102

APPENDICES……………………………………………………………………….…110

APPENDIX A. PIPELINES RAW DATA...... 110

APPENDIX B. COMPRESSOR STATIONS RAW DATA...... 111

LIST OF FIGURES

Figure Page

1-1 Energy infrastructure in Qatar……………………………………………………….6

1-2 Natural gas flows in Qatar from 2003 to 2013……………………………………....6

1-3 LNG Exports and Market Share by Country (in MTPA)……………………………8

1-4 Dolphin project...... …...9

1-5 The Qatar-Turkey Pipeline…………………………………………………….….…10

1-6 The TransAsia Pipeline System (TAPS)……….………………………………..…..11

1-7 LNG route from Ras Laffan to the port of Brunsbuttel in Germany…………..…….13

1-8 LNG route from Ras Laffan to Yanbu in Saudi Arabia……………………..………14

1-9 LNG route from Yanbu to the port of Brunsbuttel in Germany…………..…………14

1-10 The distance from the Qatari North Field to Yanbu…………………..……………15

1-11 The subsea portion between Qatar and Saudi Arabia………………..……………..15

1-12 The proposed parallel pipelines……………..……………………………………...16

2-1 General overview of a natural gas system…………..…………………………….....19

2-2 Pipe Welding……………..………………………………………………………….21

xii

2-3 Lowering of Pipe into the trench…..………………………………………………...22

2-4 Pipe Tie-ins……..……………………………………………………………………23

2-5 Trench Backfilling………..……………………………………………………….....23

2-6 A schematic representation of a typical compressor………..…………………….…24

2-7 The materials pipeline length and pipe diameter (36-inch)…..……………………...37

2-8 The materials pipeline length and pipe diameter (42-inch)...... 27

2-9 The materials cost-per-mile (36-inch)……………..…………………………..…….28

2-10 The materials cost-per-mile (42-inch)……..……………………………………….29

2-11 The materials, cost-per-mile is plotted versus pipeline diameter……….....……….29

2-12 The relationship between estimated materials cost and actual materials…..………29

2-13 Distribution of errors between the estimated materials cost and the actual materials cost……………………………………………………………………………………….30 2-14 The labor pipeline length and pipe diameter (36-inch)………………………..…...31

2-15 The labor pipeline length and pipe diameter (42-inch)……..……………………...31

2-16 The labor cost-per-mile (36-inch)………………………………………..…………32

2-17 The labor cost-per-mile (42-inch)…………………………………………..………32

2-18 The labor cost-per-mile is plotted versus pipeline diameter………………..……...33

2-19 The relationship between estimated labor cost and actual labor……………..…….34

2-20 Distribution of errors between the estimated labor cost and the actual labor cost....34

xiii

2-21 The misc. pipeline length and pipe diameter (36-inch)………………………..…...35

2-22 The misc. pipeline length and pipe diameter (42-inch) ……………………………36

2-23 The misc. cost-per-mile (36-inch) ……………………………………………...….36

2-24 The misc. cost-per-mile (42-inch) …………………………………………………37

2-25 The misc. cost-per-mile is plotted versus pipeline diameter…………………..…...37

2-26 The relationship between estimated misc. cost and actual misc. cost……………...38

2-27 Distribution of errors between the estimated misc. cost and the actual misc. cost...38

2-28 The ROW& damages pipeline length and pipe diameter (36-inch) …………….…39

2-29 The ROW& damages pipeline length and pipe diameter (42-inch) …………….…40

2-30 The ROW& damages cost-per-mile (36-inch) ………………………………….…40

2-31 The ROW& damages cost-per-mile (42-inch)……………………………..………41

2-32 The ROW& damages, cost-per-mile is plotted versus pipeline diameter…….…....42

2-33 The relationship between estimated ROW& damages cost and actual ROW& damages costs.....………………………………………………….....……………………….43 2-34 Distribution of errors between the estimated ROW& damages cost and the actual ROW& damages cost…………………………………...... ………………………..43 2-35 The total, pipeline length and pipe diameter (36-inch)………………………….....44

2-36 The total, pipeline length and pipe diameter (42-inch)………………………..…...45

2-37 The total cost-per-mile (36-inch)……………………………………………..…….45

2-38 The total cost-per-mile (42-inch)…………………………………………………...46

xiv

2-39 The total, cost-per-mile is plotted versus pipeline diameter……………………....47

2-40 The relationship between estimated the total cost and actual the total…………....47

2-41 Distribution of errors between the estimated the total cost and the actual the total cost……………………………………………………………………………………….48 2-42 Compressor Construction Unit Costs………………..……………………………..50

2-43 Compressor Cost……………………………………………………………..……..50

2-44 Compressor Estimated total cost versus compressor actual total cost………..…….51

2-45 Compressor Total, Distribution of Errors……………………………………..……51

2-46 LNG Trade Volumes 1990 – 2015…………………………………………..……..53

2-47 Typical Natural Gas Composition……………………..…………………………...54

2-48 Typical LNG Composition………………………………………………..………..55

2-49 LNG Process Chain………………………………………………………..……….55

2-50 Average Liquefaction Unit Costs…………………………………………..……....58

2-51 Average Cost Breakdown by Construction Component………………..…………..58

2-52 Average Cost Breakdown by Expense Category………………………..………….59

2-53 Liquefaction plant cost………………………..……………………………………59

2-54 Major LNG Shipping Routes, 2015……………..………………………………….61

2-55 Average LNG Spot Charter Rates versus Vessel Deliveries………..……………...62

2-56 Methods of gas transportation costs……………………..…………………………63

2-57 Installed horsepower vs. throughput capacity………..……………………………..65

3-1 CO2 Emissions from Fuel Combustion………..…………………………………….76

3-2 Space-Filling models of some GHGs…………..……………………………………76

3-3 Greenhouse Schematic………..……………………………………………………..77

3-4 Greenhouse Effect…………………………………………..……………………….78

3-5 Flaring system at a LNG plant………………………..……………………………...81

3-6 Cross-section Moss design LNG tanker………..……………………………………82

4-1 Energy security threats in the Middle East……………..……………………………86

4-2 Arabian Gulf and the Strait of Hormuz…………..………………………………….87

4-3 Bab el-Mandeb Strait…………………..…………………………………………….88

4-4 Gulf Cooperation Councils members………………………..………………………89

4-5 Russian long-term export contracts with European countries to 2030………..…..…92

xvi

LIST OF TABLES

Table Page

1-1 The top 5 countries with proven natural gas reserves…………………..…………….6

1-2 Top 6 global natural gas exporters………………………………..…………………..7

1-3 Qatar LNG exports by destination…………………………………..………………..7

2-1 Liquefaction plants in the Middle East………………………………..……………..54

2-2 Characteristics of various propulsion methods……………..………………………..62

2-3 Summary of calculated costs…………..…………………………………………….64

4-1 Main Origin of Primary Energy Imports to EU-28, 2004 – 2014……………..…….93

xvii

CHAPTER I

INTRODUCTION AND BACKGROUND

1.1 Introduction

In general, the Arab Gulf States (Kingdom of Saudi Arabia, Qatar, Kuwait, Bah- rain, United Arab Emirates and Oman) are considered to be the heart of the world’s energy sources. The transportation of this energy from the point of production to the customer involves various modes: offshore and onshore pipelines; liquefied natural gas (LNG) fleets and crude oil tankers.

Over the last two decades, the energy mix used by Europe has remained relatively unchanged: in 2013, 35% of this mix came from petroleum, 24% from gas, 17% from solid fuels, 14% from nuclear power and 10% from renewables. Europe’s energy dependency has increased for all energy imports, particularly for gas. This dependency on gas is becoming more important in the minds of European policy makers.

The reasons for this dependency are two-fold. Petroleum and nuclear energy are potential areas of concern, from both a political and a safety standpoint; additionally, re- newable energy (e.g., solar and wind) has yet to reach its full potential. LNG has emerged as an important component of the world energy market. The LNG share of the energy market rose steadily by 7% each year from 2000 to 2014. A major advantage of LNG is that it can be exported by ship in liquefied form worldwide [1].

The dependency on LNG is constantly increasing; it will compose 13% of the global gas market by 2020 and 14% of European gas. The importance of Europe as a cli-

1 ent for Qatar gas cannot be overemphasized. Currently, Qatar’s most important LNG customer is the United Kingdom, followed shortly behind by Belgium, Spain and Italy [1].

The recent Ukrainian crisis has caused Europe to rethink its energy policy. The possible role of Qatar in reducing Europe’s reliance on Russian gas was the subject of discussion between the Emir of Qatar and the US Secretary of State in 2014 [1].

In order to ship LNG to Europe under the present circumstances, there are politically volatile areas through which the shipping routes travel: the Strait of Hormuz, the

Bab el-Mandab. The crisis in Ukraine highlighted the vulnerability of gas from Russia and required the European authorities to adopt an “European Energy Security” strategy; this strategy included diversifying gas imports and constructing new LNG terminals. In

2015, the European Commission (EC) proposed a new “energy union package” plan based on five fundamentals [2]:

 Supply security

 National market integration

 Energy demand reduction

 Reduction of carbon dioxide emissions

 Research and innovation promotion

The EC has stated “that it will prepare a comprehensive LNG strategy” regarding imports; this strategy will investigate the required transport infrastructure that links LNG access points and will also “work to remove obstacles to LNG imports…”

1.1.1 Problem Statement

There are two problems in the transport of Qatari LNG to European markets:

2  The current maritime route is treacherous, involving passage through the

Hormuz and Bab el-Mandeb straits (see Figure 1-7,).

 The time required for maritime transport from Qatar to Europe.

1.1.2 Research Objectives

This dissertation describes a new route for the transportation of natural gas from

Qatar to Europe that will

 Avoid the dangerous Hormuz and Bab el-Mandeb straits

 Reduce the time required for transport

The mode of transport for the natural gas is two-fold: 1) a dual pipeline from Ras

Laffan in Qatar to Yanbu in Saudi Arabia; 2) LNG tanker transport from Yanbu to Eu- rope. The economic, environmental and geopolitical impacts of the new route and the dual pipeline will be analyzed.

This dissertation will discuss some regional and global problems related to energy transportation. Cost comparisons of transport by the new pipeline and the existing LNG tanker route are also discussed, along with the impact of the proposed pipeline on the politics of the region.

The global market for LNG has expanded greatly in recent years [3]. Total trade in LNG was 244.8 MT (million tons) in 2015 (up 4.7 MT from 2014); this marked the largest year ever for LNG trade (previous high of 241.5 MT set in 2011).

The proposed pipeline from Qatar to Yanbu should have a significant impact on

European economy. The proposed pipelines will shorten transportation time and, as a result, costs. The YOY (year over year) gain of the region was the global highest [3].

3 Taking the German market as an example, the majority of natural gas used is imported from Russia [4], this reliance on Russia has its political implications. The proposed pipeline will be able to meet Germany’s needs and make the federal republic less vulnerable to political blackmail [5]. Additionally, the proposed pipeline will shorten transportation time from Qatar to Germany by 36%. As another example, Italy and Qatar have recently discussed the construction of a second LNG terminal [6].

The many benefits of the proposed pipeline are not limited to political stability and cost reduction in Europe. The economies of both Saudi Arabia and Qatar will be strengthened by the pipeline. Not only will jobs be created, but the future demand (in

Saudi Arabia) of natural gas for electricity production will be met.

1.2 Background

The transportation of liquids by pipeline was known in antiquity. Many areas of the world transported water from its source to its place of use.

1.2.1 Pipeline history [7].

The first recorded use of pipelines for water transport was in 3000 BC in Mesopo- tamia, Egypt and China. The materials used were clay (Mesopotamia) and copper (Egypt) and bamboo (China).

Giant networks of pipelines were built by the Romans for use in transporting water throughout their city. These networks allowed even the poorest Roman citizens to en- joy the pleasures of the bathhouse. Many different materials were used in the construction of the Roman pipelines: wood, silver, bronze, and lead.

Iron pipelines were introduced in the 15th century in Europe; newly developed pumping systems enabled the building of decent water networks throughout the conti-

4 nent. With the discovery of crude oil in western Pennsylvania in the 19th century, the problem of its distribution was solved using pipelines.

1.2.2 Natural Gas in Qatar [8]

Qatar is the largest exporter of liquefied natural gas (LNG) in the world; the coun- ty’s exports of LNG, crude oil, and petroleum products provide a significant portion of government revenues. In 2013, Qatar was the world’s fourth-largest producer of dry natural gas (behind the United States, Russia, and Iran). Since 2006, it has been the world’s leading liquefied natural gas exporter, accounting for 32% of global natural gas exports.

Markets in Asia receive most of Qatar’s exports in the form of LNG; a small amount of natural gas is sent to the United Arab Emirates (UAE) and Oman via the Dolphin Pipe- line. Figure 1-1 provides an illustration of selected infrastructure in Qatar. Table 1-1 lists the top 5 countries with proven natural gas reserves, as of 2015.

Natural gas flows in Qatar from 2003 to 2013 are shown in Figure 1-2. As the ability to increase production constantly increased during this time, it is noted that consumption (domestic) basically remained unchanged.

Figure 1-1, Energy infrastructure in Qatar

Table 1-1, The top 5 countries with proven natural gas reserves

Figure 1-2, Natural gas flows in Qatar from 2003 to 2013

As is shown in Table 1-2, in 2013, Qatar was surpassed only by Russia in global natural gas exports. Table 1-3 shows Qatar’s LNG exports by destination; Europe accounts for only 23% of the total.

6 Table 1-2, Top 6 global natural gas exporters

Table 1-3, Qatar LNG exports by destination

It should be noted that Qatar is facing new competitors for the Asian market, such as Australia. In 2015 [3], Australia held its position as the second largest LNG capacity holder – second only to Qatar (see Figure 1-3). Australia will account for 17 percent of the global liquefaction capacity by 2020 (ahead of Qatar’s projected 15%).

7 Figure 1-3, LNG Exports and Market Share by Country (in MTPA)

Asia accounts for all of Australia’s LNG export, with 80% going to the Japan market (as of 2013), 16% to China, and 3% to South Korea. 91% of Australia’s LNG under development has already been assigned to Japan (90%) [2].

Australia is closer to the Asian market than is Qatar. In addition, the shipping of

LNG to Asian markets from Australia avoids those sensitive (and potentially dangerous) sea lanes encountered by Qatar at present.

1.2.2.1 Natural gas transportation in Qatar [9].

Since the start of production of production in 1949, and until the late 70’s, most of the natural gas in Qatar was flared and vented. Gas production never exceeded 10 bcm/a until 1993. To meet local demand, Qatar’s first LNG plant went into production in 1997.

8 1.2.2.2 The Dolphin project [10].

Dolphin Energy Limited was established by the government of Abu Dhabi in

1999 to implement the Dolphin Gas Project. This purpose of this project was to produce, process and transport (by a subsea pipeline) gas from Qatar’s offshore North Field to the

UAE and Oman. The Al Ain – Fujairah Gas Pipeline (182 kilometers) was commissioned in 2004. This was the first ever cross-border refined natural gas transmission in the history of the Gulf Cooperation Council. The 244-kilometer Taweelah – Fujairah Pipeline was finalized in December 2010 [10]. (See Figure 1-4).

Figure 1-4, Dolphin project

1.2.2.3 Some previously proposed Qatari Gas Pipelines.

Other gas pipelines have been proposed for transportation from the Qatari market.

Some of these are now discussed.

9 1.2.2.3.1 The Qatar-Turkey Pipeline.

According to a news report on August 26, 2009, Qatar proposed a gas pipeline from the Gulf to Turkey [11]. See Figure 1-5. Unfortunately, the political atmosphere in the area changed. The civil war in Syria would not allow for the plan to be implemented.

Figure 1-5 [12], The Qatar-Turkey Pipeline

The proposed pipeline also conflicted with Russia’s interests in the area [13].

1.2.2.3.2 The Qatar-Pakistan Pipeline.

In 1993, a memorandum of understanding between Pakistan and the Crescent Pe- troleum Company of Qatar was signed to conduct a feasibility study “for a $3.5 million,

1600 km, mostly subsea pipeline to export 2 bcfd of natural gas to Pakistan.” [14] From

Pakistan, the natural gas was to have been transferred to China. However, the project was never brought to fruition due to an agreement between Russia and China to supply China with natural gas [15]. Additionally, China and Pakistan agreed to a new project, allowing for the importation of Iranian natural gas into Pakistan with subsequent transferal via pipeline to China [16]. Recently, an agreement was signed for the supply of LNG to Pa- kistan, with Qatar supplying a billion dollars’ worth of LNG annually [17]. The LNG will be sold from 2016 to 2031. As a result, the proposed subsea pipeline is not likely to be considered further.

10 1.2.2.3.3 The TransAsia Pipeline System (TAPS).

A natural gas pipeline for the delivery of natural gas to both Pakistan and India has recently been proposed [18]. One of the possible supplier nations for TAPS is Qatar.

Figure 1-6 shows the pipeline routes of TAPS. What must be considered is the extremely sensitive relationships between Iran and GCC member states Oman and Qatar. Iran will most likely not encourage the routing of a pipeline over its territory, especially considering that Iran has a greater proved gas reserves than does Qatar (see Table 1).

Figure 1-6, The TransAsia Pipeline System (TAPS)

1.2.2.3.3 Discussion

The problems facing the transportation of Qatari natural gas are many:

1. routing of pipelines through Syria is fraught with political and military (i.e., war)

obstacles;

11 2. the proposed pipeline from Qatar to Pakistan (and, ultimately, to China) has three

problems that resulted in the agreement signed in 2016 to supply Pakistan with

LNG from 2016 to 2031:

a. the agreement between Russia and China to supply China with natural gas

for 30 years;

b. the support by China of the proposed pipeline between Iran and Pakistan,

making Iran a new competitor for Qatar;

c. the entry of Australia into the supply market (Australia is closer to China

and other Asian potential customers)

3. the impossibility of transporting Qatari gas through Iran due to political obstacles.

Iran desires to control the Asian market, particularly after the recent nuclear agreement between Iran and the West.

It is necessary for Qatar to seriously consider the European, African, and South

American markets. The pipelines proposed in this study will make delivery to these markets faster, safer, and more reliable.

1.3 The Proposed Pipelines

The objective of this dissertation is an analysis of the proposed construction of two (2) parallel pipelines from the gas fields of Qatar, under the Gulf of Bahrain, and across Saudi Arabia, along the same right-of-way currently used by the East-West Gas

Pipeline.

The role played by Qatar in the current European energy policies is rather small [1].

Its crucial role in gas exports (particularly LNG), however, is becoming increasingly important. At present, Qatar is the biggest global LNG exporter, the second largest natural

12 gas exporter; its gas reserves are one of the world’s largest (triple that of the United

States) [1].

1.3.1 Fleet Route

The proposed project present in this dissertation will shorten the transportation route from Qatar to the European markets and will avoid the sensitive straits mentioned above. As an example, an LNG tanker traveling from Ras Laffan in Qatar to the port of

Brunsbuttel in Germany covers 7449 nautical miles (nm) and takes 15.5 days (at 20 knots). This route includes the dangerous Straits of Hormuz and Bab el-Mandeb and is illustrated in Figure 1-7.

Figure 1-7, LNG route from Ras Laffan to the port of Brunsbuttel in Germany

Following the same route, if the fleet travels from Ras Laffan in Qatar and stops at the Yanbu Commercial Port on the west coast of Saudi Arabia, the distance is 2717 nm and it will take 6 days (at 20 knots), still having to go through the dangerous straits of

Hormuz and Bab el-Mandeb; this shortened route is illustrated in Figure 1-8. The proposed pipelines will allow the fleet to have to travel only from Yanbu to the European

13 port of Brunsbuttel, a distance of 4759 nm; this shortened distance will require only 9.9 days (as opposed to 15.5 days) at 20 knots (see Figure 1-9).

Figure 1-8, LNG route from Ras Laffan to Yanbu in Saudi Arabia

Figure 1-9, LNG route from Yanbu to the port of Brunsbuttel in Germany

14 1.3.2 Proposed dual pipeline route

Referring to Figure 1-10, the distance from the Qatari North Field to Yanbu (on the west coast of Saudi Arabia) is approximately 860 miles.

Figure 1-10, The distance from the Qatari North Field to Yanbu

A portion of the proposed pipelines (between Qatar and Saudi Arabia) will necessarily be offshore; the subsea portion of the proposed gas pipelines is approximately 49 miles in length. Construction of this subsea portion is necessarily more costly that onshore costs. See Figure 1-11.

Figure 1-11, The subsea portion between Qatar and Saudi Arabia

15 1.3.3 New “Hybrid” (Pipeline and Maritime) Route

The transportation of natural gas from Qatar’s North Gas Fields to Europe involves the following steps:

 Transport of the natural gas from Qatar to Yanbu through the proposed paral-

lel pipelines (See Figure 1-12): the proposed dual pipeline will transport the

natural gas from the North Field of Qatar, across Qatar to its West coast, off-

shore from Qatar to Saudi Arabia and onshore across Saudi Arabia to Yanbu,

a total distance of approximately 860 miles. The target design capacity for the

pipelines is 40 Bcm.

- Liquefaction of natural gas in proposed Yanbu LNG liquefaction plant: at the

Yanbu liquefaction plant, the natural gas delivered by the pipelines will undergo

liquefaction by having its temperature lowered to approximately -256°F (-162°C),

decreasing its volume by a factor of 600. This liquefaction plant will be of such

capacity to process the 29 MTPA expected.

- Transport of vessels to European ports: after uploading the LNG onto specialized

tankers, transport to Europe through the Suez Canal is accomplished.

Figure 1-12, the proposed parallel pipelines

16 1.4 Methodology

The methodology used in the preparation of this dissertation is discussed below.

1.4.1 Economic analysis and impact

This dissertation will discuss the economics of the construction of the proposed pipelines. The economics and cost estimation of natural gas pipelines will be presented.

Data have been gathered which allow for economic analyses including 1) material and labor costs/mile, 2) right of way and damage costs, and 3) miscellaneous costs (i.e., those costs not included in labor, material, or right of way and damage). Data are presented which allow for calculation of estimated costs versus actual costs. An analysis of compressor costs is also presented. The natural gas liquefaction plant costs will be addressed.

An analysis of the economics of gas pipeline transportation versus LNG tanker transportation is presented. Current economic data are used.

The economic benefits to Saudi Arabia and Qatar of the proposed pipelines are discussed.

1.4.2 Environmental Impact

This dissertation will discuss the impact that the construction and operation of the proposed pipelines will have on the local environment and what measures can be taken to mitigate any adverse situations. The impact that emissions (e.g., carbon dioxide) from the pipelines’ compressor stations may have on air quality will be addressed. The fate of the emission (fugitive, venting, and combustion) of methane – a greenhouse gas – into the environment (both onshore and offshore) during operation will be discussed. The contribution that shipping may make to greenhouse gas emissions is also addressed.

17 1.4.3 Geopolitical impacts

This dissertation will discuss the current transportation route followed by the

LNG tankers and the potential dangers of this route (the straits of Hormuz and Bab el-

Mandeb). The mitigating aspects of the proposed pipelines will be analyzed. The effect of the proposed pipelines on relations within the Gulf Cooperation Council (showing how good relations will result) will be discussed. Also, the political benefits of the pipelines to the European countries will be presented.

18 CHAPTER II

ENGINEERING TECHNIQUES AND ECONOMIC IMPACTS

2.1 Introduction

Natural gas is known to be a clean and efficient source of energy. Providing the consumer with natural gas involves transportation from the wellhead to the point of use.

Major modes of transportation involve LNG tankers and pipelines. The three major types of pipelines utilized along the transportation route are 1) gathering systems, 2) transmission systems, 3) and distribution systems [19]. This dissertation is concerned only with transmission pipeline systems.

The diameters of pipe used in natural gas pipeline systems generally range from 2 inches to 42 inches and are constructed from steel pipe. Natural gas distribution systems are found constructed of a variety of materials including steel, cast iron, copper, and plastic pipe (plastic pipe is commonly used in gas distribution systems). Figure 2-1 below presents a general overview of a natural gas system.

Figure 2-1, General overview of a natural gas system

19 2.2 Natural gas pipeline construction [20]

The construction of a natural gas pipeline is a complex endeavor and is made manageable through “construction spreads”; these construction spreads make use of highly specialized and qualified work crews, with each crew being having its own set of re- sponsibilities.

2.2.1 Onshore pipeline construction

Specific tasks or projects are assigned to specific crews; these tasks include clearing and grading, welding, inspection, and other tasks. The pipeline is built in sections similar to a moving assembly line. When a specialized construction crew finishes its work, the next crew moves into position. Facilities such as compressor stations are sepa- rate spreads.

2.2.1.1.1 Construction Survey

Prior to any construction, a civil survey is carefully conducted, with markers placed along the right-of-way; this ensures clearing of only the pre-approved construction work- space. The pipeline centerline is also surveyed and staked.

2.2.1.1.2 Trenching

The proposed pipelines will be installed underground; therefore, trenching will be necessary. The base of the trench should be excavated at least 12 inches (6 inches on each side) wider that the diameter of the pipe to be installed. The sides of the trench are sloped based on the stability of the solids encountered.

2.2.1.1.3 Hauling and stringing (placing of pipe)

Pipe manufacturing plants known as “pipe mills” roll and fabricate the pipe. Ex- ternal coatings may be applied to the surface to prevent corrosion. After inspection, the

20 pipe is loaded for transportation to the project; this transportation includes truck, rail, barge or ship. The pipe is stored near the project and strung (laid out) as planned. The typical length of pipe is 40 to 60 feet.

The pipe is then strung (put in place in the trench), with care being taken to protect its coating. Then, welding of the sections takes place.

2.2.1.1.4 Pipe bending

Often, pipe must be bent in order to conform with the trench; in that the steel pipe is not very flexible, on-site bending is often required. A special pipe-bending crew is on hand for this purpose.

2.2.1.1.5 Pipe Welding

After a portion of the pipe has been placed, welding is performed. Welding joins sections of pipe in the trench. A welding crew often utilizes special mechanized welding equipment to carry this process. Inspection are periodically performed to assure the quality of the weld. Quality-assurance tests involving X-rays of the pipe welds make sure that the welding meets local and national regulations. See Figure 2-2.

Figure 2-2, Pipe Welding

21 2.2.1.1.6 Pipe Coating

To prevent corrosion, natural gas pipelines are coated externally to prevent mois- ture from coming into direct contact with the steel. This coating is done before delivery of the pipe to the construction site. The coating does not come within three to six inches of the end of the pipe in order not to interfere with the subsequent welding.

2.2.1.7 Lowering of Pipe into the trench

Before placing the pipe into the trench, cleaning of the trench takes placed; if necessary, dewatering is also carried out. Lowering of the pipeline then takes place with care taken to avoid buckling and undue stress on the welds. Side boom tractors are used for this operation. See Figure 2-3.

Figure 2-3, Lowering of Pipe into the trench

2.2.1.1.8 Pipe Tie-ins

The places where line pipe cannot be welded in a continuous process are known as

tie-ins. See Figure 2-4. Examples of places where tie-ins are necessary are

22  Road and water crossings

 Valves

 Interconnects with other pipelines

Figure 2-4, Pipe Tie-ins

2.2.1.1.9 Trench Backfilling

Once the pipeline is safely in the trench, backfilling takes place. Taking care to protect the pipeline and its coating, the backfilling crew returns the soil to the trench. See

Figure 2-5.

Figure 2-5, Trench Backfilling

23 2.2.1.1.10 Final Testing and Internal Inspections

Prior to transporting natural gas through a new pipeline, the entire inside of the pipeline is cleaned; the pipeline is then filled with water to conduct a pressure test (hy- drostatic testing). If no leaks are found, the water is removed and the inside of the pipe is dried thoroughly to prevent corrosion.

2.2.1.2 Natural gas pipeline compressor stations [21]

In order for natural gas to flow through a pipeline, it must be pressurized; periodic compression assures that this flow will occur without hindrance. As the distance travelled increases, friction and geographic elevation impede the flow and reduce the pressure. To mitigate these impedances, compressor stations are placed along the pipeline to give the gas a “boost.” Typically, these stations are placed 40 to 70 miles apart. The compressor stations are “24/7/365” operation; that is, the stations operate continuously to re- pressurize the gas, ensuring uninterrupted flow through the pipeline.

Figure 2-6 gives a schematic representation of a typical compressor.

Figure 2-6, A schematic representation of a typical compressor

24 The identities and descriptions of the various sections of the plant are given below.

1. Station yard piping: the piping through which the gas moves between the pipeline and the station 2. Filters: the filter clean the natural gas by removing solids and liquids

3. Compressor units: the compressor units re-pressurize the gas flowing through the

pipeline

4. Gas cooling: pressurization of the gas causes its pressure and temperature to rise. The

gas cooling system returns the gas to normal temperatures and pressures, allowing for

transmission efficiency.

5. Lubrication oil system: the lubrication oil systems lubricate and cool moving parts of

the compressor to protect any moving parts.

6. Mufflers: mufflers reduce the noise level of the compressor units

7. Fuel system: most compressor units use natural gas from the pipeline as fuel

8. Back-up generators: for use during electrical outage

2.2.2 Offshore pipeline construction [22]

A portion of the proposed dual pipeline will be offshore, between the western shore of Qatar and the eastern shore of Saudi Arabia. Laying the pipeline can be carried out in three ways, depending on depth of the seafloor – S-lay, J-lay and tow-in. S-lay installation is used in shallow situations such as is found in the area between Qatar and

Saudi Arabia. “S-lay” refers to the shape taken on by the pipeline as it leaves the pipelay vessel.

2.3 Cost estimation for proposed pipelines

This dissertation presents a detailed cost analysis of the construction of dual pipelines from the North Gas Field in Qatar to the west coast industrial city of Yanbu in Saudi

25 Arabia. The regression model used for this analysis is that presented in the monograph.

[19]

The data used in this analysis was gathered from the Oil and Gas Journal and was kindly supplied by the publisher.1 The raw data is presented in Appendix A. The following have been estimated in this dissertation: costs of 1) materials, 2) labor, 3) right-of- way (ROW) and damage, and 4) miscellaneous costs.

A major factor contributing to pipeline cost is location. Pipeline crossing of a rural area without environmental issues can be five-times less expensive than when a dense urban area is involved [23]. The analyses performed in this dissertation give an estimation for material cost as approximately 19% of the total cost, on average. The labor cost is approximately 38 % of the total cost, on average. Miscellaneous costs are approximately

36% of the total cost. ROW and damage costs are approximately 7% of the total cost, on average.

A portion of the proposed pipelines will be offshore. The investment required for these subsea pipelines will be 5 to 6 times the onshore costs, depending on water depth

[24].

2.3.1 Materials costs

The estimated costs of materials is dependent on two factors: pipeline length and pipe diameter. As for length, there is a linear relationship between materials costs and pipeline length; Figures 2-7 and 2-8 presents this relation in graphical form for both 36- inch and 42-inch pipeline diameters.

1 Oil & Gas Journal | Sept. 7, 2015, pp. 110 – 122.

Figure 2-7, The materials pipeline length and pipe diameter (36-inch)

Figure 2-8, The materials pipeline length and pipe diameter (42-inch)

27 The materials cost-per-mile of 6 projects (36”) are presented in Figure 2-9. The average cost-per-mile is approximately $1.7 million; as can be seen from the graph, more cost-per-mile fall at or below the average than above.

Figure 2-9, The materials cost-per-mile (36-inch)

The materials cost per mile of 11 projects (42”) are graphically presented in Fig- ure 2-10. The average cost per mile is $1.4 million; as with the 36” pipeline, more cost- per-mile projects (7) fall at or below the average than above (4).

Figure 2-10, The materials cost-per-mile (42-inch)

In Figure 2-11, the cost-per-mile is plotted versus pipeline diameter; the relationship is quadratic with the derived best-fit equation being

28 Materials cost = [−750.5 (dia)2 + 77264 (dia) − 524152] (length) + 35,000 where (length) is in miles, (dia) is in inches, and cost is in 2015 dollars.

Figure 2-11, The materials, cost-per-mile is plotted versus pipeline diameter

The relationship between estimated materials cost and actual materials cost is graphically presented in Figure 2-12. The average percent error is approximately 20%.

Figure 2-12, The relationship between estimated materials cost and actual materials

29 The distribution of differences between the estimated materials cost and the actual materials cost is shown in Figure 2-13. A positive number indicates that the estimated materials cost is larger than the actual materials cost; a negative number indicates that the estimated materials cost is less than the actual materials cost.

Figure 2-13, Distribution of errors between the estimated materials cost and the actual materials cost

2.3.2 Labor costs

The largest portion of total construction costs is the labor cost – approximately

38%. As can be seen in Figure 2-14 (36-inch diameter) and Figure 2-15 (42-inch diameter), labor costs increase with pipeline length.

Figure 2-14, The labor pipeline length and pipe diameter (36-inch)

Figure 2-15, The labor pipeline length and pipe diameter (42-inch)

31 The labor cost-per-mile of 6 projects (36”) are presented in Figure 2-16. The average cost-per-mile is approximately $3.4 million. More projects (4) fall below at or below average than above (2).

Figure 2-16, The labor cost-per-mile (36-inch)

The labor cost-per-mile of 11 projects (42”) are presented in Figure 2-17. The average cost-per-mile is approximately $2.6 million. More projects (9) fall below at or below average than above (2).

Figure 2-17, The labor cost-per-mile (42-inch)

In Figure 2-18, the labor cost-per-mile is plotted versus pipeline diameter; the relationship is quadratic with the derived best-fit equation being

32 Labor cost = [−4019 (dia)2 + 261720 (dia) − 1413469](length) + 185,000 where (length) is in miles, (dia) is in inches, and cost is in 2015 dollars.

Figure 2-18, The labor cost-per-mile is plotted versus pipeline diameter

The nonlinear relationship seen in Figure 30 can be explained as follows: the relative diameter of the pipe (e.g.,12” v. 16”) does not affect the labor cost-per-mile in a linear fashion; in fact, the labor cost-per-mile is less for the 16” pipe than for the 12” pipe.

The cost-per-mile of a 42” pipe is less than that of a 32” pipe. In these cases, the nonlinear relationship could be explained by the differences in wages for various regions. In both cases, the number of employers and equipment needs required per mile of pipe laid is the same.

The relationship between estimated labor cost and actual labor cost is graphically presented in Figure 2-19. The average percent error is approximately 44%. The distribution of differences between the estimated labor costs and the actual labor costs is shown in Figure 2-20. A positive number indicates that the estimated labor cost is larger than the actual labor cost; a negative number indicates that the estimated labor cost is less than the actual labor cost.

Figure 2-19, The relationship between estimated labor cost and actual labor

Figure 2-20, Distribution of errors between the estimated labor cost and the actual labor cost

34 2.3.3 Miscellaneous costs

Miscellaneous costs are those costs that include engineering, surveying, contin- gencies, supervision, allowances, overhead, and filing fees. Figures 2-21 and 2-22 show the relationship between miscellaneous costs and length for 36” and 42” pipes, respectively. There is a rough linear relationship between cost and length for both diameters.

Figure 2-21, The misc pipeline length and pipe diameter (36-inch)

Figure 2-22, The misc pipeline length and pipe diameter (42-inch)

The miscellaneous cost-per-mile of 6 projects (36”) are presented in Figure 2-23.

The average cost-per-mile is approximately $3.5 million. More projects (4) fall below at or below average than above (2).

Figure 2-23, The misc cost-per-mile (36-inch)

36 The miscellaneous cost-per-mile of 11 projects (42”) are presented in Figure 2-24.

The average cost-per-mile is approximately $2.5 million. More projects (8) fall below at or below average than above (3).

Figure 2-24, The misc. cost-per-mile (42-inch)

In Figure 2-25, the miscellaneous cost-per-mile is plotted versus pipeline diameter; the relationship is linear with the derived best-fit equation being

Miscellaneous cost = [48309(dia) + 910148](length) + 95000 where (length) is in miles, (dia) is in inches, and cost is in 2015 dollars.

Figure 2-25, The misc. cost-per-mile is plotted versus pipeline diameter

37 The relationship between estimated miscellaneous cost and actual miscellaneous cost is graphically presented in Figure 2-26. The average percent error is approximately

40%. The distribution of differences between the estimated miscellaneous costs and the actual miscellaneous costs is shown in Figure 2-27. A positive number indicates that the estimated miscellaneous cost is larger than the actual miscellaneous cost; a negative number indicates that the estimated miscellaneous cost is less than the actual miscellaneous cost.

Figure 2-26, The relationship between estimated misc. cost and actual misc. cost

Figure 2-27, Distribution of errors between the estimated misc. cost and the actual misc. cost

38 2.3.4 Right-of-way (ROW) and Damage

“A pipeline right-of-way is a strip of land over and around natural gas pipelines where some of the property owner’s legal rights have been granted to a pipeline operator.” [25] The agreement between the pipeline company and the property owner is known as an easement. The right-of-way portion of total construction cost related to pipeline diameter and length is not easily defined. In those cases where the new pipeline is laid ad- jacent to an already existing line, there may be low or zero ROW cost. Figures 2-28 and

2-29 show the relationship between ROW and Damage costs and length for 36” and 42” pipes, respectively. There is a rough linear relationship between ROW and Damage cost and length for both diameters.

Figure 2-28, The ROW& damages pipeline length and pipe diameter (36-inch)

Figure 2-29, The ROW& damages pipeline length and pipe diameter (42-inch)

The ROW and Damage cost-per-mile of 6 projects (36”) are presented in Figure

2-30. The average cost-per-mile is approximately $0.64 million. More projects (4) fall below at or below average than above (2).

Figure 2-30, The ROW& damages cost-per-mile (36-inch)

The ROW-Damage cost-per-mile of 11 projects (42”) are presented in Figure 2-

31. The average cost-per-mile is approximately $0.16 million. More projects (9) fall below at or below average than above (2).

Figure 2-31, The ROW& damages cost-per-mile (42-inch)

In Figure 2-32, the ROW and Damage cost-per-mile is plotted versus pipeline diameter; the relationship is linear with the derived best-fit equation being

ROW and Damage Cost (dia, length) = [−7758(dia) + 485294](length) + 4000 where (length) is in miles, (dia) is in inches, and cost is in 2015 dollars. The negative slope implies that the cost per mile decreases with the increase in diameter of the pipe; this is location dependent: smaller pipelines tend to be found in urban areas where ROW costs are high; larger diameter pipelines tend to be found in rural areas where ROW costs are relatively low.

Figure 2-32, The ROW& damages, cost-per-mile is plotted versus pipeline diameter

The relationship between estimated ROW and Damage costs and actual ROW and

Damage costs is graphically presented in Figure 2-33. The average percent error is approximately 59%. The distribution of differences between the estimated ROW and Dam- age costs and the actual ROW and Damage costs is shown in Figure 2-34. A positive number indicates that the estimated ROW and Damage cost is larger than the actual

ROW and Damage cost; a negative number indicates that the estimated ROW and Dam- age cost is less than the actual ROW and Damage cost.

Figure 2-33, The relationship between estimated ROW& damages cost and actual ROW& damages

Figure 2-34, Distribution of errors between the estimated ROW& damages cost and the actual ROW& damages cost

43 2.3.5 The pipeline Total Cost (without Compressor Cost)

When the costs previously discussed (materials, labor, miscellaneous, ROW and damage) are summed, total costs are obtained. Figures 2-35 and 2-36 show the relationship between total cost and length for 36” and 42” pipes, respectively. There is a rough linear relationship between total cost and length for both diameters.

Figure 2-35, The total, pipeline length and pipe diameter (36-inch)

Figure 2-36, The total, pipeline length and pipe diameter (42-inch)

The total cost-per-mile of 6 projects (36”) are presented in Figure 2-37. The average total cost-per-mile is approximately $9.3 million. More projects (4) fall below at or below average than above (2).

Figure 2-37, The total cost-per-mile (36-inch)

45 The total cost cost-per-mile of 11 projects (42”) are presented in Figure 2-38. The average total cost cost-per-mile is approximately $6.7 million. More projects (9) fall below at or below average than above (2).

Figure 2-38, The total cost-per-mile (42-inch)

In Figure 2-39, the total cost-per-mile is plotted versus pipeline diameter; the relationship is quadratic with the derived best-fit equation being

Total Cost (dia, length) = [−7689(dia)2 + 539979(dia) − 2637000](length) + 405,000

where (length) is in miles, (dia) is in inches, and cost is in 2015 dollars.

As was noted previously, labor costs account for 38% of the total cost. Variables that affect such a major portion of total cost will necessarily be reflected in the total cost.

The quadratic relationship in labor costs per mile versus pipe diameter is, therefore, reflected in the quadratic relationship in total cost per mile versus pipe diameter.

Figure 2-39, The total , cost-per-mile is plotted versus pipeline diameter

The relationship between estimated total cost and actual total cost is graphically presented in Figure 2-40. The average percent error is approximately 28%. The distribution of differences between the estimated total cost and the actual total cost is shown in

Figure 2-41. A positive number indicates that the estimated total cost is larger than the actual total cost; a negative number indicates that the estimated total cost is less than the actual total cost.

Figure 2-40, The relationship between estimated The total cost and actual The total

Figure 2-41, Distribution of errors between the estimated The total cost and the actual The total cost

2.3.6 Compressor Cost [26]

The gas compressor is a major component of the proposed pipeline system. When analyzing the cost of gas compressors for a gas pipeline such as the one proposed in this thesis, a variety of factors must be taken into consideration:

 Capital Cost

 Maintenance Cost

 Fuel Cost

2.3.6.1 Capital Cost

There are two factors that contribute to capital cost – first cost and installation cost. Included with first cost are the compressor and driver. The foundation or skid cost for the compressor and driver must also be considered. Also involved are capital and operational spares and start-up and commissioning spares.

48 2.3.6.2 Maintenance Cost

The parts and labor needed to maintain the equipment are included in maintenance cost. Routine maintenance, such as lubrication oil changes and spark plug replace- ment, are included.

2.3.6.3 Fuel Cost

The fuel used in the compressor stations may account for 66% of the annual operating cost. The fuel (methane) may either be supplied to the stations from an outside source or may be siphoned from the gas being transported in the pipeline.

2.3.6.4 Compressor Cost Estimation

Using a data set of 45 compressor stations located throughout the United States

(APPENDIX B), a cost analysis was made. Results of this analysis are presented below.

A graphical representation of compressor construction unit costs is given in Fig- ure 2-42; this graph of cost – ($)/horsepower versus horsepower includes materials, labor, miscellaneous, land, and total.

A graphical representation of compressor cost versus horsepower is presented in

Figure 2-43. The relationship is linear, with the derived best-fit equation being

Compressor cost (US$) = 2556 (HP) + 6399906

Figure 2-42, Compressor Construction Unit Costs

Figure 2-43, Compressor Cost

The relationship between estimated compressor total cost and actual compressor total cost is graphically presented in Figure 2-44. The average percent error is approximately 17%. The distribution of differences between the estimated compressor total cost and the actual compressor total cost is shown in Figure 2-45. A positive number indicates that the estimated compressor total cost is larger than the actual compressor total cost; a

50 negative number indicates that the estimated miscellaneous cost is less than the actual miscellaneous cost.

Figure 2-44, Compressor Estimated total cost versus compressor actual total cost

Figure 2-45, Compressor Total, Distribution of Errors

51 2.4 Liquefied Natural Gas (LNG): [27]

When natural gas is cooled to approximately -256°F (-161°C) at atmospheric pressure, it condenses to a liquid. This liquefaction causes the volume of the natural gas to be reduced by approximately 600 times. Transportation of liquefied natural gas (LNG) using specially designed ocean-going vessels is an economical mode for intercontinental shipping

2.4.1 LNG History

The liquefaction of natural gas was first carried out by the British scientist Mi- chael Faraday in the 19th century. The first practical compressor refrigeration machine was built by German Engineer Karl Von Linde in Munich in 1873. The first commercial liquefaction plant was constructed in Cleveland, Ohio, in 1941.

The first intercontinental transport of LNG was made possible with the conversion of a World War II liberty freighter into the world’s first LNG tanker, The Methane

Pioneer. This tanker carried an LNG cargo from Lake Charles, Louisiana to Canvey Is- land, UK.

Since the successful performance of The Methane Pioneer, and the discovery of many natural gas fields, the natural gas industry has expanded greatly. The worldwide growth in LNG trade volumes (1990 – 2015) is shown in the following Figure 2-46. [3]

52 Figure 2-46, LNG Trade Volumes 1990 - 2015

An all-time high in total globally traded LNG volumes was reached in 2015:

244.8 MT. This represents a 4.7 MT increase over 2014.

Table 2-1 presents the current (as of 2016) distribution of liquefaction plants in the Middle East. [28] As can be seen, Qatar maintains the highest number of trains in the region and the highest storage capacity. Saudi Arabia has no liquefaction plants.

53 Table 2-1, Liquefaction plants in the Middle East

2.4.2 Composition of natural gas and LNG

Figure 2-47 shows the composition of typical natural gas:

Figure 2-47: Typical Natural Gas Composition

54 Before liquefaction, the non-methane components such as carbon dioxide and water must be removed to prevent them from solidifying as the gas is cooled to -256°F. The resulting LNG is mostly methane (see Figure 2-48).

Figure 2-48: Typical LNG Composition

2.4.3 LNG Value Chain [29]

Natural gas is located far below ground in gas fields; in order to provide this gas to customers, a certain process is necessarily carried out. This process is known as the

LNG Process Chain or LNG Value Chain. Figure 2-49 gives a schematic representation of the Process.

Figure 2-49: LNG Process Chain

 Extraction – the first step in the process chain. The natural gas that is extracted

from gas fields becomes the raw gas feed of the chain.

55  The second step in the process chain involves the cleaning of the natural gas. This

cleaning separates and removes the non-wanted compounds (e.g., carbon dioxide,

water, particulate matter). These impurities are removed as condensate.

 Liquefaction is then carried out on this purified (85 – 99% methane) natural gas.

By lowering the temperature of the gas to approximately -256°F (-162°C), con-

densation takes place and liquefied natural gas (LNG) is formed. Liquefied petro-

leum gas (LPG, ethane) is removed. At this point, the natural gas has been puri-

fied and reduced in volume by 600 times. This great reduction in volume allows

for economic transport by ship or truck.

 The next step is the transporting of the LNG to the consumer. Various modes of

transportation are used in various areas of the world. Often, the LNG is on-loaded

to specially built tankers for sea transport. Other modes include truck and train.

 Having arrived on-site, the LNG is off-loaded and placed in storage before being

converted from liquid back into its gaseous form. This process is known as regasi-

fication.

Natural gas is odorless. Many regions of the world require the addition of an odorant such as tetrahydrothiophene (THT) prior to distribution to consumers.

In the present study, an analysis is carried out on the building of dual pipelines to carry natural gas from the North Field in Qatar to Yanbu on the Western coast of the

Kingdom of Saudi Arabia. The liquefaction plant will be located in Yanbu. This liquefaction plant will be of such capacity to process the 29 MTPA expected.

56 2.4.4 Cost estimation and economics

LNG projects, in general, are very capital intensive. Each part of the value chain

(vide supra) requires enormous capital investment. [24] The capital requirements of the various components of the value chain will now be addressed. These components are

 Liquefaction plant

 Transportation

 Regasification plant (Although regasification is a major part of the LNG value

chain, a cost analysis of regasification plants is beyond the scope of this disserta-

tion.)

2.4.4.1 Liquefaction Plant Costs

The proposed natural gas pipeline project terminates in western Saudi Arabia

(Yanbu), where the gas will be liquefied at a facility known as a liquefaction plant; the general layout of a liquefaction plant has been discussed (vide supra). There are various factors (drivers) which affect the cost of the liquefaction plant [30]; amongst these are

 Location (infrastructure and construction costs)

 Project scope

 Materials and equipment

 Engineering and project management

Since 2000, there has been a large escalation in costs of liquefaction projects [3].

Figure 2-50 shows this escalation for the Pacific, Atlantic-Mediterranean, and Middle

East regions (brownfield, greenfield, and floating). Average costs increased from

$379/tonne (2000 – 2007) to $807/tonne (2008 – 2015). Greenfield projects increased

57 from $495/tonne to $1,162/tonne. In that Saudi Arabia is currently without any liquefaction facilities, this proposed project is necessarily of the “greenfield” category.

Figure 2-50, Average Liquefaction Unit Costs

The construction of a liquefaction plant has many cost variables; Figure 2-51 presents a graphical analysis of the average cost breakdown of a typical liquefaction construction project; Figure 2-52 presents a graphical analysis of cost breakdown by plant area. [3]

Figure 2-51, Average Cost Breakdown by Construction Component

58 Figure 2-52, Average Cost Breakdown by Expense Category

Figure 2-53[30] shows the range of total costs for the complete facility and for the liquefaction portion only; “normal cost” and “high cost” ranges are presented. The ranges shown reflect the effect of location.

Source: Oxford institute for energy studies Figure 2-53, Liquefaction plant cost

59 2.4.4.2 LNG Transportation Cost

There are many factors that must be considered when analyzing the transportation cost of LNG (this thesis limits the discussion to transportation by sea):

 Type of contract: long-term (10 – 15 years); short-term and spot (< 4 years) [31]

 Type of vessel propulsion: DFDE/TFDE (dual-fuel diesel electric/tri-fuel diesel

electric); steam turbine

 Distance from seller to buyer

As of the end of 2015, the total active global LNG fleet numbered 410 vessels

(this number does not include those with capacity equal to or less than 60,000 m3) with a combined capacity of 63 mmcm. 48 vessels are scheduled for delivery in 2016. Vessel size can vary significantly; recent construction shows preference for larger carriers. The

Q-class vessel was introduced in 2008 – 2010; by the end of 2015, 56% of the standard capacity was between 125,000 m3 and 150,000 m3. The largest LNG carriers are the Q-

Flex and Q-Max classes, with capacities of 210,000 – 217,000 m3 and 261,700 – 266,000 m3, respectively. These vessels make up the Qatari Q-Class and have the largest capacities. There are 43 Q-Class vessels and they accounted for 16% of the active carriers at the end of 2015. [3]

Figure 2-54 shows major LNG shipping routes in 2015. [3]

60 Figure 2-54, Major LNG Shipping Routes, 2015

The dual-fuel diesel electric (DFDE) propulsion system is able to use both diesel and boil-off gas (BOG) as fuel. BOG is that gas that vaporizes from the LNG during its storage (whether in storage tanks or on transportation vessels). The trapping of this BOG and its subsequent use as fuel in the DFDE-type vessel adds to the vessel’s efficiency.

The tri-fuel diesel electric (TFDE) propulsion type system utilizes heavy fuel oil, diesel oil and gas as fuel. TFDE vessels make up 25% of the active LNG fleet (as of the end of 2015). [3]

LNG vessels powered by steam turbine propulsion systems still dominate the existing LNG fleet. The fuel for the steam-generating boilers can be heavy fuel oil or the

BOG.

Table 2-2 gives summarizes the characteristics of the various propulsion methods.

61 Table 2-2, Characteristics of various propulsion methods

Propulsion type Fuel Consumption Average vessel ca- Typical age (tonnes/day) pacity (m3) (years)

Steam 175 <150,000 >10

DFDE/TFDE 130 150,000 – 180,000 <10

Transportation of LNG is very expensive in terms of the percentage of the overall cost of the LNG itself; there are many high costs and risks involved. Shipping costs fall in the range of 5 – 10% of the cost of a spot cargo. Long-term percentage cost is much lower, less than 5% of the overall cargo cost. The operational costs for LNG carriers include crewing, insurance, technical servicing and finance re-payments. [32]

LNG shipping costs have fluctuated widely from 2011 to 2016. Following the

2011 Fukushima crisis, spot charter rates jumped in 2013 from $60,000/day to over

$100,000/day. In 2015, the average monthly charter rates for steam vessels fell to around

$20,000/day, while the rates for DFDE and TFDE vessels fell to $27,000/day, due to lower demand. [3] Figure 2-55 gives average LNG spot charter rates versus vessel deliveries between 2011 and December 2015.

Figure 2-55, Average LNG Spot Charter Rates versus Vessel Deliveries

62 In 2016, the spot charter rate for freight west of the Suez utilizing steam turbine propulsion was $22,000/day; for freight west of the Suez utilizing DFDE propulsion, the rate was $31,000/day. The spot charter rate for freight east of the Suez utilizing steam propulsion was $22,000/day; for freight east of the Suez utilizing DFDE propulsion, the rate was $30,000/day. [33]

Figure 2-56 presents a general overview of natural gas transportation costs. It has been found that shipping liquefied natural gas is cheaper than transporting natural gas via offshore pipelines for distances of more than 700 miles or via onshore pipelines for distances greater than 2,200 miles. [27]

Figure 2-56, Methods of gas transportation costs

2.5 Results and Summary

This dissertation proposes the construction of a dual gas pipeline from Ras Laffan

Industrial City in Qatar to Yanbu, a distance of approximately 861 miles (812 miles onshore, 49 miles off-shore). These proposed dual pipelines will negate the necessity of

63 shipping around the Arabian Peninsula and will, as a result, avoid the Strait of Hormuz and Bab-el-Mandab, two of the world’s most dangerous sea route passages. Table 2-3 is a summary of calculated costs for the proposed the dual pipelines.

Table 2-3, Summary of calculated costs

Category Onshore pipeline Offshore pipe- Dual proposed Liquefaction Total project cost (812 miles), line cost (49 pipeline cost plant cost, cost 2015 2015 US$ 109 miles) 2015 2015 US$ 109 2015 US$ 9 9 US$ 10 US$ 10 109 Material 1.13 0.34 2.95 29.00 29.00 Labor 2.02 0.61 5.26 ROW and damage 0.13 0.04 0.34 Miscellaneous 2.39 0.72 6.21 Total cost (pipeline 5.26 1.59 13.70 13.70 only) Compressor Stations 0.11 2.61 2.61 Total Project Cost 45.31

Each of the proposed pipelines in this study will have a capacity of 20 billion cubic meters (20 bcm) per annum of natural gas, for a total capacity of 40 bcm per annum.

Each pipeline will utilize twelve (12) 40,000-hp compressor stations; the approximate cost of these 24 stations is 2.61 billion dollars (US). These stations will have a throughput of approximately 1935 million cubic feet per day (MMcf/d). Figure 2-57 illustrates the relation between installed horsepower and throughput rating. [34]2

2 This figure has been altered by the author to emphasize the relationship between the anticipated throughput (1935 MMcf/d) and the 40,000 hp of the stations (green lines).

64 Figure 2-57, Installed horsepower vs. throughput capacity

As can be seen in Table 2-3, the total cost for the project is 45.31 billion dollars; the liquefaction plant account approximately for 64% of the total project cost. The total cost of the pipelines is approximately 30 % of the total project cost. Approximately 6 % of the total project cost is attributable to the compressor stations.

2.5.1 Prediction of shipping cost savings utilizing proposed route

Currently, the transportation of LNG from Qatar to the European market involves shipping through the Strait of Hormuz, around the Arabian Peninsula, through Bab-el-

Mandeb, through the Suez Canal to Europe (see Figure 1-7). The proposed dual pipelines from Qatar to Yanbu will eliminate the need for traversing the dangerous route3 around the Peninsula. The distance of this route is 2717 nautical miles (nm); with the elimination of this route, the proposed pipelines will also significantly reduce the shipping time required (by at least 6 days, one way: see Figure 1-8).

3 Shipments through the Strait of Hormuz are often challenged by the Iranian Navy; Bab-el-Mandeb is notorious for acts of piracy.

65 In order to calculate the cost savings resulting from the use of the proposed route, it is necessary to know the number of carriers currently transporting LNG from Qatar to

Europe. This number can be derived utilizing a variety of sources:

 A recent report announces the reaching of a new milestone of 10,000 LNG car-

goes shipped from Qatar. 5,000 cargoes have been loaded during the past 5 years

(2011 – 2016). [35] This allows one to derive that approximately 230 ships are

loaded per annum.

 Data from the Suez Canal Traffic Statistics: 21 LNG ships traveled south to North

through the Canal in March 2016. [36] This allows one to derive that approxi-

mately 252 LNG ships pass through the Canal per annum from South to North.

Spot charter rate for freight west of the Suez utilizing steam turbine propulsion is approximately $22,000/day (vide supra). The normal time it takes to travel from Ras Laf- fan to Yanbu, at 20 knots, is approximately 6 days. Eliminating the need for this 12 days of round-trip travel by sea leads to a savings of $30 million per year for 230 LNG tankers. It should be noted that the costs that would have been incurred by the returning (emp- ty) vessels should be added to this savings.

Recently, Qatar has entered into a long-term (7.5 years) agreement with RWE

Supply & Trading (RWEST), a leading European electricity and gas company, whose headquarters is located in Germany. [37] This should result in the need for an increase in the number of LNG shipments and, therefore, in increase in the number of LNG vessels.

The benefits of these proposed route from Qatar to Europe are many:

 Dangerous sea routes will be avoided

 Shipping costs will be reduced

66  A stable supply of natural gas to Europe will be assured

 Geopolitical risks will be reduced

 Economic benefits will be enhanced

2.5.2 The Economic Benefits to Qatar and Saudi Arabia of the Proposed Transit Dual Gas

Pipeline

The proposed dual gas pipelines from Ras Laffan in Qatar to Yanbu in Saudi Ara- bia can positively impact the economies of both countries:

Benefits for Saudi Arabia -

 Transit fees acquired by the government

 Opening of LNG re-export opportunities for Saudi Aramco (a proposed stock-

holder along with Qatar Petroleum)

 Creation of new jobs, both short- and long-term

 Satisfy need for alternative fuel for electricity production

Benefits for Qatar -

 More efficient access of LNG to European markets

 Dangerous sea routes will be avoided

 Saudi future demand for natural gas will be satisfied

2.5.2.1 Defining transit and cross-border pipelines [38]

When a gas pipeline crosses another “sovereign” territory to get its throughput to market, it is called a transit pipeline. In order for a transit pipeline to be built, there must be an agreement between the owner/operator of the pipeline and the government over whose territory the pipeline passes. There are at least three parties involved in any transit pipeline agreement: the producer of the gas; the consumer of the gas; the transit country.

67 In this proposed project, Qatar is the producer, Europe is the consumer, and Saudi Arabia is the transit country.

A cross-border pipeline, by definition, commences in one sovereign territory (Qa- tar, in this case) and terminates in another sovereign territory (Saudi Arabia, in this case).

The proposed dual pipelines can be viewed as a hybrid of these two types.

2.5.2.2 Benefits for Saudi Arabia

The benefits to Saudi Arabia are numerous and are illustrated below.

2.5.2.2.1 The Transit Fee [38]

When a pipeline, such as the one proposed in this dissertation, is of the transit type, a transit fee is usually set by the country through which the pipeline travels. The setting of this fee is often difficult and controversial. Why are transit fees necessary?

There are several factors that come into play; amongst them, for example are

 Compensation for possible negative effects on transit country

 Loss of some of transit country’s “sovereignty”

In the situation under discussion, a transit fee will be paid to the government of

Saudi Arabia because of the value created by the pipelines to the producer of the gas –

Qatar – and the consumer of the gas – Europe. The Saudi government must necessarily reap some benefit.

It is proposed that the transit fee to be charged by the Saudi government be

$0.02/MMBtu-60mi. Based on maximum capacity operation of both pipelines (40 Bcma), this will result in an annual transit fee collection of approximately $405.6 million.

68 2.5.2.2.2 LNG re-export

It is possible that Saudi Arabia can tap into the pipelines and divert some of the gas for its own use. The agreement between the governments of Saudi Arabia and Qatar may contain clauses that allow some of the pipelines’ throughput to be taken in lieu of transit fees, for example. Or the Saudi government may buy outright some of the pipelines’ throughput for re-export or for domestic use. This possibility has the potential of opening vast new business opportunities for Saudi Aramco.

2.5.2.2.3 New Job Creation

The proposed dual pipelines project will require both short-term and long-term employment. Short-term labor requirements for the construction (typically over a 4-year period) of a typical liquefaction plant run in the range of 6 – 8,000 people; [30] approximately 5,000 temporary workers would be required to build the two pipelines simultane- ously. [39] Long-term labor requirements to operate the liquefaction plant and to maintain the pipeline will create jobs for Saudi citizens.

2.5.2.2.4 Satisfy need for alternative fuel for electricity production

Currently, Saudi Arabia is one of the few countries that directly burn crude oil for electricity generation. [40] During the summers 2009 and 2013, for example, the King- dom burned, on the average, 0.7 million bbl/day of crude oil for power generation. The preferred fuels for meeting summer electricity demands are natural gas or coal. The proposed dual pipelines will benefit Saudi Arabia in that some of the throughput will be used, through mutual agreement, as fuel for energy production, particularly in the West- ern Provinces (home to high population areas like Jeddah, Mecca, and Medina).

69 2.5.2.3 Benefits for Qatar

The proposed dual pipeline will extend great benefits to Qatar in the form of increased efficiency, the avoidance of dangerous sea-routes, and the satisfaction of Saudi future demand.

2.5.2.3.1 More efficient access of LNG to European markets

A major market for Qatar’s natural gas is Europe. As of 2014, European LNG imports were 37.5 MT [3]. Approximately 47% of Europe’s LNG imports originate in Qa- tar. The proposed dual pipelines will increase the capacity of LNG delivery to the Euro- pean market by 29 MTPA. As a result, the European total LNG import from Qatar will be increased from 47% to 77%.

A major side benefit of the proposed dual pipelines project will be the ability of

Qatar to focus on the increasing demand for natural gas from the Asian markets (India,

Pakistan, and local Middle Eastern countries). The proposed new liquefaction plant in

Yanbu will “free-up” current liquefaction plants in Qatar, allowing for a greater percentage of their output to be sent to Asian markets.

2.5.2.3.2 Dangerous sea routes will be avoided

Currently, shipment of LNG from Qatar to European markets involves traversing potentially dangerous sea routes: the Strait of Hormuz and Bab-el-Mandeb (vide supra).

The proposed dual pipelines will allow shipment that avoids these often treacherous areas. The benefit to Qatar will be the ability to offer contracts to customers that are void of potentially dangerous and political conflicts.

70 2.5.2.3.3 Saudi future demand for natural gas will be satisfied

As mentioned above, Saudi Arabia will soon be in need of natural gas as fuel for its growing electricity demand. The proposed dual pipelines will help to satisfy this need and bring significant income to Qatar. Politically, this can lead to greater cooperation between the two countries.

Today, any discussion of energy is necessarily accompanied by environmental and geopolitical ramifications that must be addressed. The remaining chapters of this dissertation will explore the environmental and geopolitical impacts of this proposed project.

71 CHAPTER III

ENVIRONMENTAL IMPACTS

3.1 Introduction

The environmental impact of the construction and operation of the dual pipeline project proposed in this dissertation will be discussed in this chapter. The project has two major venues: onshore (over land, mostly unpopulated, from Ras Laffan to Qatar’s western shoreline; and across Saudi Arabia to the Kingdom’s western shoreline near Yanbu); and offshore (along the seabed of the Southern Bahrain Gulf, beneath between Qatar and

Saudi Arabia). Due to the arid desert characteristics of both Qatar and Saudi Arabia in the regions of the proposed pipelines, this chapter will focus mainly on the environmental impact the project may have during the construction phase on the benthic ecosystems of the seabed between Qatar and Saudi Arabia. The environmental impact of the operation, both onshore and offshore, will then be addressed.

3.2 A brief description of the Arabian Gulf Ecosystem [41]

The ecosystem of the Arabian Gulf has many components (VEC’s, Valued Eco- system Components). These components of the Gulf’s ecosystem benefit not only the primary production of the region’s rich variety of seafood but also contribute to primary production. Some important VECs are

 Seagrass beds

72  Coral reefs

 Mangrove swamps

 Mudflats

3.2.1 Seagrass beds

These highly productive ecosystems provide many important ecological func- tions. Seagrass beds provide food sources and feeding areas for many species found in the Arabian Gulf. By stabilizing loose sediment and by removing many pollutants through filtering, seagrass beds help to improve water quality. These beds also provide areas for young, economically important species such as shrimp and oysters to grow.

The seagrass beds that are found between Bahrain and Qatar occupy an estimated area of 1000 km2. Along with those found off the coast of the United Arab Emirates, these beds compose the largest in the region.

3.2.2 Coral reefs

Coral reefs contribute to a variety of ecological services to the Arabian Gulf: re- newable sources of seafood; genetic diversity; recreational value. Coral reefs provide a wide range of living areas for fish and other reef species. Traditionally, fisheries in the area have utilized the reefs as important habitats.

Anthropogenic activity has recently contributed to the decline of coral reefs in the

Arabian Gulf. Dredging, reclamation activities, sediment runoff from dredging and pollution from onshore sources have all contributed to this decline. A recent study estimates that almost 70% of original reef cover in the Gulf has been lost [42].

73 3.2.3 Mangrove swamps

Mangroves are widespread throughout the Arabian Gulf countries. The dominate mangrove species in Arabian Gulf is the Avicennia marina. Mangrove habitats are necessary to give shelter, food areas for different marine and terrestrial fauna such as fish, shrimp, turtles, and birds.

3.2.4 Mudflats

The Arabian Gulf is sedimentary in nature; as a result, mudflats are the most widespread habitats. These mudflats are important for colonization by algal and cyano- bacterial mats, which are important in the food chains of the area. These mudflats provide feeding and roosting grounds for shorebirds.

3.3 Environmental impact of the offshore construction phase

The construction of the offshore section of the proposed dual pipeline is fraught with potential environmental hazards. In the laying of the pipeline from the pipe-laying vessel onto the seabed, care should be taken to minimize the disturbance of seabed. Dis- turbances can lead to increases in turbidity, which can affect the reproduction and growth of marine organisms [43].

Another potential marine environmental hazard that accompanies the construction of the proposed pipeline is noise [44]. Offshore pipeline construction can lead to an increase in low-frequency, ambient noise levels. Many marine organisms depend on acous- tics as their key mode of communication, navigation, orientation, feeding and detection of predators. This is due to the fact that sound travels very well in the marine environment, while light does not. Also, reproductive behavior can be disturbed by excessive noise.

74 Prior to the construction of the offshore portion of the proposed pipeline, a survey of the sea floor between Qatar and Saudi Arabia must be made. Possible methods for carrying out this survey (e.g., seismology, sonar) have the potential for negatively impacting the marine environment and, therefore, must be performed with care.

Due to the sparse population and extremely arid conditions of the onshore areas of

Qatar and Saudi Arabia where the proposed dual pipeline will be laid, the environmental impact of the construction phase of the is minimal.

3.4 Environmental impact of the onshore and offshore operation phases

The impact on the environment of the onshore and offshore operation phases cannot be overlooked. The interaction of methane, the main component of natural gas, with the environment is extremely important.

3.4.1 The nature of natural gas

Natural gas is composed mainly of methane – an odorless, colorless gas and the simplest organic hydrocarbon. Methane has the molecular formula CH4; “ball-and-stick” and “space-filling” models of the methane molecule are given below:

ball-and-stick model of methane space-filling model of methane

As a fuel, the combustion of methane can be represented by the following chemi- cal equation:

75 CH4 + O2 → CO2 + H2O + heat

It has been shown that the combustion of natural gas (i.e., methane) results in the lowest CO2 emissions of all fossil fuels (see Figure 3-1) [45].

Figure 3-1, CO2 Emissions from Fuel Combustion

3.4.2 Methane as a greenhouse gas

Methane (and its combustion product, carbon dioxide) is one of a family of compounds know as greenhouse gases (GHGs). A pictorial representation of some GHGs is given in Figure 3-2.

Figure 3-2, Space-Filling models of some GHGs

76 Greenhouse gases are so named because of the heat-retaining effect they have when present in the atmosphere. An example of typical greenhouse is given in Figure 3-3.

This schematic illustrates the entrapment of heat in the greenhouse [46].

Figure 3-3, Greenhouse Schematic

The greenhouse effect operating in the Earth’s atmosphere is due to the presence of certain molecules (GHGs) that mimic the behavior of the glass in a typical greenhouse.

Figure 3-4 illustrates this phenomenon [46].

77 Figure 3-4, Greenhouse Effect

3.4.3 Methane emission in the natural gas industry [47]

In the natural gas industry, there are many sources of emissions into the atmosphere. These releases, or emissions, can be divided into three categories:

 Fugitive emissions

 Vented emissions

 Combustion emissions

Fugitive emissions are those unintentional leaks that arise from sealed surfaces. In the case of a pipeline, leaks may emanate from bad connections or corrosion.

Vented emissions are intentional releases into the atmosphere which may be by design or operational practice.

Combustion emissions come from the incomplete combustion of methane in en- gines and flares. Compressor engine exhaust is a source of such incomplete combustion of methane.

78 3.4.4 Emissions in the proposed dual pipeline project

The proposed natural gas dual pipeline will have twenty-four (24) compressor stations. Compressor stations are a major source of fugitive methane emissions. Leaks from equipment fall into two different categories due to differences in leakage characteristics:

1) those station components that include sources linked to station inlet and outlet pipelines, dehydrators, and other piping found outside the compressor building; and 2) those compressor-related modules located that are physically connected or immediately adja- cent to the compressors [47]. Additionally, compressors emit carbon dioxide (CO2) during fuel combustion.

3.4.5 Emission of methane and other GHGs into the atmosphere [48]

As mentioned above, methane in the atmosphere is a greenhouse gas. Gaseous methane is largely transparent to ultraviolet (UV), visible, and near infrared (IR) radiation

(the components of solar radiation). However, methane absorbs and reradiates the reflected far infrared thermal radiation, as illustrated in Figure 3-4. [49]

The proposed natural gas dual pipeline terminates at the LNG condensing facility in Yanbu. It is at this facility where the gas will be liquefied, resulting in the volume being reduced by approximately 600 times. This process results in the emission, additionally, of carbon dioxide (CO2), nitrogen oxides (NOx) and sulfur dioxide (SO2) – all GHGs.

There is also the possibility of the release of small quantities of volatile organic hydro- carbons (VOCs) as fugitive emissions.

In the liquefaction process, the emissions of GHGs are due to such things as [50]

 Combustion of fuel gas to power electrical generators and refrigeration compres-

sors

79  Incinerators, flares, fired heaters

 Low pressure carbon dioxide venting

 Leakage of natural gas from fugitive losses

3.4.6 Storage [50]

After the natural gas has been liquefied at the LNG facility, the resulting LNG will be pumped into storage tanks prior to being loaded onto the tankers. There is the possibility of fugitive leakage from these storage tanks, but such leakage is minimal. The design of the storage tanks reduces the need for systematic venting. The tanks are operat- ed at just slightly above atmospheric pressure; this procedure assures a minimal pressure differential between the tank and the atmosphere, reducing the possibility for leakage.

3.4.7 Possible emission during loading and unloading [50]

After storage, the LNG will be loaded onto LNG tankers for transport to European ports. During this loading process, the LNG remains at cryogenic temperature (-120 and

-170C [-184 and -274F]. The leakage of any natural gas boil-off is minimal, due to the compressing (i.e., re-liquefaction) of the boil-off and flaring.

3.4.8 Flaring [48]

In the operation of an LNG plant, such as the liquefaction plant that will be located in Yanbu, a flaring system is necessary and critical. Flaring is the controlled burning of gas released during operation when the gas cannot be processed for commercial use.

(See Figure 3-5) [51] This safety element protects equipment during operational mishaps and shutdowns. Some flaring is also necessary during normal plant operation to prevent the ingress of air and explosion hazards. The combustion of natural gas in the flaring pro-

80 cess results in the emission of carbon dioxide (CO2), nitrogen oxides (NOx), and some particulate matter. This can result in emission of black smoke with the flame.

Figure 3-5, Flaring system at a LNG plant

3.4.9 Shipping [50]

LNG tankers are designed to burn the natural gas boil-off as fuel (along with fuel oil). Leakages can occur while loading and unloading the LNG and while berthing and unberthing from the docks. Figure 3-6 shows a cross section of a LNG tanker (Moss De- sign). The main source of GHG emissions (CO2, NOx) from this type of tanker is the combustion of boil-off gas and the other fuels used by the tanker’s propulsion system.

81 Figure 3-6, Cross-section Moss design LNG tanker

The proposed pipeline will eliminate the need to travel from Qatar to Yanbu via a sea route, reducing the sea route by 2,700 nautical miles (see Figure 1-8). Of course, this reduction in sea travel will result in the reduction of the contribution of GHG emissions from the tankers.

3.4.10 Fate of released methane in the marine environment [52]

A portion of the proposed dual pipeline will be located off-shore, along the seabed between Qatar and Saudi Arabia. During operation, there is the possibility for methane leakage. When methane is released into the marine environment, it can travel up through the water column in two forms: as dissolved and as bubbles. Dissolved methane can be subject to microbial-mediated aerobic and anaerobic oxidation. When “bubble methane” reaches the sea surface, it can be released to the atmosphere.

82 3.5 Summary

This chapter has considered the possible environmental impact of the proposed dual pipelines. The ecosystem of the seabed between Qatar and Saudi Arabia was addressed. Environmental concerns – both onshore and offshore – during both the construction and operation phases of the pipelines were mentioned. The various types of methane emission and the effect of methane leakage were discussed. Methane, and its combustion product – carbon dioxide – are known as greenhouse gases (GHGs). The nature of the greenhouse effect was discussed.

To mitigate the deleterious effects of methane and carbon dioxide (global warm- ing), techniques have been developed for their capture and use (or storage). For example, during on-loading and off-loading of the LNG tankers, some boil off (i.e., gaseous methane) is inevitable. Measures can be taken to capture this methane, preventing its leakage into the atmosphere [53]. The captured methane is transferred to a compression area where it is compressed and moved on to the LNG trains for use as fuel.

Carbon dioxide emissions can be captured and stored, preventing their being released into the atmosphere [54]. This captured CO2 can be used for industrial purposes

(e.g., making of carbonated beverages, decaffeinated coffee, dry cleaning of clothes). It is also used in the oil industry for oil-field injection and other applications.

83 CHAPTER IV

GEOPOLITICAL IMPACTS

4.1 Introduction

The previous chapters of this thesis have discussed a new proposed route for the transport of natural gas and LNG from Qatar through Saudi Arabia to European markets utilizing two modes of transportation: a dual pipeline and an LNG fleet. Additionally, the impacts on the environment of the pipelines and fleet were addressed. The engineering techniques involved in the construction of the pipelines (both on- and offshore) along with the economic impacts of the proposed project were discussed. The new route will reduce the time required to reach European markets and will avoid the old maritime route’s two potentially dangerous areas, the straits of Hormuz and Bab el-Mandeb.

The current chapter is devoted to a discussion of the anticipated geopolitical con- sequences of the proposed route. The straits of Hormuz and Bab el-Mandeb present maritime travel with particularly uncertain circumstances – threats of closure of Hormuz due to geopolitical disagreements and piracy in the vicinity of Bab el-Mandeb. The effects of the proposed pipeline on members of the regional political group known as the Gulf Co- operation Council (composed of Saudi Arabia, Bahrain, Kuwait, Qatar, Oman, and the

United Arab Emirates) are discussed. The European geopolitics of natural gas will be addressed.

84 4.2 Natural gas routes and geopolitical conflicts

In this era, actual and potential energy routes have a significant influence on political decisions. Neighboring countries – both allies and adversaries – are forced to cooper- ate due to energy route considerations. There are nations that have dominance in these gas trade routes and these routes can have significant influence on international politics.

The effect of geopolitical forces on the timing, direction, and gas flow size is noteworthy, be it by pipeline or liquefied natural gas. Concerns over import dependency of natural gas have caused governments to attempt to influence the playing field for gas flows.

There are growing concerns with import dependence that originate in fluid international political and economic relations. For those gas-exporting countries that have a strong dependency on transit countries, these concerns are problematic [55].

4.2.1 Current geopolitical problems affecting trade routes for LNG [56]

The export of LNG from the Middle East is susceptible to many security threats.

Maritime transit routes in the region are vulnerable to disruptions from adversarial governments (e.g., the “Tanker War” of 1987) and from pirates bent on kidnapping for ran- som. Figure 4-1 presents a map that highlights these problem areas (both infrastructure and energy transit).

85 Source: Robin Mills Figure 4-1, Energy security threats in the Middle East

4.2.2 The Strait of Hormuz [57]

Figure 4-2 presents a map of the region between the Arabian Gulf and the Gulf of

Oman known as the Strait of Hormuz. The Strait is a narrow waterway, 22 nautical miles wide at its narrowest point; the Strait falls within Omani and Iranian territorial waters.

The two shipping lanes, one in each direction, each two miles wide, are separated by a two-mile buffer.

86 Figure 4-2, Arabian Gulf and the Strait of Hormuz

Although the Strait has never been closed, shipping has been threatened often.

For example, during the Tanker War, 411 ships were attacked (including 239 oil tankers);

55 were either sunk or damaged beyond repair [56]. Threats have often been made by

Iranian officials to put a blockade across the Strait. These threats were made in 2008,

2011 and 2012, coinciding with the intensification of sanctions over Iran’s nuclear pro- gram.

Although threats of a blockade have often been made by Iran, they have never been brought to fruition, perhaps due to the fact that such a blockade would hinder Iran’s own ability to export oil and gas and import needed goods.

87 4.2.3 The Strait of Bab el-Mandeb [58]

Figure 4-3 presents a map of the region between the Red Sea and the Gulf of

Aden known as the Bab el-Mandeb Strait. It is located at the southeast corner of

Yemen, across from the eastern coast of Africa.

Source: Google Maps Figure 4-3, Bab el-Mandeb Strait

Like the Strait of Hormuz, Bab el-Mandeb is an important sea lane for the transportation of LNG. And, like Hormuz, Bab el-Mandeb is subject to major threats. In the case of Bab el-Mandeb, the primary dangers are piracy emanating from Somalia and ter- rorism. For example, in 2002, a French oil tanker (Limburg) was rammed off the coast of

Aden, with the loss of one crewman and the crippling of the ship. In the same area, a

Saudi oil tanker carrying 2 million barrels of oil was captured by Somali pirates in 2008.

The threat continues to date [56].

88 4.3 The Gulf Cooperation Council (GCC) [59]

In 1981, a political union of Arabian Peninsula states was formed and named

“The Gulf Cooperation Council.” GCC members are the United Arab Emirates, the

Kingdom of Bahrain, the Kingdom of Saudi Arabia, the Sultanate of Oman, the State of

Qatar and the State of Kuwait. Figure 4-4 presents a map of GCC members.

Figure 4-4, Gulf Cooperation Councils members

The objectives of the Council are to join the six states to effect coordination, integration and inter-connection amongst them. Historically, there are deep religious and cul- tural ties that connect the member states; strong familial relations exist between their citizens.

4.3.1 The effect of the proposed new route on the political relationships of GCC members

In accordance with the objectives of the GCC, its member countries strive for economic and political integration. Considering the geopolitical conflicts existent in the

Middle East region, GCC member countries must concentrate on securing their energy routes to international markets.

The Dolphin project was the first example of cross-border refined natural gas transmission in the history of the GCC (vide supra). The subsea pipeline stretches from

89 Qatar’s offshore North Field to the UAE and Oman. Despite some political “issues” that existed between Qatar and the UAE, like “family disputes,” these issues were overcome to provide regional stability and cooperation. The Dolphin project continues to this day to provide a stable route for the transportation of this important resource – natural gas.

The proposed dual pipeline for the transport of natural gas from Qatar across Sau- di Arabia to the port of Yanbu will serve to not only provide a faster and safer route to

European markets, but will also strengthen the brotherly relationship between these two nations. This enhanced relationship will be emanated to the other GCC member states, strengthening the bonds between all of them.

4.3.2 The effect of the proposed new route on the political relationships between GCC members and European countries

In 1974, a relationship between the Arab Gulf states and Europe, known as the

Euro-Arab Dialogue, was initiated. This initiative ended in 1989 without any significant achievement. The creation of this Dialogue had been sparked by the oil embargo of 1973.

The terrorist attack on the US on September 11, 2001 ignited an impetus to increase relations between the region and the European Union (EU). It was decided in 2002 to open a

Commission delegation in Riyadh, a first for the region. Amongst other things, energy cooperation would receive priority by the Commission. In 2004, the Strategic Partnership with the Mediterranean and the Middle East was adopted. With this new strategy, the EU became committed to advance its partnership with the Gulf countries [60].

Today, the need for an enhanced, deep and strategic relationship between the

GCC and EU is called for in Europe. It is not only the supply of oil that motivates this need. The importance played by the GCC in the areas of diplomacy and economics in the

90 Middle East and North Africa (MENA) is more and more significant. The huge oil and gas reserves of the GCC member countries are extremely important energy supplies to

Europe and the world; 40% of the world’s total oil reserves and 25% of the world’s natural gas reserves lie below the deserts in the region; Qatar has reserves of 25 billion cubic meters of natural gas. The GCC is a trusted ally and a stable and reliable economic part- ner of the EU. It invests large amounts of capital in the EU countries [61].

The recent crisis in Ukraine has highlighted the potential major importance of the

GCC to the countries of the EU. The role played by Russian energy in the geopolitics of

Europe was displayed during the recent events in Ukraine. Ukraine is a transit country through which Russia transports half of its natural gas headed to Europe [62]. The proposed new route from Qatar across Saudi Arabia to European markets has the potential to further develop and strengthen the political relations between the GCC and Europe.

4.4 European Geopolitics of Natural Gas [63]

The trading of energy between nations has become one of the major political issues in 21st century Europe. Of particular importance are the energy security of the importers and consumers, the large profits made by the energy producers and exporters and energy trading firms, and the possible political influences of national governments and alliances like the EU. The transportation of natural gas involves the crossing of international frontiers and, as a result, is dependent on the cooperation of various governments; politicization is a natural consequence. The demand for “clean energy” and the lowering of the emission of air pollutants (e.g., green-house gases) in Europe makes the use of natural gas as a primary source for energy important, its supply becoming even more of a political matter.

91 The problems that arise from the mixing of money and politics makes the international gas trading game very unclear. The long-term intentions of some of the players are particularly vague. Oftentimes, this lack of transparency is due to changing political in- teractions between the players that are not directly related to the trading of energy. Ex- amples are the Russian-Georgian war in 2008 and the recent prolonged Ukraine crisis.

4.4.1 Europe’s current reliance on Russian gas [64]

During the ten-year period, 2003–2013, Russian gas exports to European countries ranged from a low of 145 bcm per annum to a high of 179 bcm per annum. Russia

(Gazprom) is the largest single supplier of gas to these countries.

Most of the gas exports to Europe from Russia are sold on long-term contracts that vary in length from 10 to 35 years. Figure 4-5 presents a profile of Russian long-term contracts with European buyers from 2005 to 2030, with annual contract quantities

(ACQ) and “take-or-pay” levels. These contracts are legally binding, subject to international arbitration, and contain “take-or-pay” clauses which require buyers to pay for a minimum quantity of gas.

Figure 4-5, Russian long-term export contracts with European countries to 2030

92 The importance of Russian gas to EU countries was brought to prominence by the

2014 Ukrainian crisis. The post-Cold War political and strategic relationships between the European states and Russia were fundamentally changed by the crisis. It is felt by many that this dependency on Russian gas is unacceptable in that it provides Russia with a political lever to influence its relations with European countries. The history of Soviet dominance in the Baltic and east European areas is not easily forgotten. Fear of invasion by the “Russian bear” has only been heightened by the recent events in Ukraine. The countries which hold this fear could terminate their gas buying contracts before they expire (an expensive proposition) or could fail to renew them when they do expire. These countries would need to search for alternative gas supplies.

4.4.2 Europe’s new options for gas supplies

Currently, the majority of natural gas imported into Europe is supplied by Russia.

There is a sizable supply imported from North Africa; LNG is exported to Europe from the Middle East and other countries. Table 4-1 lists the main origin of primary gas imports (by percentage units) to the 28 member states of the EU, from 2004 – 2014 [65].

Table 4-1, Main Origin of Primary Energy Imports to EU-28, 2004 – 2014

93 Since 1980, North Africa (Algeria, Libya) has been Europe’s second largest supplier of natural gas. In the long term, the North African region has the potential to be a key source of gas supplies to Europe; however, the possibility for an increase in North

African gas exports to Europe in the short- and medium-term is not clear. To increase exports, major capital investment is needed; the Arab Spring event in 2010 has made the climate for investment cloudy. Additionally, the significant increase in domestic demand for gas reduces the volume that the region has for export. Experts have predicted that any net increase in gas exports from North Africa will take place after 2020. Lack of investment in infrastructure, along with an increase in local demand for gas clearly places hurdles on the export track from the region [64].

A new gas source option for Europe is the region of the Caspian Sea and Central

Asia. Gas can be brought to Europe via Turkey from the Caspian region. This option has been part of European policy discussions for 25 years. The Caspian region countries of

Azerbaijan and Turkmenistan, and Iran and the Kurdish of Iraq are potential suppliers

[64].

The recent Ukrainian crisis brought upon by Russia has disturbed the supply of natural gas to Europe from Russia. The countries of the Caspian and Central Asia regions fall under the geopolitical influence of Russia, making this supply option an unreliable resource, despite the recent nuclear agreement between Iran and the West.

The scenarios mentioned above require that Europe take on a more rational energy policy, one where the demand for gas will grow again; however, the security of supply will become more of a problem. Europe’s current dependency on Russia’s pipelines for

94 natural gas imports is fraught with uncertainty (e.g., the 2014 Ukrainian crisis). Increas- ing the importation of LNG would help to remove this uncertainty [66].

What new options are available to Europe for reliable increased importation of

LNG? An emerging supplier of natural gas is Australia; it is predicted to become the largest exporter of LNG by 2019 (with an expected capacity of 86 mtpa), moving up from its current second position to overtake Qatar. The current largest exporter of LNG is Qa- tar (77 mtpa). Increasing Europe’s LNG imports from Qatar is another possibility [67].

An emerging LNG supplier is the United States, due to the exploitation of indige- nous shale gas fields. The US Department of Energy had received 25 applications for new LNG export projects by mid-2016. These new projects offer a potential future capacity of 311 mtpa. For construction to begin on these new projects, approval must be granted by the US Federal Energy Regulatory Commission. Out of the 25 mentioned, only 5 are under construction (with capacity of 64 mtpa) [67].

A comparison of the options mentioned above leads to the following conclusions:

 LNG originating in Australia is expensive due to high labor costs, high equipment

costs (accompanied by expensive delays) and high transportation costs (due to the

great distance from Australia to Europe). Without a return of the LNG price to

within the range of $10 – 14/MMBtu from its current low value, positive returns

on a full cost basis will not be generated by the existing infrastructure. It should

also be noted that Japan has already been assigned 91% of Australia’s future LNG

output (vide supra, Chapter 1) [67].

 As mentioned above, America has the potential capacity to export 311 mtpa of

LNG (vide supra); America’s relative proximity to Europe would seem to make it

95 an attractive source. However, due to economic forces, the cost to Europe for

American LNG is around $6.50 – 7.00/MMBtu; this price is well above the spot

price in the United Kingdom or continental Europe (approximately $4/MMBtu in

mid-May 2016). A very competitive price of around $3.50 – 4.00/MMBtu is pos-

sible; the problem is that at this price, a positive return to investors will not be

feasible; in fact, investors would actually lose money meeting their contractual

obligations [67]. Since the discovery of shale gas fields in the United States,

America’s role in the natural gas world has been reversed: once an importer of

natural gas, America is now an exporter of this energy commodity. Its future as an

exporter, though, is not hurdle free. Environmental concerns and increasing do-

mestic demand may alter America’s exporting prospects.

 A very attractive alternative for Europe is to increase its imports of LNG from

Qatar. Compared to the relative uncertainties of other suppliers mentioned above,

the stability of Qatar is noteworthy. LNG output from Qatar’s North Field was

limited to 77 mtpa in 2005 (and remains so). The low cost of production is also

very attractive – estimated at below $2/MMBtu. As a result, in spite of the low

prices for LNG seen since 2015, Qatar is likely to remain one of the largest ex-

porters in the world for the foreseeable future. However, there is a problem – the

transportation route from Qatar to Europe. At present, the shortest route from Qa-

tar to Europe is around the Arabian Peninsula (including the Straits of Hormuz

and Bab el-Mandeb), going through the Suez Canal, and across the Mediterranean

(vide supra, Chapter 1).

96 According to the facts given above, Australia would be a possible supplier of

LNG to Europe; however, its commitment to Japan, and the close Asian markets, limit its attractiveness to Europe. America would be a reliable supplier to Europe if the international spot-market price increased above $6.50 – 7.00/MMBtu, allowing the US to increase its investment in LNG production. The goal of this dissertation has been to present an alternative route from Qatar to Europe. As mentioned previously, this proposed dual pipeline and LNG plant project will result in the production of 29 mtpa of LNG. The proposed new route will avoid the current dangerous sea lanes around the Straits of Hor- muz and Bab el-Mandeb, and will shorten dramatically the distance and time required for transport. And, due to the Qatar’s low LNG production costs, Qatar will continue to be a reliable and attractive supplier.

4.5 Summary

This chapter has discussed the relationship between natural gas routes and possible geopolitical conflicts. The attempts of governments to influence gas flows due to concerns of import dependency of natural gas was discussed in detail. The susceptibility to many security threats in the exportation of LNG from the Middle East is great. Maritime transit routes – particularly the straits of Hormuz and Bab el-Mandeb – are subject to disruptions from adversarial governments, piracy, and terrorist threats.

The local political alliance – the GCC – must concentrate on making their energy routes to international markets secure. The successful Dolphin project shows how cooperation within this group can lead to regional stability. The project provides a stable route for the cross-border transportation of natural gas. This dissertation’s proposed dual pipeline and new route for natural gas transportation should strengthen the relationship

97 amongst the GCC member states. Also, the proposed new route should have a positive effect on the political relationships between GCC and EU members.

Europe is currently very dependent on Russia for its supply of natural gas. One of the transit countries utilized by Russia for its export of natural gas to Europe is Ukraine.

The recent crisis has led to periodic disruptions in the exporting of natural gas from Rus- sia. These disruptions have led many to feel that European dependency on Russian gas is unacceptable; the dependency gives Russia an influential political lever in its relation with EU countries.

There are options available to Europe for sources of gas supplies that are unhin- dered by the “Russian Bear.” These supplier options for natural gas are North Africa, the region of the Caspian Sea and Central Asia; supplier options for LNG are Australia, the

United States and Qatar.

Qatar is a particularly attractive alternative supplier. The production cost of LNG in Qatar is the least expensive in the world ($2/MMBtu). The proposed new route offers

Europe an alternative that is less expensive and more reliable than almost any other option.

98 CHAPTER V

CONCLUSION AND RECOMMENDATIONS FOR THE FUTURE

This dissertation analyses the creation of a new transportation route for the transport of natural gas/LNG from Qatar to Europe. The construction of a dual gas pipeline is proposed from Ras Laffan Industrial City in Qatar to Yanbu in the Kingdom of

Saudi Arabia, approximately 861 miles (812 miles on-shore, 49 miles off-shore). An analysis of the costs involved in the construction of this dual pipeline and of a natural gas liquefaction plant in Yanbu is presented. The liquefaction plant accounts for approximately 64% of the total project cost. The total cost of the pipelines is 30.24% of the total project cost. 5.76% of the total project cost is attributable to the compressor stations.

The benefits of a new route for the transportation of natural gas/LNG from Qatar to Europe are

 Avoidance of treacherous sea routes

 Decrease in time required for delivery

 Reduction in transportation costs

 Economic benefits for Saudi Arabia (transit fees, re-export of LNG, new

job creation, satisfy need for alternative fuel for electricity production)

 Economic benefits for Qatar (efficient access to European markets, future

sales to Saudi market)

 Reduction of greenhouse gases from LNG fleet vessels as a result of the

shorter maritime route

99  Trapping and conversion (for industrial use) of greenhouse gasses (CO2,

CH4) released from the compressor stations and the LNG plant.

 Provide a secure Qatari natural gas route to Europe

 Enhancement of relations between GCC member states

 Enhancement of relations between GCC and Europe

 Providing of a stable option to Europe for natural gas imports

As a result of this study, there are certain recommendation that can be made. The investigation has shown that this proposed project can heap benefits not only on Qatar and Saudi Arabia, but on the member states of the GCC and Europe.

The following proposals are recommended:

 The Gulf Cooperation Council member states must work together and collaborate

to secure their energy transportation routes by supporting one another and remove

any foreseeable hurdles

 Saudi Aramco and Qatar Petroleum should invest in this proposed project in order

to reach their economic goals

 A transportation company for the transport of LNG from Saudi Arabia to Europe

should be formed jointly between Qatar and Saudi Arabia

 The Kingdom of Saudi Arabia should invest to explore for new fields in the

Western Provence for conventional and unconventional gas reserves in order to

satisfy future domestic demand and for export

 Investment by Qatar in LNG strategic storages in Saudi’s Western Provence in

order to continuously supply Europe in case of disruptions (i.e., plant or pipeline

shutdown)

100  Investment in CO2 sequestration facilities

 The dual pipelines should be buried in order to assure security

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107

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108

APPENDICES

109

APPENDIX A

PIPELINES RAW DATA

Diameter Location Length, MilesMaterial Labor Misc ROW & damagesTotal $/mile 8 South Carolina 28 2762509 20896941 9088522 2903245 35651217 1273258 8 Nevada (lat.) 35.2 6914341 17232716 2227106 590999 26965162 766056 12 West Virginia (lat.) 9.29 3137352 14606491 6698659 2499750 26942252 2900135 12 Tennessee 10 2228422 20841396 19647280 6563628 49280726 4928073 14 Kentucky (R.) 22.5 19070199 64658263 32547975 3159048 119435485 5308244 16 Massachusetts (lat.) 1.2 521934 6873406 9054585 1545988 17995913 14996594 16 Pennsylvania (L)3 7.2 2251504 7085000 17413496 3000000 29750000 4131944 16 Delaware(L) 10.1 4267743 11864160 13870597 2075000 32077500 3175990 20 Pennsylvania (R.) 3 1824188 10649200 5674019 — 18147407 6049136 20 Nebraska (lat.) 11.7 4517914 18854141 12472523 5084742 40929320 3498232 20 Kentucky-Indiana (lat.) 29.9 10828000 45469000 10959000 6800000 74056000 2476789 20 Pennsylvania (R.) 34 16252000 2456000 103714000 13586000 136008000 4000235 24 New York (R.) 3.05 2229383 6415769 5286168 1330920 15262243 5004014 24 Washington (lat.) 3.1 3439619 11802419 7514667 — 22756705 7340873 24 Virginia 4.33 4274263 10776945 13167263 753716 28972187 6691036 24 West Virginia 5 8258014 17025549 17767354 2233250 45284167 9056833 24 Oklahoma (lat.) 16.2 8750000 17300400 2637075 1726000 30413475 1877375 24 New York 96.65 54319820 184405412 82781766 14199645 335706643 3473426 24 Mass.-Conn.-NY (L) 7.97 13933400 31533543 30157597 10045640 85670180 10749082 24 Ala.-Ga.-Fla. 509 494920613 758984318 1130069320 287597204 2671571455 5248667 24 WV-Penn.-Ohio (lat.) 238.4 210874734 488310024 290213258 40450405 1029848421 4319834 26 Ohio (R.) 10.08 11053668 31624946 16881461 7304060 66864135 6633347 30 Virginia (R.) 2.52 1702333 20147514 10637702 1323128 33810677 13416935 30 West Virginia-Ohio 34 23970811 127430716 55613786 20244687 227260000 6684118 30 Pennsylvania 57.39 66127550 208544686 164575712 40264277 479512225 8355327 30 Kentucky (R.) 1.57 1731081 9119216 7889022 162125 18901444 12039136 30 Louisiana (lat.)(L) 34.1 37200000 125100000 48000000 8300000 218600000 6410557 30 Penn.-WV-Ohio 160.5 149256811 45222976 354369658 22113596 570963041 3557402 36 Nevada (R.) 1.56 2159100 198500 6165200 1876000 10398800 6665897 36 Pennsylvania (L) 2.92 6937323 22730527 16598611 895300 47161761 16151288 36 Louisiana 7 19979382 34304232 31696084 4254448 90234146 12890592 36 Kentucky (L) 7.6 6934400 19651900 12598728 1938800 41123828 5411030 36 Pennsylvania (L) 8.1 13454639 28715152 27094081 2117189 71381061 8812477 36 Florida 126 123709840 202444408 240028000 154812983 720995231 5722184 42 Alabama (L) 2.55 3074371 6270566 7530655 210591 17086183 6700464 42 Alabama (L) 3.92 5216183 9878888 9112561 308730 24516362 6254174 42 Alabama (L) 5.3 7130148 11474600 12731923 418087 31754758 5991464 42 Alabama (L) 5.48 7259668 12487780 14315443 489613 34552504 6305201 42 Alabama (L) 6.73 10169367 14877056 14792394 978557 40817374 6064989 42 Alabama (L) 7.48 11160824 15630559 18170090 676407 45637880 6101321 42 Alabama (L) 7.6 8376390 16329370 16799572 586244 42091576 5538365 42 Pennsylvania (L) 8.56 13562275 43040380 31372342 2207986 90182983 10535395 42 Ohio-Michigan (L) 100 123459549 247877937 162188148 18108943 551634577 5516346 42 Pennsylvania 126.31 257662581 445246498 409789868 67467112 1180166059 9343410 42 Ohio 374.5 425249569 858157116 569290020 65573601 1918270306 5122217

110 APPENDIX B

COMPRESSOR STATIONS RAW DATA

Location Horsepower material Labor Land Misc. Total $/hp Pennsylvania-Maryland 4000 8372310 9492113 88840 6508169 24461432 6115 Texas 5280 13185836 6341458 1206508 23060767 43794569 8294 Virginia2 6000 7922272 11724279 153000 14049506 33849057 5642 Texas 8400 19619358 11033491 182500 22045951 52881300 6295 Texas2 8400 15512379 7911412 105000 20646159 44174950 5259 Kentucky2 10771 13876400 3380800 9500 5202473 22469173 2086 West Virginia 10771 16257741 11453586 1132632 17091618 45935577 4265 Indiana2 10915 14407000 12905000 53000 7896000 35261000 3231 Louisiana 10915 14416000 500000 553000 17848732 33317732 3052 Louisiana 12500 17800000 13600000 100000 9400000 40900000 3272 Louisiana2 12500 15902839 6655755 207040 30867997 53633631 4291 Illinois 15000 18985208 5262510 739200 913535 25900453 1727 West Virginia 15000 17492088 11134250 460000 8310895 37397233 2493 Kentucky 16000 23491600 12561500 532437 22872598 59458135 3716 Pennsylvania2 16000 20523854 8999832 90379 13703156 43317221 2707 Pennsylvania2 16000 16862516 5579627 90379 10668158 33200680 2075 West Virginia 20500 21550959 13598002 1247068 20944571 57340600 2797 Florida 20500 23127876 8039004 23408 25865413 57055701 2783 Florida 20500 19867561 7815283 1000000 19400714 48083558 2346 Georgia 20500 19867558 7815283 900000 19555539 48138380 2348 Pennsylvania2 20500 27284153 25054227 255990 25868163 78483033 3828 Kentucky2 20500 20115998 7617278 10500 16348408 44112684 2152 Ohio 21000 25170900 13570000 660000 13517759 52939659 2521 Virginia 21830 29141500 18141416 38600 20807203 68128719 3121 Ohio 23877 28192665 462713 651514 38087974 67394866 2823 Virginia2 25000 20453040 16487424 50810 30730483 67721757 2709 Ohio 25830 40768292 11357239 435176 8839867 61400574 2377 Maryland2 30000 27984502 22992885 135022 21838196 72950605 2432 Pennsylvania 30000 35418722 29616585 1564870 44518976 111119153 3704 Tennessee 30000 58922000 19768600 1506640 43672032 123869272 4129 New Jersey 30500 23263556 11643208 1453278 33779973 70140015 2300 Alabama 32000 38662930 15041970 809900 27247590 81762390 2555 Kentucky2 32000 26678500 11460100 28000 12740731 50907331 1591 Kentucky2 32000 42338309 15402505 30500 18135132 75906446 2372 Louisiana 32000 36489980 13100210 1267470 22677804 73535464 2298 Louisiana2 32000 35975876 13677357 444888 23141747 73239868 2289 Florida 36400 44083859 10771176 2966680 38331166 96152881 2642 Pennsylvania 40000 39121785 29368354 1929968 43957085 114377192 2859 Louisiana 64000 80561300 33517300 2301600 36514900 152895100 2389 Alabama 71000 65915515 19421902 2013500 47395069 134745986 1898 WV-Penn.-Ohio 72645 133306605 45764725 1683538 33996608 214751476 2956 Ohio 82000 105547600 52729600 7149200 60441254 225867654 2754 Ohio 114945 202901251 52982823 1944345 45151811 302980230 2636 Texas 121750 149729000 53896000 1753000 178444000 383822000 3153 West Virginia-Ohio 143000 131083228 74317641 3641528 133501181 342543578 2395

111