© Gastech 2005

Gastech 2005

MEDGAZ Pipeline: Ensuring Energy Security for the Iberian Peninsula

by

Jay Chaudhuri, MEDGAZ S.A.

www.medgaz.com

16th March 2005

© Gastech 2005 Chaudhuri 2

SUMMARY It is accepted by the energy economists that for short to medium distance gas transportation; high pressure trunk lines are the safest and cheapest way of transporting gas to market. The proposed ultra-deep water natural gas pipeline linking Algeria and Spain is designed to transport up to 16 BCM/year gas into the Iberian and European energy markets. When commissioned, the proposed pipeline will be well placed to meet the demand for gas in the Iberian market which has shown compound annual growth rates of 17%. Extensive technical studies conducted by Medgaz have already validated the proposed deepwater pipeline design and the associated offshore route, which will traverse the Mediterranean Sea at water depth in excess of 2000 metres. Internal and external studies indicate that the proposed Medgaz pipeline will be the most economic solution for enhancing and ensuring energy security for the Iberian Peninsula. The paper details the design, operation and environmental considerations which have governed the project development strategy to-date. The proposed pipeline is expected to be commissioned during 2008.

1.- GAS CONSUMPTION & SUPPLY COSTS : IBERIAN PENINSULA • Iberia’s fast growing energy market poses challenges

to the existing infrastructure. Spanish gas consumption has grown from 21.4 BCM in year 2002 to 28.3 BCM in year 2004. It is anticipated that in the year 2011 annual demand will exceed 44 BCM (Fig. 1).

• Manufacturing growth and need to switch to ‘Kyoto Protocol’ friendly fuels is increasing gas demand at 17% compound rate; while system capacity has barely managed to keep in pace with the demand growth.

• There are a number of gas and power infrastructure projects underway but peak capacity shortages currently being experienced will stretch to year 2010 (Fig. 2).

• Delays in increasing infrastructure capacity will harm the development of the Iberian energy market in the short to medium term and growth potential of the economy.

• ‘Average to peak’ capacity margin lower than OECD average.

Fig. 1 – Spanish Gas System Capacity (Source : CNE, 2004)

Fig. 2 – Spanish Peak Day Gas Supply & Demand (Source : Wood Mackenzie, 2003) The Long Run Marginal Cost (excluding producing country royalty) for potential gas supply to Spain has been studied extensively by independent energy consultants OME and Wood Mackenzie. The studies indicate clearly the economic benefits of the proposed MEDGAZ gas pipeline, since this is the lowest cost supply option for Spain (Fig. 3).

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Firm Demand Interruptible Demand Indigenous Production

Contracted Supply Storage (*) Additional Capacity

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© Gastech 2005 Chaudhuri 3

Fig. 3 – LRMC supply cost (source: OME)

2.- OVERVIEW OF THE MEDGAZ PROJECT MEDGAZ project was initiated by Cepsa and Sonatrach in 2001. Current partnership structure of the project is shown in Fig. 4.

Schematic of the pipeline routing is illustrated in Fig. 5.

Fig. 5 - Medgaz Offshore Pipeline Route

The principal features of the Medgaz system are outlined below: • Capacity to supply 16 billion m³/year of gas to the

Iberian Peninsular and Europe via two 24 inch diameter submarine pipelines planned for construction in two phases.

• Two offshore pipelines will directly connect the Algerian gas fields and Spanish gas network across the Mediterranean (Alboran Sea) at a maximum depth

of 2155 m and an approximate length of 200 km (Fig. 6).

• The proposed route is characterized by: - non-steep continental slopes on either side of the

Alboran Sea; - quaternary clay soil for the major part of the

route; - stable sea-bed conditions.

• Two onshore terminals will assure the safe and efficient transportation of gas:

- BSCS: Beni Saf Compressor Station, near Sidi Djelloul in Algeria

- OPRT: Offshore Pipeline Receiving Terminal, near Almería in Spain

• Phase 1: Construction of the east offshore pipeline and the short onshore sections for the second west pipeline, the compressor station at Beni Saf and the receiving terminal at Almería – Capacity 8 billion m³/year.

• Phase 2 : Construction of the west pipeline – Total capacity of the two pipelines 16 billion m³/year

• Onshore connecting pipelines (to be constructed by others):

- Algerian section: 550 km. - Spanish section: 285 km.

Fig. 6 – Pipeline Route Profile

3. TECHNO – COMMERCIAL DATA Gas transportation build-up profile:

Year 1 2 3 4 5 15Flow [BCM/y] 6 7 8 8 8 16

Number of pipelines 1 1 1 1 1 2

Design Pressure = 220 barg Maximum temperature = 60º C Minimum temperature = 0º C Design Code = DnV OS F101 Steel Grade X70 = SAWL 485 I DUF Pipe Thickness = 22.9 / 28.5 / 29.9 mm

SONATRACH20%

CEPSA 20%

BP 12%

IBERDROLA 12%

GdF 12%

ENDESA 12%

TOTAL 12% MEDGAZ - Transportation System

OFFSHORE SECTION

-2200-2100-2000-1900-1800-1700-1600-1500-1400-1300-1200-1100-1000-900-800-700-600-500-400-300-200-100

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Fig. 4 MEDGAZ Partnership Structure

Supply costs* for potential gas supply for SPAIN (2010-2020)

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NORWAY-Norwegian Sea

NORWAY- LNG Snohvit

YEMEN LNG

OMAN LNG

UAE LNG

IRAN LNG

NIGERIA LNG

QATAR LNG

TRINIDAD &TOBAGO-LNG

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NORWAY-North Sea Medium fields

LIBYA LNG

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ALGERIA via GME

ALGERIA via Medgaz

$/MBTU* Long Marginal Cost excluding producer country's royalty

© Gastech 2005 Chaudhuri 4

4. MARINE SURVEY CAMPAIGNS Several marine surveys were performed during 2002 – 2004 period;

• Geological inspections of the proposed route • Environmental survey of marine flora/fauna on the

offshore and onshore sections on the Algerian and Spanish sides.

• Geophysical investigations close to coast at 25m depth isobathe

• Onshore inspection of the shore approach in Algeria and Spain

• High resolution seismic survey of the route for better evaluation of the geological risks.

• Bathymetry, environmental, visual and magnetic surveys

5. ROUTE SELECTION The information provided by the survey campaigns has permitted selection of the definitive pipeline route to meet the following objectives:

• Minimisation of environmental impact • Protection of marine flora/fauna on the offshore and

onshore sections on the Algerian and Spanish sides. • Avoidance of natural obstacles that exist along the

route • Low geological and geotechnical risks • Minimal number of cable crossings • Ensuring the feasibility to employ S-and/or, J-lay

construction method • Minimisation of ‘free-span’ risks

6. ROUTE CHARACTERISTICS

• Length of offshore route 198.3 km • Maximum water depth 2155m (49% > 1000m) • 19 curvature points • 5 crossings of telecommunications cables (all at

water depth greater than 1000m ) • 1 geological fault crossing : Yusuf Fault • Critical zone KP71 – KP77: Slopes <14 degrees • More than 95% of the route: slopes less than 4

degrees (Fig. 7) • Critical zone KP71 – KP77: Habibas escarpment

Fig. 7 Slopes of the Spanish Continental Shelf

7. GEOTECHNICAL INVESTIGATIONS During 2002, CSIC performed a comprehensive study of the geo-morphology and seismic risks of the proposed offshore route which helped to focus the critical zones of the route for subsequent detailed study and geotechnical investigations (Figs. 8 and 9). During 2003, an in-depth geotechnical investigation was performed involving soil sampling and in-situ tests at more than 130 locations along pipeline route. Work programme included; • Sampling by piston corer • Cone penetration test (CPT) • Seismic CPTs • T-bar test • Water temperature and chemical assay in laboratory • Geotechnical laboratory tests including shear cyclic

loading and carbon dating

Fig. 8 Bathy-Morphological Characteristics of Pipeline Route

Source: CSIC

© Gastech 2005 Chaudhuri 5

Fig 9 Seismic Risk Source Distribution

8. GEOHAZARD EVALUATIONS Based on the results of various surveys conducted by MEDGAZ and subsequent technical studies, it can be concluded that the proposed`pipeline route will benefit from;

• Absence of significant geological and seismic risks; • Ideal seabed conditions for pipelay and long-term

operation of the pipeline;

• The steepest slopes encountered at the Habibas escarpment (KP71 - KP77) will not affect pipeline stability and long-term operation.

• The critical slopes of the route are stable for seismo-tectonic events with return periods of 475 years.

• The design of the pipeline is demonstrated to be extremely robust for safe operation in conceivable earthquake conditions.

9. MEETING THE ENVIRONNEMENTAL CHALLENGES The pipeline design incorporates the following features;

• To minimize the problems of environment during construction, shore approach sections of the second 24 inch pipeline will be built during Phase 1 of construction of the first pipeline. Thus, when the second offshore pipeline is constructed, there will be no significant onshore construction activity in Algeria and Spain.

• The width of the offshore corridor is minimized; while allowing sufficient space for the installation of the future second line.

• The program of work is planned to avoid significant construction installation activities close to the coastal zones during the peak tourism periods of the summer months.

• Dredging and rock-dumping is minimized to reduce the disturbance of sea-bed flora and fauna.

10. DESIGN BASIS FOR COMPRESSOR STATION

• BSCS inlet pressure : 45 barg

• BSCS outlet pressure : 200 barg (max.)

• Phase 1 conditions for operation of a single offshore pipeline:

- Capacity : 8 BCM/year

- 3 compressors in service : 2 LP+1 HP

• Phase 2 conditions for operation of two offshore pipelines:

- Capacity : 16 BCM/year

- 5 compressors in service : 3 LP+2 HP

Fig. 10 BSCS – 3D Visualisation 11. DESIGN BASIS FOR RECEIVING TERMINAL

• OPRT Arrival Pressure : 82 barg

• OPRT arrival temperature : 0º C (min)

• Energy requirement for gas heating : - 0 MW for steady state operation - 12, 6 MW during re-start from marine pipeline packed condition

• Spanish pipeline entry pressure : 80 barg

Fig. 11 OPRT – 3D Visualisation

12. ENVIRONMENTAL ASPECTS FOR DESIGN OF ONSHORE TERMINALS The MEDGAZ project has applied proven environmental principles for the design of the terminals. Some of the design features considered to minimise environmental impact include: • Specification of dry low emission turbines for

compressor drives; • Selection of BSCS compressor configuration for

optimum fuel consumption at projected gas transportation rates;

• Use of air for actuation of BSCS valves; • Use of flaring (instead of venting) during planned de-

pressurisation of either terminal;

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© Gastech 2005 Chaudhuri 6

• Specification of low NOx burners for OPRT gas re-heaters.

13. PROJECT SCHEDULE

The current execution schedule is shown below in Fig. 12.

Fig. 12 MEDGAZ Project Schedule 14. SUMMARY AND CONCLUSIONS Technical summary: • Route selection is based on results of exhaustive

geophysical and geotechnical investigation, which has minimised project technical risks.

• MEDGAZ project has implemented latest and proven deepwater pipeline construction technologies to overcome the technical challenges; ensuring minimum transport costs for the proposed new route of gas supply to the Iberian peninsula.

• In-depth ‘baseline’ studies and proven environmental principles have been adopted to ensure environment-friendly project implementation. In addition, the Medgaz project will contribute significantly towards the implementation of sustainable development strategies of an integrated energy plan for the Iberian peninsula.

Economic and commercial summary: • Enhancement of security of energy supply for Spain

and Europe. • The most economic method of gas supply to the

Iberian peninsula. • Promotes competition in the Spanish and Southern

European energy markets. • Approved as ‘Quick Start’ Priority Project under the EU

TEN-E programme (Decision 1229/2003/CE). • On 12th January, 2005 the Spanish Government

advised that priority rating “A” will be accorded to the MEDGAZ project, ensuring project implementation to progress for ‘First Gas’ delivery in 2009.

15. ACKNOWLEDGEMENTS

The author wishes to thank the companies which have participated in the Medgaz project to-date, for their technical contribution to the project e.g.:

- C&C Technologies Inc. - Snamprogetti s.p.a. - CSIC - Fugro b.v. - Fugro (UK) Ltd. - INTEC Engineering (UK) Ltd. - Rambøll A/S - Initec S.A. - D’Appolonia s.p.a. - Geoconsult A/S - JP Kenny Ltd.

Abbreviations:

BSCS : Beni Saf Compressor Station OPRT : Offshore Pipeline Receiving Terminal BCM : Billion Cubic Metres DnV OS : Det Norske Veritas Offshore FEED : Front End Engineering Design EIA : Environmental Impact Assessment FID : Firm Investment Decision ROW : Rights of Way SAWL : Submerged Arc Weld Longitudinal LP : Low Pressure HP : High Pressure LRMC : Long Run Marginal Cost KP : Kilometre Point MCM : Million Cubic Metres

1 Front End Engineering & Desing2 Firm Investment Decision

1S 2S 1S 2S 1S 2S 1S 2S 1S 2S 1S 2S 1S 2SProject Launch

Feasibility Study

Route Confirmation & FEED1

Transition to Construction Company

Investment Decission (FID)2

Project Execution

Start-up (First Gas)

2005 2006 20072001 2002 2003 20041S 2S2008

1S 2S2009

Commercial Agreements

Permitting

1 Front End Engineering & Desing2 Firm Investment Decision

1S 2S 1S 2S 1S 2S 1S 2S 1S 2S 1S 2S 1S 2SProject Launch

Feasibility Study

Route Confirmation & FEED1

Transition to Construction Company

Investment Decission (FID)2

Project Execution

Start-up (First Gas)

2005 2006 20072001 2002 2003 20041S 2S2008

1S 2S2009

Commercial Agreements

Permitting

1 Front End Engineering & Desing2 Firm Investment Decision

1S 2S 1S 2S 1S 2S 1S 2S 1S 2S 1S 2S 1S 2SProject Launch

Feasibility Study

Route Confirmation & FEED1

Transition to Construction Company

Investment Decission (FID)2

Project Execution

Start-up (First Gas)

2005 2006 20072001 2002 2003 20041S 2S2008

1S 2S2009

Commercial Agreements

Permitting