Middle East develops as a pipeline project hub

The Middle East is becoming a pipeline project hub with new developments being contracted, commissioned and completed across the region.

A myriad of pipeline projects are taking place across the Middle East region with new international agreements being signed, long-awaited pipelines becoming operational and construction completion approaching for other pipeline infrastructure works in the near future.

EastMed Pipeline sets a timely pace

The IGI Poseidon S.A. – a 50/50 joint venture between Edison S.p.A and DEPA S.A. – says its EastMed pipeline development is gaining traction following the signing of an Intergovernmental Agreement (IGA) on the project by Cyprus, Greece and Israel.

Due to the signing, contracts can now be awarded, which the JV says will happen shortly to speed up the remaining steps prior to the Final Investment Decision (FID) and the commencement of construction works by 2023.

The contracts to be awarded concern the engineering details required for the project’s implementation, as well as the permitting activities in Cyprus and Greece. IGI Poseidon S.A. says a priority for its operations is compliance with the highest environmental and security standards.

IGI Poseidon S.A. Chair Mr. K. Xifaras says the IGA is the result of many people’s hard work over the last few years to bring the EastMed pipeline’s realisation as step closer.

“IGI Poseidon is now determined to honour the provisions of the IGA by accelerating further the project’s development. We shall be informing all stakeholders in Europe and beyond of the EastMed’s unique geopolitical and economic benefits,” says Mr Xifaras.

The IGA, which allows for additional future signatories, confirms the recognition of the EastMed project’s strategic importance as it enhances energy security and diversifies sources and routes of natural gas.

Together with the Poseidon pipeline – also operated by IGI Poseidon – the project will constitute the cluster of infrastructure bringing gas from the East Mediterranean to Europe, securing a direct export route from the new discoveries in the area.

By ensuring the pipeline’s timely realisation and its viable operation, the IGA provides for cooperation via an intergovernmental joint committee to facilitate the project’s development in accordance with the highest environmental standards the future possibility of transporting gas from other new sources.

According to its schedule, the EastMed pipeline project will be ready for operation in 2025.

Turkish project awarded national importance

In addition to the IGA signature on the EastMed project, the EastMed-Poseidon Pipeline Project has been designated a Project of National Importance and of Public Interest to Greece; a designation that includes the Poseidon pipeline’s onshore section from the Turkish-Greek border to Greece’s Ionian coast in Thesprotia.

The landmark decision by the Greek Parliament follows the signing of the EastMed pipeline’s IGA and the 2005 Greece-Italy Agreement on the Poseidon pipeline.

The EastMed-Poseidon Project, in conjunction with IGI Poseidon’s interconnector Greece-Bulgaria IGB, will complete the southeast European energy system by broadening the Southern Gas Corridor with a new route to secure gas from the East Mediterranean region.

IGI Poseidon CEO Mr P. Vergerio says the designation of the project as a national importance is an important recognition after many years and efforts made in its development.

“Now that the Interconnector Greece-Bulgaria (IGB) is under construction, the company is looking forward to further integrate the South East Europe gas system bringing the EastMed-Poseidon Project to the Final Investment Decision within the next two years targeting the completion of the development process in cooperation with all the involved countries,” says Mr Vergerio.

Abu Dhabi to complete multibillion-dollar deal

The United Arab Emirates has also been keeping busy with pipeline activities, alike to its Middle Eastern neighbours.

State-owned energy producer Abu Dhabi National Oil Co (ADNOC) is nearing completion of a multibillion-dollar stake sale in its natural gas pipelines, set to be one of the year’s biggest infrastructure deals for the region.

The buyers – an investor group backed by Global Infrastructure Partners (GIP) and Brookfield Asset Management Inc. – could sign an agreement with ADNOC for a 49 per cent holding in the pipelines later this year at a value of more than US$15 billion.

The GIP consortium includes Italian infrastructure operator Snam SpA, Ontario Teachers’ Pension Plan, Singapore sovereign fund GIC Pte and South Korea’s NH Investment & Securities Co. The group is said to have been seeking a loan of approximately US$8 billion to finance the potential purchase of the stake in the gas pipelines and reached out to banks in April to gauge their interest in participating.

According to people with close knowledge of the matter, equity financing has been arranged and the bidders are negotiating the terms of a debt package with banks; however, while discussions are advanced and ongoing, the timing and valuation could still change.

This prospective deal comes after Abu Dhabi has been opening the operations of its state-owned oil producer to foreign partners as part of a push to diversify its economy and generate additional sources of funding.

ADNOC has already sold shares in its distribution unit and brought in international investors to its refining and oil field services business, while KKR and BlackRock Inc. agreed in 2019 to invest $4 billion into ADNOC’s oil pipeline network – with GIC also buying a stake in the business later.

However, the UAE is not the only Persian Gulf oil producer using its energy assets to bring new capital into the region. In Saudi Arabia, Aramco – the world’s largest oil producer – is also weighing the sale of a stake in its pipeline unit to raise money due to the slump in crude prices.

Aramco acts on historic oil price rout

Saudi Aramco has reaffirmed its commitment to pay out US$75 billion in dividends this year, and needs to make the first instalment for its US$70 billion acquisition of a stake in chemicals producer Saudi Basic Industries Corp.

Due to the historic collapse in oil prices and its list of spending obligations, Aramco may need to raise cash this year and is considering doing so by selling a stake in its pipeline unit.

People close to the matter say the company could raise more than US$10 billion from the sale, with Aramco already holding preliminary discussions with potential advisers on the deal. However, since it is still at an early stage of discussions, Aramco may decide against the sale entirely.

Along with the prospective sale, the company has been kept busy with its refinery that has begun receiving pumped hydrogen from Air Liquide Arabia (ALAR).

A shift towards cleaner fuel

According to Reuters, ALAR has begun pumping hydrogen through its US$400 million pipeline network in Yangu, Saudi Arabia and will supply a Saudi Aramco refinery as the region seeks towards a shift from oil to cleaner fuel.

Pressure has mounted on large fossil fuel producers to reduce carbon emissions as concern mounts about its impact on climate change. Many in the industry are turning to hydrogen gas, which can be used to fuel vehicles and to store green energy.

The Saudi Aramco Mobil Refinery (SAMREF), a joint venture (JV) between Aramco and a subsidiary of US oil major ExxonMobil, will be the first company to use the Yanbu hydrogen grid, ALAR General Manager Francois-Xavier Haulle told Reuters.

Mr Haulle’s company, a JV between France’s Air Liquide and Saudi Arabia’s TAQA, plans to provide hydrogen to three other clients in 2020, due to its criticality in a clean, secure and affordable energy future.

In 2015, Saudi Arabia told the United Nations it would reduce expected emissions by up to 130 million t a year by 2030, although it did not give detail of its current emissions. As hydrogen can decarbonise a range of sectors, including long-haul transport and chemicals, this initial step to shift towards cleaner fuel will support Saudi Arabia’s 2015 commitment.

This article was featured in the July 2020 edition of Pipelines International. To view the magazine on your PC, Mac, tablet or mobile device, click here.

If you have news you would like featured in Pipelines International contact Journalist Sophie Venz at svenz@gs-press.com.au

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