Sidney P. Santos
Rio Pipeline Conference & Exposition 2015
Copyright 2015, Brazilian Petroleum, Gas and Biofuels Institute - IBP
This Technical Paper was prepared for presentation at the Rio Pipeline Conference & Exposition 2015, held between September, 22-24, 2015, in Rio de Janeiro. This Technical Paper was selected for presentation by the Technical Committee of the event. The material as it is presented, does not necessarily represent Brazilian Petroleum, Gas and Biofuels Institute’ opinion or that of its Members or Representatives. Authors consent to the publication of this Technical Paper in the Rio Pipeline Conference & Exposition 2015.
A gas pipeline project involves very high CAPEX and OPEX resources under a scenario of uncertainties due to gas reservoir, market demand and growth, volatilities related to costs of material, equipment and construction. Volatility over construction and assembling schedule is also very important since impacts directly on the project free cash flow and if not appropriately addressed has a potential of destroying project value. Volatilities are evaluated by Monte Carlo simulation. To define accurately the pipeline configuration with diameter, compressor stations quantity, installed power, availability, and gas fuel demand and get results to support the decision making process, project sponsors should count on a reliable design process and simulation tools. A case study is presented showing how the proposed methodology is applied optimizing design process by using specialized software available in the market that incorporate the state-of-the-art of gas pipeline design technology.
The process of a conceptual gas pipeline design is normally time consuming and designers normally do not have all the necessary information at the time they perform the feasibility study. Also from the time they conclude the evaluation until the effective approval for construction it may be expected some years to pass since a lot of issues must be appropriately addressed such as agreements, environmental requirements, world economy, social demands and political scenarios. All of these subjects add uncertainties to the project and must be handled with technics and negotiation. This paper focus on some aspects of the designing process that support the decision making process.
This methodology applies a quick, accurate and reliable method that integrates different levels of management and professionals on the conceptual design of a gas pipeline: Figure 1 illustrates the flow of activities that supports the decision making process. Involves expertise in the technical, economic, risk analysis and risk mitigation areas.
Figure 1 – Methodology for Gas Pipeline Conceptual Design
3. Case Study and Thermohydraulics
The case study refers to the Bolivia-Brazil Gas Pipeline Project and uses general information made public for the project. Since this project is a reference of a successful gas pipeline project in Brazil and taking into account its magnitude and capacity is an excellent comparison for the methodology presented in this paper. Cost database was mostly taken from O&G Journal information.
3.1 Overall technical information
Diameter : 32 inches
Straight length : 1068 miles (1719 km)
Length with route information : 1119.9 miles (1802 km)
Max. Allowed Working Pres. – MAOP : 1420.09 PSIG (99.84 kgf/cm2)
Pipe material : API 5L X80
Pipe internal roughness (epoxy painted) : 350 µ inches (0.009 mm)
Pipeline Inlet Pressure : 1415.1 psig (99.49 kgf/cm2)
Minimum Pipeline Delivery Pressure : 498 psig (35 kgf/cm2)
Pipeline overall heat transfer : 0.3886 Btu/h.ft2.F (1.9 Kcal/h.m2.C)
Flow Equation : Colebrook
Gas specific gravity : 0.6
Soil temperature : 86 F (30 C)
Maximum Compression ratio : 1.4
Suction and Discharge Header pressure drop : 5 psi (0.35 kgf/cm2)
After cooler pressure drop : 5 psi (0.35 kgf/cm2)
After cooler outside temperature : 131 F (55 C)
Site elevation : 0 feet (0 meter)
Site Temperature : 86 F (30 C)
Operating compressor units per station : 2
Standby compressor units per station : 1
Design capacity at the end of the pipeline : 1059.44 MMSCFD (30 MMSCMD)
3.2 Economic Assumptions
Pipeline construction schedule : 4 years
Pipeline CAPEX schedule
Year 1 : 15%
Year 2 : 30%
Year 3 : 30%
Year 4 : 25%
Pipeline material cost : 3000 US$/ton
30” : 2.0318 MMUS$/mile
32” : 2.1969
34” : 2.3754
36” : 2.5657
42” : 3.1805
Compressor station construction schedule : 3 years
Year 1 : 0 %
Year 2 : 10%
Year 3 : 40%
Year 4 : 30%
Compressor Station CAPEX (includes standby units)
30” alternative : 2,893 US$/hp
32” : 2,944 US$/hp
34” : 2,961 US$/hp
36” : 2,992 US$/hp
42” : 2,957 US$/hp
O&M Compressor Station (without Fuel) : 5% of Compressor Station CAPEX
O&M Pipeline : 1.5% of Pipeline CAPEX
Fuel price : 5.0 US$/MMBTU
Discount rate : 12% a year
Economic life : 30 years
3.3. Thermohydraulic Simulation without elevation profile and route information
The first step of the methodology presented is to run thermohydraulic simulations to identify the best alternative for the project. For this case study we have adopted economic vales based on costs assumed by the author and do not represent what was adopted for the Bolivia-Brazil Gas Pipeline Project when its feasibility study was carried out around the year 1995 by Petrobras. The application GasPipelineDesign® was used for the following calculations and identified the 5 best alternatives for the project with nominal diameters of 30, 32, 34, 36 and 42 inches. GasPipelineDesign® has automatically evaluated a very wide range of diameters before selecting the best 5 alternatives. This step of the methodology does not require elevation profile and route information. This is taken care of by the application GasPipelineExpansion® after selecting the best alternative.
3.3.1 Executive report
The executive report includes the main information to be used by the high level executives sponsoring the project to support the decision making process. Includes the breakdown costs, figure 2, and the J-curves graph, figure 3 that presents cost index versus capacity. The lowest cost index for the desired design capacity points to the best alternative. The best alternative for this case study requires a nominal diameter of 36 inches that is different from the 32 inches adopted for the Bolivia-Brazil Gas Pipeline Project.
Figure 2 – Executive Report – Cost breakdown
Figure 3 – Executive Report – J-Curves Graph
3.3.2 Technical report
The technical report includes the thermohydraulic results for each of the 5 alternatives considered as the best ones and shown graphically on the J-curves. For the purpose of comparison we are presenting the detailed technical information for the nominal diameter of 32 inches since the breakdown costs and J-curves are presented for all 5 alternatives in previous paragraphs.
Figure 4 – Technical Report – Thermohydraulics for ND 32”
3.4. Thermohydraulic Simulation with elevation profile and route information
The input data and results obtained by GasPipelineDesign® were exported to GasPipelineExpansion® to perform calculations using elevation profile and route information. This case study includes gas deliveries along the gas pipeline. Figure 5 presents the results exported to Google Earth for the alternative with route, elevation profile and gas deliveries.
Figure 5 – GasPipelineExpansion – Kml file exported to Google Earth
4. Economic Analysis
The economic analysis adopted the criteria of comparing what is different between the alternatives. Then we used the present value of CAPEX, O&M and Fuel Gas. The economic assumptions are presented in paragraph 3.2 and the economic results in paragraphs 3.31 and in J-Curves. The best alternative is the one with nominal diameter of 36 inches.
5. Failure Analysis and Capacity Frequency
Failure analysis is of key importance to evaluate appropriately the remaining pipeline capacity under failures of compressor units at the compressor stations or even the failure of an entire compressor station. To perform this analysis it is necessary to count on Monte Carlo simulation to identify the location and frequency of failures of compressor units and a thermohydraulic simulator to identify the maximum capacity at each failure scenario, as described by Santos (2003, 2006, 2009, 2011). The result of this study makes possible to make the gas pipeline capacity curve for different redundancy levels. We start with a compressor system without standby compressor units and then with increasing quantities until all the stations have one standby unit. The trade off is to identify the firm capacity that can be granted by installing standby units and, consequently, the economic benefit obtained by it versus the total CAPEX and OPEX required to install the standby units.
6. Quantitative Risk Analysis and Risk Mitigation
This technic uses a Microsoft Excel spreadsheet with an economic model of the gas pipeline project and a Palisade @risk simulation tool using Monte Carlo. The procedure is to select important variables such as Pipeline capacity, CAPEX, OPEX and Construction and Assembly Schedule with their statistical distribution and model them in the spreadsheet and run the risk simulation tool as presented by Santos (2003, 2009). The result of this analysis allows identifying and supports decisions to mitigate the project economic risk on the NPV of the project as show on figure 6. Mitigation can be made when it is identified the impact of each variable on the overall risk as show by the tornado graph in figure 7. It shows how a variation of one standard deviation on one variable (e.g. CAPEX Year 1) affects the variable under analysis (e.g. NPV). To give an example of a risk mitigation decision, assume the most impacting variable on project risk is CAPEX and we know that pipeline and compressor station costs are the most demanding item of CAPEX. What can be done to mitigate risk? Project sponsors can negotiate agreements with pipes and compressor units’ vendors mitigating or even eliminating their volatilities. Another approach would be to increase the transportation rate (more revenues) for the project to cover the risk to a certain level but with care as not to affect negatively the feasibility of the project.
Figure 6 – Example of a Distribution Result for NPV before risk mitigation
Figure 7 – Example of a Tornado diagram
The methodology presented in this paper makes use of specialized software that helps designers and project sponsors to quickly, accurately and reliably execute project feasibility.
The author acknowledges At Work Rio Solutions Ltda. to allow presenting this information covering the methodology for conceptual design of gas pipeline projects and gas pipeline expansion. Some figures as reports and graphs were taken from GasPipelineDesign® and GasPipelineExpansion®.
SANTOS, S. P., LUBOMIRSKY, M. KURZ, R. Gas pipeline design under market risk. In: Rio Pipeline Conference and Exposition, 2011, Rio de Janeiro, BR.
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SANTOS, S. P.; BITTENCOURT, M. A. S.; VASCONCELLOS, L. D., Compressor Station Availability – Managing its Effects on Gas Pipeline Operation. In: International Pipeline Conference, 2006, Calgary, CA.
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