NATURAL GAS

Pipelines

Gas pipelines, like other infrastructure projects, are location specific i.e. once constructed they cannot be moved and thus the value of a pipeline is determined by the quantity of gas that it can move rather than any intrinsic value related to the capital cost. Gas pipelines have large economies of scale, governed by basic physics, such that the unit cost to move 1,000 cubic meters over 200 km is roughly the same as moving 12,000 cubic meters over 1,000 km.

Gas pipelines are highly capital intensive, which has the implications that capital costs need to be controlled and the utilization rate for the pipeline needs to be high to minimize the unit transportation costs. Utilization is normally guaranteed by long term contracts that lock in volume off-take commitments over the contract period, usually through take or pay agreements. The pricing of the gas needs to remain competitive over the life of the project and this is typically achieved by the use of indexation to competing fuels.

Key factors in assessing the economic and financial viability of gas pipeline projects include supply risk, market risk, construction risk, political risk, regulatory risk, foreign exchange risk, and operational risk. Each of these needs to be evaluated to ensure that appropriate mitigation is in place to protect investor returns.

Nexant Services

Nexant is recognized for its expertise in the field of gas transmission, based on broad project experience from technical, financial and environmental perspectives. Members of our consultancy staff have been intimately involved in the development of many of the world's major gas pipeline projects in a variety of roles, including high-level conceptual development, market expert, cross-border legal specialist, and engineering manager. This experience, in combination with our general gas sector expertise, enables us to provide clients with gas transmission services covering the following areas:

  • Technoeconomic feasibility
  • Gas supply economics
  • System development
  • Conceptual design and engineering
  • Policy and regulatory advice

Selected Project Experience

  • Gas pipeline infrastructure study—Pakistan
  • Project advisor for the West Africa Gas Pipeline Project
  • Gas pipeline asset valuations—Former Soviet Union
  • Natural gas transmission—Bangladesh
  • Gas pipeline study—Oman
  

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