An imminent need for crude oil and a shift toward LNG as a fuel for long-haul transportation across APAC will shape the growth curve of oil pipeline infrastructure market
Over the last decade, fossil fuels such as crude oil and natural gas have become an increasingly important energy source worldwide. The expansion of urban infrastructure and industrial activities has incited the extension of oil pipeline infrastructure across both developing and developed economies. In fact, data from the PHMSA state that around 2.8 million miles of natural gas pipelines are already present beneath U.S. soil, offering fuel access between drilling sites, storage areas, utilities, and homes.
Indeed, oil pipeline infrastructure is crucial for the economic growth of any country. As a matter of fact, an estimated 64% of U.S. energy commodities are transported through oil pipelines. As countries look to thrive in globalization, the oil pipeline infrastructure market is expected to foresee commendable growth in the future.
The International Energy Agency has forecasted world oil demand to average around 99.7 mb/d in 2022, an increase of 2.1 mb/d compared to that in 2021.
To meet such an impending demand, countries are injecting huge funds to extend their oil pipeline infrastructure. Highlighting an example, in 2020, Australia approved a US$2.6 billion (A$3.6 billion) gas project planned by Santos Ltd. that could meet up to half of New South Wales’ fuel needs and help fill a supply gap expected from 2024.
New developments in crude oil sector
Crude oil is one of the most important fuel sources which contributes to over a third of the world’s energy consumption. It is especially important to businesses such as plastic producers, airlines, and agricultural businesses that rely heavily on fuel. As the importance of this commodity excels, it is expected to create a vast market for oil pipeline infrastructure players in the coming years.
Listed below are a few of the developments favoring crude oil pipeline infrastructure industry outlook:
- In 2022, oil giants China National Offshore Oil Corporation (CNOOC) and TotalEnergies signed a $10 billion deal to develop and build a vast regional oil pipeline in Uganda to pump oil through a 900-mile heated pipeline — said to be the longest of its kind when completed — to the Indian Ocean port of Tanga.
- In 2022, Texas pipeline company Max Energy announced the purchase of Southcross Gulf Coast Transmission, Ltd.’s Upper Gulf Coast Pipeline System to add another 328 miles of pipeline which the company is laying down in the Texas Gulf Coast.
Offshore pipelines facilitating oil exports
Offshore pipeline infrastructure is considered to be among the safest, energy-efficient, cost-effective, and environment-friendly mode for the transportation and delivery of fossil fuels from resource sites to end-users and markets. These pipelines need the lowest maintenance costs and offer minimal impact on land use patterns. Currently, massive offshore pipeline systems are used to continuously convey gas or oil from one nation to another.
The discovery of new offshore gas fields is said to boost the deployment of these offshore pipeline systems in the ocean over the next few years. In 2022, oil and gas company Energean announced linking the Karish offshore gas field to the Israel National Gas Line (INGL). The treated gas is expected to be delivered via underwater oil pipeline to the land-based system at Dor Station prior to entering the national pipeline on its way to distribution companies and end consumers.
Elevated demand for LNG across APAC
LNG is steadily replacing diesel, with governments pushing its use as fuel for long-haul transportation as it exhibits less carbon footprint and is a cheaper fuel alternative. Reports indicate that China currently consumes 12-13 million tonnes of LNG in the transportation sector annually, which is half of all LNG that is imported by India for use in fertilizer units, power plants, city gas and other industries.
Compelled by its benefits, the Indian government has devised plans to raise the share of natural gas in the primary energy basket to 15% by 2030 from the current 6.7%. With this switch, oil and gas companies are expected to expand their oil pipeline network across APAC to meet emerging LNG demand.
Recently, British energy giant Shell revealed plans to retail LNG in India for long-haul transportation like trucks. The company considers India to be one of the fastest-growing LNG markets in the world, with demand forecasted to be nearly 35 to 40 million tonnes in the period between 2020 to 2040.
Regional oil players are also expanding their pipeline network in the country. One such heavy hitter is IndianOil which currently manages one of the world’s largest oil pipeline networks and has achieved a throughput of 76.019 million metric tonnes during the year 2020-21. Between 2020-2021, the company has added 337 km of additional pipeline length, as part of its plans to continuously expand the network.
In essence, the oil pipeline infrastructure market is expected to foresee steady growth, endorsed by the exploration of new oil fields and the extension of offshore pipelines to meet evolving industry and consumer demand. The market might face some minor impacts caused by the rapid shift towards renewable energy sources. Nonetheless, as the transportation sector adopts low-emission fuels, the demand for LNG and related pipeline infrastructure may spur over time.