Last June, the Navy divers, operating under the cover of a widely publicized mid-summer NATO exercise known as BALTOPS 22, planted the remotely triggered explosives that, three months later, destroyed three of the four Nord Stream pipelines, according to a source with direct knowledge of the operational planning.
Victoria Nuland’s glee over the Nord Stream damage (video clip below) is particularly galling to those responsible for offshore production, worker safety, and environmental protection. Does she realize that the Gulf of Mexico has more than 13,000 miles of active offshore pipeline that could be similarly targeted, and that the US has 2.6 million miles of onshore pipelines?
Whether or not the US was involved in the Nord Stream sabotage, Ms. Nuland’s schadenfreude is disturbing given the economic and security implications of the attack.
Nord Stream AG, or the operator of Nord Stream 1 pipeline, sent a specially equipped vessel on Thursday to investigate damage to the pipelines under the Baltic Sea.
Nord Stream AG, whose majority shareholder is Russia’s state energy giant Gazprom, said the chartered vessel arrived at the location of damage in Sweden’s exclusive economic zone.
The vessel, bearing the Russian flag, would have specialists aboard to assess the damage within a day and investigation would take three to five days, the company said.
Nord Stream AG said it didn’t have relevant permits to conduct an investigation until now.
The quote below is encouraging. Hopefully, the technical team will be able to function independently, and will have strong leadership. I would like to see participation by the Petroleum Safety Authority of Norway.
“There are good teams in place to handle pipeline accidents, there are emergency pipe inventories and experts for onshore and offshore,” Jens Schumann, managing director of gas pipeline grid company Gasunie Deutschland, said.
Nord Stream AG has started mobilization of all necessary resources for a survey campaign to assess the damages in cooperation exchange with relevant local authorities. Currently, it is not possible to estimate a timeframe for restoring the gas transport infrastructure. The causes of the incident will be clarified as a result of the investigation.
Some quotes that I found particularly interesting in Dan Yergin’s Forbes Interview:
“We don’t have a physical shortage of natural gas in the U.S., we have a shortage of pipelines. It’s very hard to get any new major pipelines done. In fact, it’s somewhere between very hard, and impossible.”
“Some of the assumptions about how easy things would be [related to the energy transition] are turning out to not have been correct. I think there is some reassessment of ESG [Environmental, Social, and Governance investment] going on, and at the same time, many investors also want good returns. Therefore, they’re looking at the oil and gas sector in a way they weren’t looking at it a year ago.”
With regard to concerns about US government policy panic: “For instance, a ban on oil exports. First of all, if you banned product exports, it would actually send gasoline prices higher…. If limits were put on LNG exports, it would be a terrible shock to Western unity and Europe’s ability to stay the course.”
On Saudi Arabia: “I think the old relationship with the U.S. is over. China is the main, critical market for the Kingdom now….The Crown Prince has said that he wants Saudi Arabia’s Sovereign Wealth Fund to be the biggest in the world, and it is probably on the way to being that. He sees Saudi Arabia becoming very influential in the world’s economy, not only as an oil producer, but as a financial player.”
“The likelihood that there will be new Iranian oil coming onto the market is increasingly unlikely“
This WSJ report, if accurate, reflects the mindset that you can increase oil production on demand when absolutely necessary, and avoid committing to longer term oil and gas supplies. The goal of such thinking is to address supply crises without alienating the uncompromising climate ultras. You suspend lease sales, deny new pipelines, and demonize oil and gas and the people who produce it. When supplies tighten and prices spike, you tap the strategic reserve, appeal to OPEC, talk to Venezuela and Iran, and ask Canada to ship more oil in rail cars or trucks (but no new pipelines please!). .
Below is a pie chart constructed using data from a 2018 DOT report to Congress. For logistical and economic reasons, pipelines are overwhelmingly the crude oil transport method of choice. Rail cars and trucks are called on where there are no pipeline options.
Looking at the systems, one would assume that pipelines have safety and environmental advantages. Loading and unloading hundreds of tanks would seem to be inviting spills, although most would presumably be small. The DOT data bear this out. On a volume transported basis, spill incidents occurred nearly 15 times more frequently for rail cars and trucks than they did for pipelines.
For pipeline(s), an incident occurred approximately once every 720 million gallons of crude oil shipped. For rail, an incident occurred approximately once every 50 million gallons of crude oil shipped. For truck(s), an incident occurred approximately once every 55 million gallons of crude oil shipped.
Looking at the percentage spilled, pipelines also had a significant (7.6 times) advantage over rail, but only a slight advantage over trucks.
Volume of Crude Oil Shipped and Spilled by Pipeline, Rail, and Truck, 2007-2016
Pipeline
volume shipped (k gal)
1,298,630,088
volume spilled (k gal)
13,161
% spilled
0.0010%
Rail
volume shipped (k gal)
23,052,960
volume spilled (k gal)
1,751
% spilled
0.0076%
Truck
volume shipped (k gal)
47,894,868
volume spilled (k gal)
521
% spilled
0.0011%
Because fatalities or hospitalizations were extremely rare, DOT chose not to normalize those data. There were a total of 3 fatalities associated with both pipeline and truck shipments. While no fatalities were associated with rail shipments, DOT noted that 47 deaths resulted from a crude oil derailment in Lac Megantic, Quebec in 2013. BOE further reminds readers that this train was transporting Bakken crude from North Dakota to a refinery in St. John, New Brunswick.
The bottom line is that you have to plan ahead to satisfy future supply needs. This is particularly true for the offshore sector where the lead times are longer, but the production volumes relative to the number of wells and facilities are higher (a good thing). The need for oil and gas is not going away, nor are threats to energy security. There are plenty of people in the U.S. Department of the Interior who understand this. Empower them to safely expedite leasing, exploration, and development!
At the behest of Congress, coastal areas and beaches are now designated as Unusually Sensitive Areas (USAs). Given that any offshore liquids pipeline has the potential to affect coastal waters or beaches, the rule would seem to require that all such pipelines be included in Integrity Management Programs, which are mandatory for pipelines that could affect USAs. (The IMP requirements would almost certainly apply to all DOT regulated offshore pipelines. Their applicability to DOI/producer pipelines is less certain. Of course, very little is clear and consistent in US offshore pipeline regulation.)
As one would expect, the recent Huntington Beach pipeline spill is among the incidents cited in the justification for this regulation. More surprisingly, the Santa Barbara well blowout was also cited. This incident occurred 53 years ago, was the result of a reckless drilling program, and had nothing to do with production operations or pipelines.
As noted in a recent BOE post, the regulatory regime for offshore pipelines is badly in need of overhaul. DOT and DOI, with inconsistent jurisdictional boundaries, regulations, and approaches, have primary responsibility and multiple regulatory entities have roles.
Lastly, PHMSA seems to have inadvertently posted a highlighted copy of the new regulation. Nothing at all scandalous (looks like someone was highlighting potential talking points), but possibly amusing to other regulation nerds. 😃