Oil and Gas Pipeline Construction Costs

This article is part of the Global Fossil Infrastructure Tracker, a project of Global Energy Monitor.

Sub-articles:

FrackSwarm portal Coal terminals Coal transport and infrastructure Oil and gas pipelines LNG terminals Pipeline construction costs Methodology and data notes

Summary

The following are ranges for pipeline cost estimates. For further discussion, see below:

• Oil & Gas Journal 2015-2016: $4.75 million/km (US onshore gas)
• Oil & Gas Journal 2014-2015: $3.23 million/km (US onshore gas)
• American Petroleum Institute 2017: $3.32 million/km (US onshore gas, national average)
• Global Fossil Infrastructure Tracker median for 64 onshore and offshore projects: $2.34 million/km (date unspecified, worldwide)

Background

There are four categories of pipeline construction costs; material, labor, miscellaneous, and right-of-way (ROW). The cost per category, expressed as a percentage of total construction costs, tends to vary by both location and year. Materials may include line pipe, pipe coating, and cathodic protection. Miscellaneous costs generally cover surveying, engineering, supervision, contingencies, telecommunications equipment, freight, taxes, allowances for funds used during construction (AFUDC), administration and overheads, and regulatory filing fees. ROW costs include obtaining rights-of-way and allowing for damages.

Current Trends

Pipelines built in 2015 and 2016 were historically expensive, as determined by the costs for new projects as filed by operators with FERC, according to an Oil & Gas Journal analysis. For proposed onshore US gas pipeline projects in 2015-16, the average cost was $7.65 million/mile ($4.75 million/km), up from both the 2014-15 average cost of $5.2 million/mile ($3.23 million/km) and the 2013-14 average cost of $6.6 million/mile ($4.10 million/km). In 2012-13 the average cost was $4.1 million/mile ($2.55 million/km) as compared with $3.1 million/mile ($1.93 million/km) in 2011-12; $4.4 million/mile ($2.73 million/km) in 2010-11; $5.1 million/mile ($3.17 million/km) in 2009-10; and $3.7 million/mile ($2.30 million/km) in 2008-09.

For the 33 land spreads filed for in 2015-16, cost-per-mile projections rose in all categories except material. In 2011 miscellaneous charges passed material to become the second most expensive cost category and they retained this position through 2016. Material-$992,991/mile, down from $1,012,698/mile 2014-15. Labor-$3,603,334/mile, up from $1,977,938/mile for 2014-15. Miscellaneous-$2,615,028/mile, up from $1,867,393/mile for 2014-15. ROW and damages-$441,548/mile, up from $378,255/mile for 2014-15. The continued rise in miscellaneous costs is driven by companies increasing the amount set aside for contingencies in their estimates.

Labor spiked as a portion of land construction costs, reinforcing its place as the single most expensive category. Labor's portion of estimated costs for land pipelines jumped to 47.08% in 2016 from 37.77% in 2015, 42.36% in 2014, 38.84% in 2013, 44.61% in 2012, 44.27% in 2011, and 44.61% in 2010. Material costs for land pipelines, meanwhile, eased to 12.98% from 19.34% in 2015, 13.6% in 2014, 23.2% in 2013, 15.99% in 2012, and 14.54% in 2011.

Average Pipeline Size

Pipeline cost is often estimated per inch-mile. According to NaturalGas.org, the average diameter of an interstate pipeline is between 24 inches and 36 inches, or an average of 30 inches.

Offshore versus Onshore

According to USAID, offshore costs per mile for pipelines were about 1.96 times as high as costs per mile for onshore pipelines in 2000-2001, in 1995-1996 the cost ratio was 1.79.

Gazprom Costs

An analysis of Gazprom offshore construction costs found the following:

• Nord Stream - €3.4 million/km
• South Stream - €2.7 million/km
• Dzhubga-Sochi - >€5.0 million/km

BTU Analytics Survey or U.S. Northeast and Central U.S. Pipelines

A survey by BTU analytics of 9 gas pipelines in the U.S. Northeast found a range of $5.5 million - $13.14 million per mile, with a median of $8.45 million/mile, or $5.25 million/km. The pipelines were onshore and ranged from 118 to 600 miles length. The pipelines were built from 2017 to 2020. The analysis also cited two pipelines in the Great Plaints and West Texas/Gulf Coast regions. Those pipelines included a pipeline built in 2009 that cost $2.98 million/mile in 2009 dollars, and two pipelines that cost $3.51 million and $5.15 million per mile respectively in 2019.

American Petroleum Institute 2017 Estimate

In its study of infrastructure through 2035, the API estimated average U.S. pipeline costs of $178,000 per inch-mile for 2016 (in nominal dollars) for large gas transmission pipelines. Combined with the estimate of 30 inches for average pipeline size, that amounts to $5.34 million per mile for gas pipelines, or $3.32 million per km. The API also estimate regional costs multipliers:

• Central - 0.65
• Midwest - 1.20
• Northeast - 1.68
• Offshore - 1.00
• Southeast - 0.80
• Southwest - 0.74
• Western - 0.94

Estimating Construction Costs

The average cost-per-mile for the projects rarely shows consistent trends related to either length or geographic area. In general, however, the cost-per-mile within a given diameter decreases as the number of miles rises, suggesting that fewer and longer pipelines are more cost efficient. Lines built nearer populated areas tend to have higher unit costs. Additionally, road, highway, river, or channel crossings and marshy or rocky terrain each strongly affect pipeline construction costs.

A 2011 study published in the Journal of Oil, Gas, and Coal Technology identified the variability within the four main cost categories. The percentage share of material cost of pipeline construction increased when pipeline diameter increased. In term of pipeline lengths, the share of material cost rose from 28% for short pipelines to 35% for long pipelines, with share of the other cost components decreasing except ROW, which was constant at 7% regardless of the total pipeline length. Therefore, the share of material cost increased when pipeline diameter and length increased, but the labour cost maintained as the primary cost component for all diameters and lengths, averaging 40% of total cost. The shares of cost components were also different for different regions in the United States. The material cost in the Central region made up around 41% of the total cost, while it was only 24% of the total cost in the Northeast and Southeast regions. The share of labour cost is between 34% and 48% in different regions. This may be influenced by differing costs of living by region. Miscellaneous cost was often a small part of the total cost, but the share of miscellaneous cost in the Southeast region reached to 30% of the total cost, even higher than share of material cost. The share of ROW cost of US pipelines ranged from 4% to 12% of total cost, while the share of ROW cost in Canada share was only 1% of total cost. The share of material cost and labour cost were approximately the same for Canadian pipelines, about 40%. The results agree with the conclusion that the shares of costs vary by countries and categories.

Stranded Assets

Stranded assets refers to the amount of fossil fuel reservers that would have to remain in the ground, or fossil fuel infrastructure that wold have to remain unused at some point prior to providing a return on the investment, if the world were to transition to non-fossil fuel energy sources. For example, according to a 2015 study in Nature, an estimated 33% of oil reserves, 50% of gas reserves and more than 80% of known coal reserves should remain unused in order to meet global temperature targets under the Paris Agreement. Assets become stranded when new government regulations that limit the use of fossil fuels (like carbon pricing) are instituted, from a change in demand (for example, a shift towards renewable energy because of lower energy costs), or by legal action. Those who have invested in the fossil fuel industry are at most risk, including people who have bought stocks or bonds. This can include a wide variety of people and institutions such as individual investors, banks, pension funds, insurance companies, and universities, among others. Although the ‘stranded assets’ discussion often focuses on fossil fuels, it’s not just companies extracting oil, gas, and coal that could be affected by transition risk. Other companies that use fossil fuels as inputs for production, or are otherwise energy or carbon-intensive, could also be affected by new climate legislation, technological advances, or a shift in demand.

A 2018 study published in Nature Climate Change suggests that part of the stranded assets would occur as a result of an already ongoing technological trajectory, irrespective of whether or not new climate policies are adopted. This loss would be amplified if new climate policies were adopted to reach the 2 °C target of the Paris Agreement, or if low-cost producers (such as some OPEC countries) maintain their level of production, or sell out, despite declining demand. The magnitude of the loss from stranded assets may amount to a discounted global wealth loss of US$1–4 trillion. Net importers, such as China or Europe, would fair better as fossil fuel prices drop. But net exporters, for example, Russia, the United States, or Canada, could see their fossil fuel industries nearly shut down. The two effects would largely offset each other at the level of aggregate global GDP.

Meanwhile, a 2018 report indicated that major banks have increased fossil fuel financing. A report by Rainforest Action Network, Oil Change International, BankTrack, Indigenous Environmental Network, Sierra Club, and Honor The Earth, found that the major banks funneled $115 billion into extreme fossil fuels (defined as: tar sands, Arctic, and ultra-deepwater oil; coal mining and coal-fired power; and liquefied natural gas export in North America) in 2017, an increase of 11% from 2016. The single biggest driver of the increase in financing came from the tar sands sector, where financing grew by 111% from 2016 to 2017. The massive hike in bank support for tar sands to nearly $47 billion, led tar sands to overtake coal power as the most heavily funded extreme energy sector. Further investments increase the carbon bubble and therefore the potential negative future consequences caused by the bursting of it.

Survey

The following table shows the results of a survey of projects documented by the Global Fossil Infrastructure Tracker. The survey is based on a diverse collection of projects worldwide. It shows the wide range in costs per km, which can likely be attributed primarily to differences between offshore and onshore projects, the inclusion or exclusion of additional infrastructure such as drilling platforms or pressurization stations, regional cost differences, and variations by year. For that reason, these results should be viewed as non-conclusive. A more reliable global finding would require careful project definition (including exclusion of secondary infrastructure), thereby allowing apples-to-apples comparisons. The median cost in the survey is $2,338,492 per km, lower than the $4.75 million/km estimated by Oil and Gas Journal in November 2018 for U.S. onshore gas pipeline projects in 2015-2016, but within the range of reported costs in the preceding 8 years, which ranged from $2.30 million/km in 2008-09 to $4.1 million/km in 2013-14 (see above).

Wiki	Name	Owner	Status	Estimated Investment (US$)	Lengthkm	Inv per km (US$)
http://bit.ly/2PmmZHc	Saddle West Pipeline	TransCanada	Proposed	655,000,000	29	22,586,207
http://bit.ly/2gqy1bb	Alaska LNG Pipeline (AKLNG)	Alaska Gasline Development Corp (AGDC)	Proposed	55,000,000,000	2760	19,927,536
http://bit.ly/2z9PJeY	Driftwood LNG Pipeline	Tellurian Inc.	Proposed	2,900,000,000	154	18,831,169
http://bit.ly/2RB09JD	Kukrahati-Itinda Gas Pipeline	H-Energy	Proposed	1,828,846,000	125	14,630,768
http://bit.ly/2BPP9Ba	Rio Bravo Gas Pipeline	NextDecade	Proposed	2,200,000,000	220	10,000,000
http://bit.ly/2Pk8x2B	Eagle Spirit Pipeline	Eagle Spirit Energy Holdings Ltd.	Proposed	16,000,000,000	1601.3	9,991,882
http://bit.ly/2RnomCZ	TEMAX Project	Spectra Energy (50%), ConocoPhillips (50%)	Proposed	500,000,000	53.1	9,416,196
http://bit.ly/2PzmJVt	2019 NGTL System	TransCanada	Proposed	2,400,000,000	275.2	8,720,930
http://bit.ly/2JfrAFN	Sooner Trails Pipeline		Proposed	3,500,000,000	402.3	8,699,975
http://bit.ly/2Je5SC1	Granite Bridge Pipeline	Algonquin Power & Utilities Corp.	Proposed	340,000,000	43.5	7,816,092
http://bit.ly/2Rk8wcc	Buckeye Xpress Pipeline	TransCanada	Proposed	709,000,000	103	6,883,495
http://bit.ly/2PyoSk6	North Montney Mainline Pipeline	TransCanada	Proposed	1,400,000,000	206	6,796,117
http://bit.ly/2PzmJVt	2018 NGTL System	TransCanada	Proposed	570,000,000	88.5	6,440,678
http://bit.ly/2Rnu1ZS	Wyndwood Pipeline Expansion Project	Spectra Energy	Proposed	170,300,000	27.4	6,215,328
http://bit.ly/2JfajfN	South Saskatchewan Access Pipeline		Proposed	47,000,000	8	5,875,000
http://bit.ly/2z8EW4K	Eagle Mountain-Woodfibre gas pipeline	FortisEnergy B.C.	Proposed	250,000,000	47	5,319,149
http://bit.ly/2Jkk5gZ	Haynesville Global Access Pipeline	Tellurian	Proposed	1,400,000,000	321.9	4,349,177
http://bit.ly/2JfpJAP	Delmarva Pipeline	H4 Capital Partners LLC	Proposed	1,300,000,000	305.8	4,251,145
http://bit.ly/2Je683X	Buncombe County Pipeline	SCANA	Proposed	72,500,000	19.3	3,756,477
http://bit.ly/2gAgk8W	Keystone XL Oil Pipeline	TransCanada	Proposed	7,000,000,000	1900	3,684,211
http://bit.ly/2PmwBBY	Permian Global Access Pipeline	Tellurian Inc.	Proposed	3,700,000,000	1005.8	3,678,664
https://bit.ly/2CTIisZ	Cirebon-KHT Gas Pipeline	Rekind	Proposed	300,000,000	84	3,571,429
http://bit.ly/2ptQvws	West-East Gas Pipeline		Proposed	5,000,000,000	1500	3,333,333
http://bit.ly/2BSPbbq	Northern Access Gas Pipeline	National Fuel Gas Company	Proposed	500,000,000	155	3,225,806
http://bit.ly/2RtenMu	East Med Gas Pipeline		Proposed	7,000,000,000	2200	3,181,818
http://bit.ly/2RwOzPk	Bay of Bengal-Chittagong Oil Pipeline	Bangladesh Petroleum Corporation	Proposed	694,000,000	220	3,154,545
http://bit.ly/2Rsr8GU	Bay of Bengal-Chittagong Oil Pipeline 2	Bangladesh Petroleum Corporation	Proposed	694,000,000	220	3,154,545
http://bit.ly/2gA9TD5	Pilgrim Oil Pipeline	Ares Management	Proposed	900,000,000	286	3,146,853
http://bit.ly/2JgiMzw	Big Foot Oil Pipeline	Enbridge	Proposed	200,000,000	64.4	3,105,590
http://bit.ly/2PIMXoM	Israel Jordan Gas Pipeline		Proposed	200,000,000	65	3,076,923
http://bit.ly/2JdyiMl	Southern Reliability Link Pipeline	New Jersey Resources	Proposed	130,000,000	48.3	2,691,511
http://bit.ly/2JdyYBn	Whistler Pipeline	Targa Resources	Proposed	2,600,000,000	997.8	2,605,733
http://bit.ly/2PiDpQR	Permian to Gulf Coast Pipeline		Proposed	2,000,000,000	965.6	2,071,251
http://bit.ly/2JfqlX9	Marquette Connector Pipeline	AltaGas	Proposed	137,500,000	67.6	2,034,024
http://bit.ly/2BRlXdl	Spire STL Pipeline	Spire	Proposed	210,000,000	106	1,981,132
http://bit.ly/2Jg62cf	Risberg Line Pipeline	RH Energytrans	Proposed	86,000,000	45.1	1,906,874
http://bit.ly/2Jfeecs	Palmetto Pipeline	Kinder Morgan	Proposed	1,100,000,000	579.4	1,898,516
http://bit.ly/2PoRZGL	Energia Mayakan Pipeline Expansion		Proposed	300,000,000	159.3	1,883,239
http://bit.ly/2RxJ6YJ	Ennore-Nellore Gas Pipeline	Gas Transmission India Private Ltd.	Proposed	779,672,880	430	1,813,193
http://bit.ly/2PCaLu9	Israel Cyprus Gas Pipeline	Energean	Proposed	350,000,000	200	1,750,000
https://bit.ly/2OndckB	Cirebon-Semarang Gas Pipeline	PT Pertamina Gas	Proposed	400,000,000	235	1,702,128
http://bit.ly/2toFVeU	Reedy Creek Walumbilla Pipeline	APA Group	Proposed	80,000,000	49	1,632,653
http://bit.ly/2JiImUA	Arkoma Residue Capacity Pipeline	Tall Oak Midstream	Proposed	200,000,000	128.7	1,554,002
http://bit.ly/2z9Q80Y	Eastern Shore Gas Pipeline Expansion	Chesapeake Utilities	Proposed	99,000,000	67	1,477,612
http://bit.ly/2Jf2PJD	Roadrunner Pipeline	Fermaca (50%), ONEOK (50%)	Proposed	475,000,000	321.9	1,475,614
https://bit.ly/2Q6HN32	Cactus 2 Oil Pipeline	Plains All American Pipeline	Proposed	1,100,000,000	829	1,326,900
http://bit.ly/2PAwBhO	Neka Jask Pipeline	National Iranian Oil Company	Proposed	2,000,000,000	1515	1,320,132
http://bit.ly/2RwyZTT	Hon La-Thakhek Oil Pipeline	Petro Lao	Proposed	380,000,000	306	1,241,830
http://bit.ly/2JdfKfr	Arctic Fox Pipeline	Fairbanks Pipeline Company	Proposed	1,000,000,000	827.2	1,208,897
http://bit.ly/2Prs29D	Iron Horse Pipeline	Tallgrass Energy (50%), Silver Creek Midstream (50%)	Proposed	150,000,000	128.7	1,165,501
http://bit.ly/2PeJ36P	Knight Warrior Pipeline	Blueknight Energy Partners	Proposed	300,000,000	257.5	1,165,049
https://bit.ly/2Ps2Yz6	Salina Cruz-Tapachula Gas Pipeline	Afinan	Proposed	442,000,000	440	1,004,545
http://bit.ly/2DHBYSf	Western Slopes Pipeline	APA Group	Proposed	450,000,000	450	1,000,000
https://bit.ly/2pU3kjO	Natuna-West Kalimantan Gas Pipeline	TBD	Proposed	550,000,000	687	800,582
http://bit.ly/2z11vIV	Yamoussoukro-Ferkessédougou Petroleum Products Pipeline	Petroci	Proposed	250,000,000	357	700,280
http://bit.ly/2oZrgBj	Queensland Hunter Gas Pipeline	Hunter Gas Pipeline Pty Ltd	Proposed	500,000,000	825	606,061
https://bit.ly/2CgE7ak	Central Kalimantan-South Kalimantan Gas Pipeline	TBD	Proposed	97,000,000	162	598,765
http://bit.ly/2RwKV8k	Barauni-Guwahati Gas Pipeline		Proposed	414,900,000	750	553,200
http://bit.ly/2JeJZTg	Mountaineer Gas Pipeline	IGS Utilities	Proposed	45,000,000	90.8	495,595
http://bit.ly/2RDXjUf	Contai-Paradip-Dattapulia Gas Pipeline	H-Energy	Proposed	333,858,720	705	473,558
http://bit.ly/2RtwnWW	Mehsana-Bhatinda Gas Pipeline	Gujarat State Petronet; Indian Oil; Bharat Petroleum; Hindustan Petroleum	Proposed	955,674,720	2052	465,728
http://bit.ly/2JgXd1u	Doosan Bobcat Pipeline	MDU Resources Group	Proposed	13,800,000	33.8	408,284
http://bit.ly/2PzmJVt	2021 NGTL System	TransCanada	Proposed	140,000,000	350.8	399,088
https://bit.ly/2IYxniG	West Kalimantan-Central Kalimantan Gas Pipeline	TBD	Proposed	516,400,000	1800	286,889