Growing demand for petroleum-based products in every corner of the globe has generated a need to accelerate the process to locate and recover the supply of oil and natural gas from major reserves across the globe. However, the fact that supply and demand are rarely concentrated in the same place, caused an urgent need for economical, reliable, and efficient means of transportation for oil and gas supplies.
Tankers, railroads, and pipelines have proven to be efficient and economical means for connecting petroleum supply and demand. However, in many cases, pipelines are widely considered the most critical infrastructure for the transportation of oil and natural gas, connecting producing areas to refineries, chemical plants, households, and business needs.
Over the years, pipelines have become the most trusted means of transportation that can guarantee an uninterrupted flow of vital, energy-generating gases and liquids for domestic and international users.
Having a higher transportation capacity, pipelines are more economical and reliable. It is constant, less exposed to environmental and socioeconomic risks such as earthquakes, strikes, or closed roads, while its rate of serious incidents is far below the rate recorded for transportation on trucks and even trains.
However, expanding hydrocarbon arteries is not without its challenges. Building a major oil and gas pipeline is among the most complex projects that any organization can undertake. It is filled with many different potential difficulties that can cause delays, excessive costs, and various other problems. A cross-border pipeline may take a decade or longer before the actual construction starts. It may be challenged by difficult terrain, infrastructure shortfall, or right of way issues. However, It’s the geopolitical and security challenges that make pipelines a more complicated issue than it seems to be.
In the world of oil and gas, geopolitical factors tend to gain greater importance as the mismatch between production and consumption becomes larger. The quest for oil and gas resources has already fueled several conflicts in many corners of the world throughout history.
As there is the geopolitics of oil and gas, there is the geopolitics of the pipelines too.
Although the economic aspect remains the main driver for pipeline projects, the destiny of many of these projects remains hanged on geopolitics decisions that may kill them despite their economic feasibility. In several cases, pipelines were not only used for turning raw energy into profit, but also as veins of geopolitical power.
The availability of economic feasibility and the required finance will not be enough for the construction of the cross-border pipelines if it fails to secure strong political will, support from the transit countries and local authorities, and ensure proper management of geopolitical risks as political messages may flow through a pipeline.
Over the past decade, pipelines have entered political discussion and debate as they became a manifestation of power and became one of the most visible points of social conflict over infrastructure and logistics.
Nord Stream 2
One of the striking examples of pipelines’ geopolitical complexities is the Nord Stream 2, which was at the heart of the current Russia-Ukraine conflict.
The 1,200 km pipeline, which runs under the Baltic Sea to take gas from the Russian coast near St. Petersburg to Lubmin in Germany, was observed by the United States as a fundamentally political, rather than commercial, project.
The US and several European allies thought that the pipeline is intended to destabilize Ukraine economically and strategically, depriving the country of an estimated $3 billion a year in gas transit revenue. It was also thought to be a punishment to Ukraine for choosing to step outside of Moscow’s geopolitical orbit.
For decades, there were fears in the US that allowing European countries to be highly dependent on Russia for energy will make them vulnerable to Russian political and economic pressure.
The US has tried to block Nord Stream 2 before, by imposing sanctions on companies involved in the project. However, it has only targeted Russian firms and not German ones, for fear of damaging diplomatic relations with Berlin.
Before the Ukraine crisis, former German leader, Angela Merkel, did a lot to try and push through Nord Stream 2 as Germany already imports 35 percent of the gas it needs from Russia and she thought Nord Stream 2 would be a way of getting much more Russian gas delivered directly to Germany.
However, the massive energy project that cost $11 billion has become one of the first causalities of the Russian military operation in Ukraine, which prompted the German government under Chancellor Olaf Scholz to stop the certification process altogether.
The US has also shown the same fears about the TurkStream pipeline, which will carry Russian natural gas to southern Europe through Turkey and is also part of Moscow’s efforts to reduce shipments via Ukraine.
Security and Social Challenges
Among important Pipelines issues that were recently a subject of front-page news is the TransCanada’s Keystone XL project. This pipeline, which was supposed to be the final part of a multi-stage pipeline project, was intended to link oil extracted in Alberta, Canada, with storage facilities and refineries based in the US. The pipeline project has gone for good following President Joe Biden’s denial of a key permit on his first day in office. For ten years, the Keystone XL was the epicenter of an enormous environmental, public health, and civil rights battle.
In several parts of the world, many pipeline projects turned to be pumping dreams after failing to cross the barriers of political and security fears.
On top of them, we can see the much-delayed Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline project. The $10 billion project, if realized, would bring significant benefits for the four countries. It would help to diversify the energy markets for Turkmenistan, and create income ranging from $500 million to $1 billion annually in transit fees for cash-strapped Afghanistan and satisfy growing energy demands of Pakistan and India. However, significant obstacles, related to the financing difficulties and the provision of security along the proposed route, must be addressed before the first gas from Turkmenistan could reach India.
Growth Despite Difficulties
The strategic influence of pipelines in the relationships between countries is undeniable, as they can supply energy to every territory, especially for the landlocked countries and areas with no natural resources.
According to Global Data statistics, the total length of global oil and gas trunk pipelines is 2.12 million km in 2022 and is expected to increase registering a total growth of more than 4% by 2026.
Asia leads globally with 155 planned and announced trunk/transmission oil and gas pipelines during the outlook period, followed by North America and Europe. Asia also leads globally in terms of new-build pipeline length growth, followed by North America and Europe.
Away from geopolitical complexities, oil and gas pipelines can work as a tool for spreading peace and achieving common prosperity. It remains the most secure and economical way to transport the much-needed energy sources.