Documentos de Académico
Documentos de Profesional
Documentos de Cultura
SUBMITTED BY
ORONERO PIPELINES
(“OroNero”)
A subsidiary of Oro Nero Corporation
U2005/3070211-220
APRIL 2009
COMPANY PROFILE
Oro Nero Pipelines is a subsidiary of the popular Integrated Energy Conglomerate, Oro Nero
Corporation (Oro Nero). Oro Nero Pipelines was incorporated 15 years ago under the laws and
statutes of Angoria to enable it focus on its core business which is getting Oil and Natural gas from
the producers to the end users.
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The Parent company holds 75% of the stock in Oro Nero Pipelines and Oro Nero Corporation
is also listed in various stock exchanges worldwide including the New York Stock Exchange (NYSE)
under the symbol, “ORO”. The remaining 25% equity is publicly held. Oro Nero Pipelines is listed
under the symbol, ‘ORP’.
Oro Nero Pipelines has consistently given positive Returns on Investments to shareholders
for the past 12 years, with earnings showing a cumulative average year on year growth of 21.3%
over the period.
Oro Nero Pipelines formerly existed as Angorian Pipe Co., a moribund state enterprise which
was sold during the privatization program of the Angorian Government in 1993. Oro Nero
corporation successfully bid for and purchased 75% equity in the company and completely
revamped it, turning it into what it is today.
The Board of Oro Nero comprises ten members; four (4) of whom (inclusive of the Chairman
of the Board) are Non-Executive Directors, while six (6) are Executive Directors. The Directors are
listed in the Directors’ report. The Company’s Board is made up of a crop of seasoned professionals
who have excelled in their various professions including oil and gas and law and possess the
requisite integrity, skills and experience to bring independent judgment to bear on Board
deliberations.
In line with best practice, the Company in June 2008 appointed Mr. Victor Alete and Mr.
Rapt Ejike as Independent Directors based on the Angorian criteria on the appointment of
independent Directors and the core values enshrined in the Company’s Code of Corporate
Governance. Both Directors do not have any significant shareholding interest or any special business
relationship with the Company.
The Executive Directors of the company along with their Ranks are as follows:
EXPERIENCE
Oro Nero pipelines Inc, a division of the Oro Nero Corporation has been into the business of
construction, maintenance and operation of oil and gas pipelines for over 15 years. Oro Nero
Pipelines is committed to linking all oil and gas pipelines to their markets for effective exploitation.
The company, which has the vision of being the number one reference when quality
pipelines are mentioned, has satisfactorily completed so many projects spanning the globe which are
mentioned below:
1.) 1994-1997. The 600 mile, 48”, Angorian South North pipeline. This cost a total of $750
million
2.) 1995-1997. The 365 km, 48”, 56” pipeline linking Calabar and Ajaokuta, both in Nigeria.
3.) 1997-1999 The 800 mile, 42”, Oil pipeline linking West African Gas Markets to Nigerian
Suppiles. This cost $1.3bilion.
4.) 1999-2001. The 1,442 mile, 52" Alaska Gas Pipeline in the Mackenzie valley.
This was constructed at the cost of $2.8billion within schedule
5.) 2000-2001 The 375 mile, 32" south-west gas pipeline linking the gas fields in Nigeria's Niger
Delta to Lagos. $500million
6.) 2000-2003 The 2615 mile 42" linking Libya to the UK. This cost 5$5 billion
7.) 2002-2005. The 4000 mile, variable Diameter, North American Gas Supply Network. This
Cost a total of $12 billion.
8.) 2003-2006, The2600 mile, 28” Ukraine Georgia Supply System. This cost $3.2 billion.
9.) 2005-2007, The 1200 mile, 36” mixed product line linking Russia to the FSU. $1.8 billion
10.)2006-2008 The 1592 mile, 42” pipeline linking South Africa to Angola. $2billion
11.)2007-? The 1635 mile, 35” Iran – China oil line. Estimated at $2.6 billion
TECHNICAL DESCRIPTION.
Oro Nero has prepared a natural gas pipeline development plan to facilitate the
commercialization of the Lardistan south basin natural gas reserves.
Oro Nero proposes to construct a 960-mile natural gas pipeline from Lardistan to major
cities in Rotlanda. For planning and design purposes, Oro Nero is analyzing a 36-inch diameter (“NPS
36”), high-pressure (2,500 psia) pipeline that has an initial design capacity of 750 MMcfd and can be
expanded very efficiently to approximately 800 MMcfd by adding incremental compressor units.
The pipeline when constructed would have the following major technical features:
Tubes of high grade (X80) corrosion resistant steel with inner and outer smooth polymer
coating produced during the manufacturing process
Cathodic protection of the linear part of the offshore section (with anodes placed during
construction and operational during service life)
Compressor stations
PHYSICAL CHARACTERISTICS
Total Pipeline length: 960 MILES
Length on land: 768 MILES
Length in Water: 192 MILES
Type: Longitudinal SAW
Initial Throughput: 750 MMCF
Expansion Potential to: 800MMCF
Operating Pressure: 2500psia
Initial Compressor Stations: TWO (2)
Heater Stations: ONE (1)
Meter Stations: TWO (2)
Pipe Steel Grade: X80 (GRADE 550) CARBON STEEL
Pipeline Diameter: 36”
Pipe Wall Thickness: 1.45”
EFFICIENCY LEVEL
The South Central pipeline would operate at an efficiency level of 99.9%with all measures
taken to minimise and eliminate downtime.
The pipeline will receive pipeline quality gas 1 at Lardistan’s South Basins where it will
proceed southward along the described ROW till it gets to the river where it will cross
before it gets to Rotlan City.
Oro Nero’s proposed pipeline route is the certificated ANGTS route that has been
sanctioned by both the Lardistani Senate and Rotlan Parliament.
There would be camps for workers (temporary) built along the ROW and also, two
compressor stations and a Gas Treatment Plant would also be constructed.
TECHNOLOGY
For so many years now, Oro Nero has led and participated in numerous technical
and economic studies and proposals for pipeline projects worldwide. In the process, Oro
Nero has analyzed, in considerable detail, large-diameter pipeline design and construction.
Armed with almost half a century of experience operating large-diameter, high-
pressure natural gas pipelines, compressor stations and measurement stations in regions
where winter temperatures can drop below -40°F, Oro Nero has the expertise to develop
the Lardistan pipeline.
Oro Nero has continuously improved upon its cold climate expertise by incorporating
learning into the operating procedures of existing facilities and into the design criteria for
1
Pipeline quality gas is obtained by removing most of the heavy hydrocarbons, moisture, CO2 and other
impurities from the natural gas stream.
Oro Nero Corporation 2009 Page 6
new projects. Oro Nero’s active research program has focused on material, strain-based
design and structural reliability; fracture behaviour and control; frost heave and thaw
settlement in permafrost and discontinuous permafrost areas; trenching techniques;
horizontal drilling methods; buoyancy control and advanced software development.
The application of many of these technological advancements has increased
efficiencies, safety and environmental protection while decreasing costs. A sample of
technological advancements which we would employ:
High-strength pipe materials
X80 (Grade 550) – Oro Nero first installed X80 pipe on its system in 1994. Since that
time, Oro Nero has installed approximately 3000 miles of large-diameter X80, including
projects dealing with discontinuous permafrost in Northwestern Alaska. The use of X80
continues to lower pipeline material and construction costs by reducing pipeline weight and
reducing construction impacts on the right-of-way.
Fracture control plans – Such plans are now an integral element of any regulatory
application in support of new projects. Oro Nero has developed fracture control plans for
pipelines. Oro Nero engineers have applied and upgraded their knowledge and experience
to control the propagation of longitudinal fractures, and to understand the gas
decompression behaviour that is a key aspect of this phenomenon. These approaches have
been validated through some full-scale fracture tests.
Frost heave and thaw settlement – Frost heave and thaw settlement are unique winter
pipeline design challenges. Numerous transitions to and from permafrost and the related
frost heave and thaw settlement can induce excessive stress and strain on the pipe.
Lardistan’s discontinuous permafrost, especially in the mountainous regions, Oro
Nero the experience it needs to design pipelines for Lardistan.
Strain-based design – This concept specifies the pipe material characteristics
required to meet expected strain loads. Oro Nero is a leader in the development and
application of strain-based design methodologies. We have an in-depth understanding of
material and structural behavior, an extensive operations database, and advanced analytical
models to support design innovations
Mechanized welding – Mechanized welding will be essential for mainline welding of
any pipeline project. Automated and higher productivity welding, with minimum
intervention by the welder, will be a distinct advantage in harsh conditions and short
construction seasons. Oro Nero and BP Exploration are developing a new, fully automated
pipeline welding system. Advanced mechanized welding has been accompanied by the
introduction of mechanized ultrasonic inspection. Oro Nero has led the industry in the
application of this technology. Advanced welding design, processes and inspection ensure
the structural integrity of the field weld.
Advanced monitoring, control and communication systems – Oro Nero operates
one of the largest and most sophisticated gas pipeline systems in the world. We use leading-
edge software to operate our SCADA system, employing a variety of telecom options to
communicate with our remote sites, which allows us to choose the right telecom solution
based on site requirements and cost. Our systems are highly available (99.9 percent), fully
redundant with a remote hot standby contingency site. By applying new technology, Oro
Nero has gone from 14 control centres with a supervisory gas control centre down to a
single gas control centre.
PRELIMINARIES
7 Compensation 1 Month
CONSTRUCTION STAGE
8 Holiday Testing
10 Laying of riverbed portion 6 Weeks The S-lay Method would be used and a
robotic trenching machine
POST-CONSTRUCTION STAGE
1 Testing 3 months
Drying of Pipeline 2 weeks Use dry air to push foam pigs to collect
water
Several crews known as "spreads" will build the pipeline in sections. The plan
assumes that the pipeline will be separated into five construction sections for each
year of construction. The spreads will construct sections ranging in length from 150
to 200 miles.
The peak field workforce is estimated to be between 6,500 and 7,000 people
for the pipeline’s construction.
The reason for the choice of the pipeline route chosen compared with
alternatives,
Risk analysis for gas leakage, which would show the consequences of any gas
leakages both on land and water to humans, wildlife and property.
ECONOMIC ANALYSIS
The South Central Gas pipeline project would be a very financially viable
project as there is a wide market for the Goods in question and also, there is a global
trend of a shift towards the use of clean fuels for industrial and domestic use as a
result of the climate change phenomenon.
Our company, over the years, with our vast experience, has developed an
economical, cost effective means of constructing and managing gas pipelines and this
project, would be the recipient of years of expertise in pipeline management.
ESTIMATED COSTS
The South Central Gas pipeline project is estimated to cost a total of
$1,700,000,000 (One Billion, seven Hundred Million Dollars only) of which 25% would
be spent in the first year, 50% in the second year and 25% in the third year.
This figure includes the value of the financing which would be obtained in
respect of the pipeline.
The break down for the construction cost of the pipeline is as follows (prices in
$MM).
In calculating the costs for the pipeline, an O & M contingency of 20% was
added to the calculated value yearly to make up for contingencies in O&M costs that
may be associated with lack of skilled labour, poor infrastructure, bureaucratic
changes and the like that commonly delay projects and increase costs.
Oro Nero pipelines has entered into long term gas shipping contracts with
existing upstream gas production companies for about 600 MMcfd of gas deliverable
FINANCE
The South Central Pipeline would be financed by a consortium of investor-
lenders who would provide a total of 25% or $406,559,999 of the project sum at an
interest rate of 12% to be amortized over 10 years. The financiers include
Internacionale Credit Suisse, HSBC,FCMB.
The pipeline would also be insured by the International insurance group AIG in
order to mitigate against losses and to pay workmen compensation.
ESTIMATED REVENUES
Revenues for the pipeline in question would be obtained from tariffs on the amount of
Natural gas which passes through the Gas pipeline. Currently, the tariffs are estimated at $1.3 per
Mcf of Gas based on the average estimated throughput of 700MMcfd of gas, the yearly revenues are
estimated as follows:
This is a low estimate since the pipeline is estimated to stabilize production at 750 MMcf per
day and also, leap-year revenues have been ignored to allow for any unforeseen breaks in
production. This is the gross revenue from the pipeline before various costs would be taken into
consideration.
RATES
The tariff rates for the South Central gas pipeline are estimated at about $1.3 per Mcf of
Gas. This tariff is acceptable by both the Lardistani & Rotlan Governments and is the base on which
the financial estimates for the project have been based. The breakdown of the tariff is as follows:
US$/Mcf %
BETWEEN
AND
This contract is made as of the 10th day of February, 2008 by and between the ORO
NERO PIPELINES LIMITED and LARDISTAN GAS COMPANY, a Lardistani company, pursuant
to the following recitals and representations: Whereas, Oro Nero Pipelines Limited has
received and accepted a certificate of public convenience and necessity issued by the
Federal Energy Regulatory Commission, authorizing Oro Nero Pipelines Limited to manage,
construct and operate a pipeline gas transmission. Whereas Oro Nero Pipelines Limited has
entered into gas transportation agreement with the Lardistan Gas Company herein called
Gas supplier(s), for the transportation of up to 120MMcf of natural gas per day; whereas
Oro Nero Pipelines Limited and Lardistan Gas Company now desire to establish the terms
and conditions under which Lardistan Gas Company render services to Oro Nero Pipelines
Limited by entering into this Gas transportation contract.
2. On the commencement date, Lardistan Gas Company shall make the equivalent
quantity corresponding to the input quantity, not to exceed the maximum equivalent
quantity for each delivery on behalf of Oro Nero Pipelines Limited on a firm basis.
Oro Nero Corporation 2009 Page 18
3. Lardistan Gas Company shall be solely responsible for securing faithful performance
by gas supplier(s) in all matters which may affect Oro Nero Pipelines Limited’s
performance hereunder, and Limited shall not be liable hereunder to Lardistan Gas
Company as a result of the failure of Gas supplier(s) to so perform
ARTICLE 3 – TERM
1. This contract shall be effective as of the date first therein above written; provided
however, that Lardistan Gas Company shall be under no obligation to receive or
deliver any quantities of natural gas and Oro Nero Pipelines Limited shall be under
no obligation for any payment(s) hereunder prior to the commencement date.
2. This contract shall be enforced and shall continue to be effective until a date which is
at least one month from the commencement date, pursuant to any effective
provisions for termination of this contract by Lardistan Gas Company as stated in
Rate Schedule FTS or the general terms and conditions for transportation service,
provided however that if the FERC authorizes Lardistan Gas Company to abandon
service to Oro Nero Pipelines Limited on an earlier date. This contract shall terminate
as of such earlier date.
ARTICLE 4 – CORRESPONDENCES
All correspondences to Oro Nero Pipelines Limited shall be addressed to:
The Manager
Power Operations
P. O. Box 860
ANGORIA, AN 62157.
The Manager
Republic of Lardistan.
Either party may change its address under this article by a written notice to the other party.
Subject to the requirements of section 7 of the National Gas Act, Lardistan shall not
be required to render or continue to render sales on behalf of any Oro Nero Pipelines
Limited that has applied for bankruptcy under the bankruptcy code or on behalf of any
lardistan gas company which, at Oro Nero Pipelines Limited’s request , fails within a fifteen
(15) day period to desmonstrate and maintain credit worthiness, provided however, that
Lardistan Gas Company shall render or continue to render transportation service for any
such Oro Nero Pipelines Limited which prepays for such service or which, upon fifteen (15)
day notice by Oro Nero Pipelines Limited, furnishes good and sufficient security bond or
other good and sufficient security as Lardistan Gas Company in its reasonable discretion
deems acceptable of a continuing nature and in an amount equal to the cost of performing
the transportation service request for a two month (2) period.
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1. A Gas Gathering pipeline Network to collect the gas from sources of production to link to the
main trunk line for onward delivery to Rotlanda.
2. A central gas treatment plant to remove impurities and refine the gas to pipeline quality gas
before it gets to the trunk line.
Balancing the flow in the pipeline system to maintain operational integrity to ensure
pipe pressures are kept within design parameters.
Therefore, the company would also build an Underground facility to protect against these
situations and would also utilize line-packing in storage of the gas.
Loan
26%
33% HSBC
FCMB
UBA
GTB
21%
20%
The partner banks and their contributions are shown in the chart.
RISK MANAGEMENT
CONSTRUCTION RISK
During construction of the pipeline, some issues might come up such as natural disasters,
delay in supply of materials, system failure due to substandard material, and so on. The company
observes the highest codes of quality in existence and also has already put in contingency plans in
place for any of the imaginable scenarios.
PRICE RISK
In the day to day operation of the pipeline, there is interaction of demand and supply forces
which can lead to volatility in prices of Natural Gas. This Risk has been taken care of as contracts for
transportation of the Gas have been signed with both parties agreeing to a tariff rate for 30 years.
OPERATIONS RISK
Problems such as shortfalls in through put and so on, which might be experienced during the
running phase of the gas pipeline have all been taken care of. The pipelines are all linked to an
underground storage system for emergency and other purposes and also, Natural gas loss during
maintenance procedures is highly minimized through the advanced techniques we employ in
maintenance of our pipelines.
There have not been any serious internal conflicts for religious, ethnic or political reasons since the
1987 coup and any which have occurred have been non-violent.
There does not seem to be solid evidence of military’s intent to take control of government and it is
believed that this would continue to be the case in the nearest future.
Rotlanda: Rotlanda has a well-functioning multiparty democracy. The political system is one of the
most stable in the region with over 50 years of democracy since its independence from Angoria.
2004 is presidential election year in Rotlanda and due to the increase in unemployment and
percentage of population living below poverty level, there ahas been a mild upsurge of crime and
social unrest in the country.
Opposition parties, indigenous groups and international NGO's oppose this pipeline for a variety of
reasons ranging from un-sustainability, potential adverse environmental impacts and violation of the
property rights of indigenous groups Risk Mitigation
Rotlanda: The completion of the pipeline to Rotlanda would be the beginning of a new era in
industrialisation as industries would be attracted to set up in the country with availability of a cheap
and steady gas supply, environmentally, the company has an enviable record of constructing in line
with environmental best practices so we would ensure that there is minimum environmental impact
on the proposed pipeline route.
For the Indigenous groups, since they claim the lands as ancestral, the company would give them
access to areas and also assign them the responsibility of protecting the parts of the pipeline which
crosses their area. Projects which are also of utmost importance to each community would be
awarded for each in the vicinity of the pipeline.
For the political parties, it is believed that the ruling NRP would keep power in the upcoming
elections and if not, the opposition parties would see the viability of the proposed project as it would
create jobs, increase the country’s GDP hence reviving the failing economy of Rotlanda
REGULATORY RISK
There is a risk of regulatory bodies from either country changing rules and regulations on
pipeline operation and also a risk of price caps being fixed on tariffs which may hurt revenue
projections on the pipeline. This risk, though minimal, has to be taken as one of the risks of business
and in the worst case scenario, the pipeline, being as hugely profitable as it is now, would still
recover costs of construction and operation and would also yield some returns to investors.
LEGAL RISK
There
2. The terms and conditions for tenders or auctions shall be defined by the agency and
registered at the Ministry of Justice of Lardistan one month prior to the
announcement of auction.
4. Clean Air Act: This Act is designed to protect and enhance the nation’s air resources
so as to promote the public health, welfare, and productive capacity of the populace.
5. Article1.22 under general provisions of the Petroleum Industry Reform Law of Lardistan ,
““Force Majeure” – Acts of God, strikes, sabotages and other industrial disturbance, civil
unrest, war, blockade, earthquakes, avalanches, epidemics, flood and similar events, which
are out of reasonable control of Parties and which are impossible to eliminate by Parties.
Force Major does not include deterioration of Investor’s financial condition provided that it
is not connected to the above listed events. In such cases advantages under Force Major
conditions does not apply to the amount payable by Parties under Agreement.”
SMART DEVELOPMENT
Oro Nero pipelines, from years of operating various pipeline systems scattered around the
globe has come to realise that there is no feasible long term development without the input,
Participation and support of the stake holders or community. The company is globally admired as a
development partner, touching lives and making improvements to conditions on ground in any part
of the world where we operate.
Oro Nero is guided by the vision of being the energy company most admired for her
partnership and performance. In the pursuit of this vision, the company has been pivotal in
promoting the ideas and programmes that foster sustainable development in facets of her
operational terrains. We do this through a corporate responsibility programme targeted at
improving the quality of life by contributing to schemes that stimulate socio-economic
growth. In the same vein, Lardistan stands to benefit considerably from the project in two
broad-based areas. These are the provision of basic infrastructure and business and human
capital development.
INFRASTRUCTURE PROGRAMMES.
Road construction.
This increase would be as a result of our intensive human resource optimization and
technology transfer program which we carry out in all communities were we operate. The
scholarships we award are given to bright students who, on undertaking to work with us, are sent on
an intensive program at any station in our vast network to learn the basics and also advanced
techniques which we employ in managing projects..