Corrosion Control in the Oil and Gas Industry

1

The Oil and Gas Industry

Abstract

This chapter provides a bird’s eye view of the oil and gas industry. It discusses the importance of energy from hydrocarbons, describes different types of hydrocarbons, indicates their sources, and provides a brief history of the industry. It then explains how the industry is regulated by various government agencies in North America, and finally presents the impact of corrosion on the industry.

Keywords

Regulation; Cost of corrosion; Hydrocarbons; Oil and gas; Oilsands; Conventional oil production; Non-conventional oil production; Shale oil; Shale gas; Tight gas; Hydrates; History; Oil and gas; production; Oil and gas; transmission; Oil and gas; refinery; Oil and gas; distribution; Oil and gas; storage

1.1 Introduction

This chapter provides a birds-eye view of the oil and gas industry. It discusses the importance of energy from hydrocarbons, describes different types of hydrocarbons, indicates their sources, and provides a brief history of the industry. The chapter then explains how the industry is regulated by various government agencies in North America, and finally presents the impact of corrosion on the industry.

1.2 Energy from hydrocarbons

The progress of civilization over the past two centuries has depended on the energy derived from crude oil, natural gas, coal, and nuclear reaction, as well as from renewable (wind, sun, biofuels, and hydroelectric) sources. Table 1.1 lists sources of energy in 2005; of these hydrocarbons (crude oil and natural gas) and coal comprised 84%.¹ Total global energy demand in 2030 is projected to be 50–60% more than current levels. Figure 1.1 presents the anticipated sources of energy in 2030; energy from nuclear and renewable sources could increase substantially, but energy from hydrocarbons and coal would nevertheless be up to 80% of the total.²

Table 1.1

Current Sources of World Energy¹

∗Based on 2005 estimates

FIGURE 1.1 Anticipated Sources of Energy in 2030.² Reproduced with permission from Cambridge University Press.

The industry has produced 1.063 trillion barrels (bbl) of oil since its inception in the late 1800s. The global demand for oil in 2000 was 76 million bbl/day (27.74 billion bbl/year). Table 1.2 presents annual production of the major oil-producing countries.³ In 2030, global oil demand is estimated to be about 37.6 to 50.4 billion bbl/year.

Table 1.2

∗ Worldwide Oil Production³

∗Based on Table 1, page S2 of reference 1.3

∗∗Not available

The industry has also produced 3,000 trillion cubic feet (TCF) [85 trillion cubic meters (TCM)] of gas. The remaining gas reserve is estimated to be 7,000 TCF (200 TCM). The global demand for natural gas in 2000 was 88.7 TCF (2.51 TCM) per year. In 2030, gas demand is estimated to be about 130–212 TCF per year (3.7–6.0 TCM per year).

The energy (heat) content is a unique property of each type of hydrocarbon. The normal unit used for heat is the British Thermal Unit (BTU). The amount of heat required to raise the temperature of one pound (lb) of water by 1°F is one BTU. The heating value may be reported as higher heating value (HHV) and lower heating value (LHV). HHV is a measure of the gross amount of heat produced when the hydrocarbon burns. LHV considers the loss of heat due to vaporization of water during the burning of hydrocarbon. The thermal efficiency (TE) can be calculated from the HHV and LHV using (Eqn. 1.1):

(Eqn. 1.1)

Table 1.3 presents the HHV and LHV values of some hydrocarbons.⁴ The oil and gas industry strives to produce and supply hydrocarbons with higher thermal efficiencies as economically as possible.

Table 1.3

Heating (Energy) Values of Hydrocarbons and Other Substances⁴

1.3 What are hydrocarbons?

Hydrocarbons are chemical species containing only carbon and hydrogen atoms. Hydrocarbons can be chemically classified into several categories, but with respect to the oil and gas industry three types are important: alkanes, cycloalkanes, and aromatic compounds.

1.3.1 Alkanes (Paraffins)

In the oil and gas industry alkanes are known as paraffins. Alkanes are saturated (all bonds between carbon and hydrogen atoms are single bonds) hydrocarbons. Alkanes have a general formula CnH2n+2; where ‘n’ is the number of carbon atoms. Table 1.4 presents the chemical and physical properties of some alkanes.

Table 1.4

Properties of Alkanes (Saturated Hydrocarbons or Paraffins)

The simplest hydrocarbon, having just one carbon atom (n = 1), is methane. Methane is the primary component of natural gas. Natural gas containing only methane is called ‘dry gas’. In the past, natural gas was simply burned (known as flaring), but now it is used as a major fuel source. The advantage of natural gas is that it produces less CO2 when combusted compared with other hydrocarbons. Hence it is considered a clean fuel.

Hydrocarbons with values of ‘n’ between 2 and 5 [(ethane (C2), propane (C3), butane (C4), and pentane (C5)] are collectively known as natural gas liquids (NGLs), liquid petroleum gases (LPGs), or condensates. At atmospheric pressure they exist in the gaseous state, but the application of pressure turns them into liquids. Natural gas containing NGLs is known as wet natural gas.

The alkanes with ‘n’ values between 5 and 8 [pentane (C5), hexane (C6), heptane (C7), and octane (C8)] are refined into gasoline (petrol). Due to its high energy density, easy transportability and relative abundance, gasoline has become the most commonly used fuel in automobiles. Table 1.5 presents the common names and uses of different alkanes.

Table 1.5

Use of Various Hydrocarbons

∗Pentane (number of carbon 5) is also included

1.3.2 Cycloalkanes (Naphthenes)

Cycloalkanes are known as naphthenes. Cycloalkanes are saturated hydrocarbons having one or more carbon rings with a general formula CnH2n. Figure 1.2 compares the structures of hexane (paraffin) and cyclohexane (naphthane); both have six carbon atoms. Cycloalkanes have similar properties to alkanes but higher boiling points. Cyclohexane is commonly used as a solvent in the chemical industry and laboratories. It is also the raw material used to produce nylon.

FIGURE 1.2 Comparison of the Structures of Hexane and Cyclohexane.

(A) Hexane. (B) Cyclohexane. (Each apex of the hexagon represents a –CH2 group).

1.3.3 Aromatic hydrocarbons

Aromatic hydrocarbons are unsaturated hydrocarbons with the formula CnHn. They have at least one characteristic ‘six carbon ring’ called a benzene ring. Figure 1.3 compares cyclohexane and benzene, which both have an ‘n’ value of six. Aromatic hydrocarbons tend to burn with a sooty flame. Many of them have aroma (smell) and are carcinogenic (cancer causing).

FIGURE 1.3 Comparison of the Structures of Cyclohexane and Benzene.

(A) Cyclohexane. (Each apex of the hexagon represents a –CH2 group). (B) Benzene. (Each apex of the hexagon represents a –CH group; ring represents double-bond structure).

1.4 Hydrocarbon sources

Hydrocarbons occur naturally in the earth. According to the most widely accepted theory, hydrocarbons were formed when organic matter (such as the remains of plants or animals) was compressed under the earth, at very high pressure and high temperature for a very long time.

Hydrocarbons may occur in the earth either as liquid or as gas. Liquid hydrocarbon is commonly known as crude oil and gaseous hydrocarbon is commonly known as natural gas. Crude oil is also known as ‘petroleum’ – derived from ‘petros’ (a Greek term for stone or rock) and ‘oleum’ (a Latin term for oil). An ancient term for petroleum is ‘rock oil’. An oil-producing well may also produce gas. The gas produced from an oil well is commonly known as ‘associated gas’. The relative proportion of gas and oil in the well is expressed as the gas to oil ratio (GOR). At relatively lower temperatures, more crude oil is formed and at higher temperatures more gas is formed. As we go further beneath the earth’s crust, the temperature increases. For this reason, gas is usually associated with oil in wells that are within one to two miles from the earth’s crest. Wells deeper than two miles primarily produce natural gas.

In addition to oil and gas, wells may produce several other substances, including salt water (commonly known as formation or produced water), organic compounds (nitrogen, oxygen, and sulfur-containing species), metals (iron, nickel, copper, mercury, and vanadium), and radioactive materials (commonly known as NORM – naturally occurring radioactive materials). The gas phase may contain, in addition to hydrocarbons, carbon dioxide (CO2), hydrogen sulfide (H2S), hydrogen, and helium. The term ‘sweet’ is commonly used to refer to environments containing CO2 with no H2S. The term ‘sour’ is used to refer to environments containing H2S. Sour environments may also contain CO2.

The less the hydrocarbons are contaminated with other non-energy substances, the easier it is to extract them from the earth. To quickly express the value of crude oils, some industry bench mark crude oils have been established. Table 1.6 presents some commonly used key industry benchmark crude oils. The value of crude oil is also ranked using American Petrochemical Institute (API) gravity. API gravity and density are inversely related, i.e., the higher the density, the lower the API gravity (Table 1.7) and the higher the API value, the more valuable is the crude oil.⁵

Table 1.6

Characteristics of Some Bench Mark Crude Oils

Table 1.7

Relationship Between API Gravity and Density⁵

In general, hydrocarbon sources may be broadly classified into conventional, unconventional, and renewable.

1.4.1 Conventional

There are no strict definitions of conventional oil and gas sources, but in general hydrocarbons can be produced from conventional hydrocarbon sources with little or no effort. For a source to be identified as conventional, 40% or more of the fluids it contains should be hydrocarbons; the underground pressure and temperature should be high enough for the hydrocarbons to reach the surface on their own (or with minimal pumping); the API gravity should be high enough for oil to flow easily; and the properties of rock in the reservoir should be conducive to the free flow of hydrocarbons. The oil and gas industry uses five rock properties to determine whether the reservoir can produce hydrocarbons by conventional methods. They are:

• Porosity: the ratio of the void space in a rock to the bulk volume of rock;

• Permeability: a measure of the ability of rock to permeate hydrocarbons through it;

• Fluid saturation: a measure of oil, water, and gas contents of a rock;

• Capillary pressure: a measure of ability of hydrocarbon to pass through a capillary tube which is an indirect measure of whether the rock is wetted with water or oil;

• Electrical conductivity: a measure of conductivity of bulk fluid in the rock. The oil-phase has low conductivity and the water-phase has high conductivity.

Conventional production may take place in three stages: primary production, secondary, and tertiary. During the early stages of production, the reservoir pressure and hydrocarbon content are high. As the reservoir pressure and hydrocarbon content decrease, water is pumped into the well to continue to produce from it. This process is known as secondary recovery or water flooding. Secondary recovery by water injection increases the amount of oil recovered over primary production, but may still leave more than 80% of oil in the reservoir. To recover more oil, gas (CO2, N2 or methane) may be injected. The process of recovering oil by injecting gas is known as tertiary recovery.

A few countries with the largest conventional oil reserves account for more than 70% of hydrocarbon production. Table 1.8 presents one estimate of the remaining quantities of conventional oil in some countries.²

Table 1.8

Supply of Oil in Selected Countries²

1.4.2 Unconventional

Unconventional sources may be defined as those that cannot produce hydrocarbons at economic flow rates and in economic volumes unless the reservoir is first stimulated. The stimulation techniques include heat treatment, hydraulic fracture treatment, multilateral wellbores, and some other techniques that expose more of the reservoir to the wellbore. According to estimates, the world’s remaining supplies of unconventional resources are 13–15 trillion barrels of crude oil and 32,000 TCF (910 TCM) of natural gas (Table 1.9).⁶ Unconventional sources of hydrocarbons include oilsands, oil shales, gas shales, tight gas, coal bed methane, and gas hydrates.

Table 1.9

Global Unconventional Gas Sources⁶

1.4.2a Oilsands

Oilsands are a naturally occurring mixture that typically contains 10–12% bitumen, 80–85% minerals (clays and sands) and 4–6% water. Bitumen is a mixture of large hydrocarbon molecules containing up to 5% sulfur compounds by weight, small amounts of oxygen, heavy metals, and other materials. Physically, bitumen is denser than water and more viscous than molasses (sometimes existing as a solid or semi-solid). Bitumen-containing oilsand deposits are found in over 70 countries, but three quarters of the world’s known reserves are in Canada and Venezuela. Oilsands represent about 66% of the world's total reserves of oil. According to estimates, the volumes of oil in Canadian and Venezuelan oilsands are at least 1.7 trillion barrels (270 x 10⁹ m³) and 235 billion barrels (37 x 10⁹ m³) respectively.⁷–⁹

Most of the oilsands in Canada are located in three principal deposits in Northern Alberta: Athabasca, Cold Lake, and Peace River. The deposits encompass nearly 47,845 miles (77,000 km²) of land area. The first Canadian oilsand mining operations started in 1967, the second began in 1978, and the third began in 2003. Currently several further mining operations are either under development or commercial consideration. In 2005, oilsands accounted for 50% of Canada's total crude oil output.

The Venezuelan oilsands are commonly known as ‘extra heavy oil’. Bitumen and extra heavy oil are essentially the same. The Venezuelan oilsands occur at higher temperatures 120°F (50°C) and the Canadian oilsands occur at freezing temperatures. For this reason, the Venezuelan oilsands exist mostly in the liquid state, whereas Canadian oilsands exist in semi-solid and solid states. Hence the extraction of Venezuelan oilsands is relatively easier than Canadian oilsands.

In the USA, oilsands are primarily concentrated in eastern Utah, with an estimated 32 billion barrels (5.1 x 10⁹ m³) of oil. These oilsands have been quarried since the 1900s and are used mainly as paving materials.

Oilsands are extracted by surface mining, or by in situ methods including cyclic steam stimulation (CSS), steam-assisted gravity drainage (SAGD), toe to head air injection (THAI), cold heavy oil production with sand (CHOPS), and the vapor extraction process (VAPEX) (see sections 2.8 and 2.9).

1.4.2b Shale oil

Shale oil is a fine-grained rock containing significant amounts of hydrocarbons.¹⁰ The global deposits of shale oil from which crude oil can be recovered are estimated to be about 3 trillion barrels (∼500 x 10⁹ m³). Shale oil deposits occur in the USA, Estonia, China, Brazil, Germany, Israel, and Russia. The USA possesses 68% of the world shale oil resources, but in 2009 Estonia produced 80% of its oil requirements from oil shale.¹¹

The most common method of extracting shale oil is by surface mining. The in situ combustion process is used for extracting shale oil from far below the surface. The extracted shale oil then undergoes pyrolysis at 842 to 932°F (450 to 500°C) to produce oil shale (synthetic crude oil), shale gas and residue (solid). This process also produces sulfur, ammonia, alumina, soda ash, uranium, arsenic, and nitrogen. Thus, similar to oilsands, the production of oil from shale oil is energy intensive and environmentally challenging.

Most shale oil is used as fuel in power generation plants. For example, 90% of the shale oil produced in Estonia is used for power generation. Countries such as Romania and Russia also use shale oil for power generation. It may also be used to produce several products including carbon fibers, adsorbents, carbon black, phenols, resins, glues, tanning agents, mastic, road bitumen, cement, bricks, construction and decorative blocks, soil additives, fertilizers, rock-wool insulation, glass, and pharmaceutical products. When the price of oil is high, however shale oil is used to produce crude oil.

1.4.2c Shale gas

Gas produced from shale is known as shale gas.¹² Shales containing gas have a high organic material content (up to 25%), to which the natural gas is adsorbed. For this reason, the shale has low permeability for gas flow. The shale must be fractured to increase gas permeability. Techniques used to fracture the shale include hydraulic fracturing, horizontal drilling, and injection of large volumes of water containing sand particles at high pressure.

1.4.2d Tight gas

Tight gas refers to the natural gas trapped in reservoirs of low permeability. The low permeability of the reservoir is due to the fine-grained nature of the sediments, compaction, carbonates and silicates filling the pores. Gas from these reservoirs is produced by using similar special techniques to those used to produce gas from shale gas resources.

1.4.2e Coal bed methane

Methane adsorbed onto the surface of the coal bed is known as coal bed gas or coal bed methane (CBM).¹³ Coal beds predominantly contain methane, but they may also contain small amounts of ethane, propane, light liquid hydrocarbons, and CO2. To produce commercially, the methane content in the coal bed should be more than 92%. Extraction of methane from a coal bed depends on its porosity, the adsorption strength of methane onto carbon, fracture permeability, thickness of the formation, and initial reservoir pressure. Methane is extracted from the coal bed by drilling a steel pipe into the coal seam to release the pressure. As the pressure in the coal seam decreases, methane adsorbed onto coal desorbs and escapes to the surface through the steel pipe.

1.4.2f Gas hydrates

Gas hydrates are solids with a cage-like chemical structure, in which natural gas (methane) molecules are enclosed in water molecules. Hydrates are formed naturally at sub-zero temperatures, when methane produced by the breakdown of organic materials solidifies with water. Hydrates contain immense volumes of methane. For example, one unit volume of methane hydrate may produce 160 unit volumes of methane at a given pressure. In addition ethane, propane, and butane hydrates also occur.

Globally, the amount of methane in gas hydrates is estimated to be 1 x 10⁴ gigatons.¹⁴ Canada has the most concentrated deposits of gas hydrates in the world. Russia, USA, India, Japan, and China also have substantial deposits of gas hydrates. The first hydrate core was obtained from water 5,635 feet (1,718 m) deep in Guatemala. The second hydrate core was obtained from water 1,738 feet (530 m) deep in the Gulf of Mexico. The Malik field in the Canadian Arctic was the first experimental field to produce natural gas from gas hydrates.

The formation and breakdown of gas hydrates depend on water content, composition of water, pressure (normally high pressure facilitates hydrate formation), and temperature (normally low or sub-zero temperatures facilitates hydrate formation). By varying the pressure, temperature, and adding chemicals (e.g., methanol or ethylene glycol), hydrates may be broken down to produce natural gas.

1.4.3 Renewables

At this time, renewable hydrocarbon technology is not mature enough to replace fossil fuels, but is mature enough to supplement them. In some countries, fossil fuels used in automobiles contain 10 to 20% biofuels. Many governments have passed legislation encouraging the use of renewable fuels. Among the renewable fuels, biofuels (bioethanol and biodiesel) are most promising. Bioethanol is mixed with gasoline and biodiesel is mixed with diesel.

According to a 2006 survey, the worldwide production of bioethanol was 126 million barrels (15 billion liters) and that of biodiesel was 33 million barrels (4 billion liters). The production of both bioethanol and biodiesel is anticipated to increase 10-fold over the next ten years. Currently, Brazil and the USA are leaders in the production of bioethanol. Table 1.10 presents the amount of bioethanol produced in different countries in 2006.¹⁵ The world trend shows a nearly five-fold increase in world production over the next 20 years. The primary sources for bioethanol are corn and sugarcane. Other sources include hemp, sugar beets, maize, barley, potatoes, cassava, sunflower, wood pulp, and brewing wastes.

Table 1.10

Global Production of Bioethanol¹⁵

Biodiesel is predominantly produced in Europe (90% of total biodiesel production). The remaining 10% is produced in the USA (8%) and other countries, including Argentina, Brazil, Canada, India, and Malaysia. In 2007, the USA produced 2,392 million liters (632 million gallons) of biodiesel. In 2004, Canada produced approximately 3.5 million liters (875,000 gallons) of biodiesel, and in 2010 the production is expected to reach 500 million liters (132 million gallons).¹,¹⁶

Biodiesel is produced from a variety of sources. Figure 1.4 presents various sources of biodiesel.¹⁷,¹⁸ About 80% of the biodiesel in Europe is produced from rapeseed oil and about 20% from soybean oil. In the USA, most biodiesel is produced from soybeans. In Canada, biodiesel is produced from yellow grease, tallow, canola, and soybeans. Both the US and New Zealand are conducting experimental studies to produce biodiesel from algae. In India, biodiesel is produced from two non-edible plants – Jatropha curcas and Pongamia pinnata.

FIGURE 1.4 Some Resources for the Production of Biodiesel.¹⁷,¹⁸

The content of biodiesel in the blend is identified using the designation ‘B’, followed by the percentage of biodiesel. For example, B2 indicates 2% biodiesel and 98% petroleum diesel and B20 indicates 20% biodiesel and 80% petroleum diesel. Of the various blends, B20 is most commonly used. The energy content of biodiesel (as measured, for example in BTU) is about 7–9% less than that of petroleum diesel.

1.5 History of the oil and gas industry¹⁹–²⁴

The oil and gas industry has been maturing over the past two centuries and continues to evolve. This section presents a brief history of the oil and gas industry so that we can appreciate its magnitude, knowledge, wealth, breadth, and impact.

1.6 Regulations

Chapter 2 describes different entities of the oil and gas industry network. Most parts of these networks are underground, except for some huge facilities such as storage tanks and refineries. The existence of underground facilities is indicated with aboveground markings in many countries. For example, in USA the American Public Works Association (APWA) uses yellow color code to indicate oil and gas structure. Table 1.11 presents the APWA color code to indicate various infrastructures.

Table 1.11

American Public Works Association Color Code∗

∗American Public Works Association (APWA) color code

The vast underground oil and gas networks are strictly regulated by a number of government regulatory agencies; from the design and construction stages to operation and discontinuation (often referred to as abandonment) stages. These agencies ensure that the oil and gas network is operated safely, responsibly, and in the public interest. Table 1.12 presents typical types of approvals required for operating an oil and gas network in Canada, and Table 1.13 presents typical types of application required for approval.²⁵ Table 1.14 presents the types of regulators for gas networks in the USA. Table 1.15 presents some regulators in Canada and USA.

Table 1.12

Typical Approval Requirements in Alberta, Canada

∗The Government of Alberta which administers and enforces Environmental Protection and Enhancement Act

Table 1.13

Energy Resources and Conservation Board Pipeline Application Procedure²⁴

Table 1.14

Examples of USA Regulatory Bodies for Gas Networks

Table 1.15

Some Government Bodies Regulating Oil and Gas Industry in Canada and USA

While different countries have different regulations, they are all more or less based on the same principle; i.e., to safeguard people, the environment, and the facility. Table 1.16 compares different regulators' approaches.²⁶ Some regulations are prescriptive in nature, while others are descriptive. In prescriptive regulations, the steps to be taken to maintain the integrity of the infrastructure are prescribed. Generally, prescriptive regulations are to be considered only as a minimum. Responsible operation may need to go further. In descriptive regulations, the expectations of the regulators are outlined, leaving the steps to be taken with the operators. There are many terms for this style of regulation: goal-based, outcome-based, goal-oriented. All describe the desired outcome and leave the mechanics of how to achieve that to the operator.

Table 1.16

Comparison of Different Philosophies of Regulations²⁵

Because transmission pipelines operate at elevated pressure, travel long distances, and pass through other infrastructure such as roads, buildings, railway lines, electric towers, and industrial complexes, the regulations governing their operation can be more stringent than those governing other parts of the oil and gas industry. Regulations in Canada (mostly descriptive) and in US (mostly prescriptive) for transmission pipelines are discussed in the following paragraphs as illustration.

In Canada, the National Energy Board (NEB) regulates the design, construction, operation, and abandonment of interprovincial and international pipelines within Canada. According to the NEB Act (OPR 99), ‘pipeline’ means a line that is used or to be used for the transmission of oil, gas, or any other commodity and includes all branches, extensions, tanks, reservoirs, storage facilities, pumps, racks, compressors, loading facilities, inter-station systems of communication by telephone, telegraph or radio and real and personal property and works connected therewith, but does not include sewer or water pipeline that is used or proposed to be used solely for municipal purposes.

Pipelines within the province are regulated by provincial regulators. For example, in Alberta, most activities related to the planning, construction, operation, and abandonment of oil and gas pipelines are regulated by the Alberta Energy Regulator (AER). The AER is responsible for issuing approvals for gathering and transmission lines as well as high pressure (greater than 700 kPa) distribution lines that lie fully within Alberta. Alberta Transportation and Utilities (ATU) board regulates lower pressure lines.

Regulations may require the operator to have manual describing operations, maintenance, repair, corrosion control, and integrity management processes as well as to have documents to demonstrate compliance. Regulations may also require the operator to evaluate, inspect, and/or test annually the operating or discontinued pipelines and the operator to submit corrosion control experience, monitoring data and inspection data.

It is generally expected that the operators are responsible for ensuring that their operations are conducted in accordance with regulations and best practices. However, in certain situations, regulations may be enforced. Table 1.17 presents the enforcement ladder that AER uses to categorize the levels of non-compliance.²⁷

Table 1.17

Alberta (Canada) Provincial Government’s Enforcement Ladder²⁶

In addition, Canadian environmental protection agencies may regulate conservation and reclamation activities on private land for gathering, transmission, and distribution pipelines. Additional approvals from environmental, fisheries, and ocean governing agencies may also be required to construct, operate, or discontinue the pipelines. In addition to these government approvals, operators must also obtain the landowner’s permission for construction and maintenance of pipelines.

The Federal Energy Regulatory Commission (FERC) oversees the USA interstate natural gas pipeline industry. The commission regulates both the construction of interstate natural gas pipelines and transportation of natural gas in interstate commerce. Companies wishing to build interstate pipeline facilities or operate pipelines must first obtain a Certificate of Public Convenience and Necessity from FERC. This is done to ensure that pipeline facilities benefit consumers, are compatible with the environment, and minimize interference with the public’s and landowners’ rights-of-way along the pipeline.

The Office of Pipeline Safety (OPS), within the US Department of Transportation (DOT), Pipeline and Hazardous Materials Safety Administration (PHMSA), regulates hazardous liquid and gas onshore pipelines. Offshore pipelines are regulated by the US Department of Interior's Minerals Management Service (MMS).

The minimum pipeline safety standards are prescribed in the US Code of Federal Regulations (CFR), Title 49, ‘Transportation’, Parts 192–195.

• Part 192: Transportation of natural and other gas by pipeline

• Part 193: Liquefied natural gas facilities

• Part 194: Response plans for onshore oil pipelines

• Part 195: Transportation of hazardous liquids by pipelines

Regulations of pipelines are often based on rigorous standards and best practices developed by various industry, technical, and scientific associations. The voluntary consensus standards and best practices are developed as a method of improving the individual quality of a product or system. Table 1.18 presents some organizations that develop standards pertaining to oil and gas industry.

Table 1.18

Selected Technical Organizations Developing Standards for Oil and Gas Industry

Despite the best efforts of companies, industry, regulatory agencies, and stakeholders, oil and gas infrastructure may sometimes fail, releasing their contents to the environment. The impact of the failure depends on its size and type, the location and type of infrastructure, and the products being transported. The failures may be broadly classified into accidents, incidents, and leaks. Accidents are major occurrences, such as a line rupture or an instantaneous tearing or fracturing of material, which immediately shut down the system. Incidents are minor leaks and operational malfunctions that affect the safety of the system and that curtail operations. Leaks are loss of product through small openings, cracks, or holes that do not immediately affect pipeline operation and which may have gone unnoticed for a long time.

When a failure occurs, normally another government body investigates it. In Canada, for example, the Transportation Safety Board (TSB) investigates incidents on federally regulated infrastructure to identify direct causes and contributing factors. In the USA, the National Transportation Safety Board (NTSB) investigates pipeline significant accidents (fatality or substantial property damage; typically any failure causing more than five gallons or equivalent amounts of hydrocarbon release). The investigatory agencies conduct failure analysis and root-cause analysis. The investigatory agencies may also issue safety recommendations aimed at preventing future accidents.

1.7 The significance and impact of corrosion in the oil and gas industry

In order to use hydrocarbons as energy source, they must be extracted from underground, all other non-energy containing products separated from them, and the different types of hydrocarbons separated from one another. These processes occur at various stages between the wells where the hydrocarbons are found and the locations where they are used as fuels. Between the sources of the hydrocarbons and the locations in which they are used as fuels, there is a vast network of oil and gas infrastructure. Table 1.19 presents the major sectors of oil and gas network and Chapter 2 describes their characteristics. This vast network comprises different materials exposed to different environments and to different operating conditions (flow, temperature, and pressure). As consequence of various interactions, the integrity of the infrastructure may be compromised resulting in failures. In general, the causes of failure may be classified into two categories: pre-service and in service. Table 1.20 summarizes the major factors that can compromise the integrity of the oil and gas network.²⁸ From Table 1.20 it is obvious that corrosion is a key cause of failure. Recently, the cost of corrosion in the USA was surveyed. The cost of corrosion in the oil and gas industry from that survey³ and from other studies is summarized in the following sections.

Table 1.19

Annual Corrosion Cost in Major Sectors of USA Oil and Gas Industry³

∗The amount is only for production from conventional sources (corrosion cost for production from non-conventional and renewal sources is not included)

∗∗World total

Table 1.20

Types of Failures and their Causes in Oil and Gas Industry²⁷

1.7.1 Production sector

Components of production sector include drill pipe (see section 2.2), casing pipe (see section 2.3), downhole tubular (see section 2.4), acidizing pipe (see section 2.5), water generator (see section 2.6), gas generator (see section 2.7), wellhead (see section 2.10), production pipeline (see section 2.11), gas dehydration facility (see section 2.14), oil separator (see section 2.15), lease tank (see section 2.18), and waste water pipeline (see section 2.19). The oil and gas production sector may be broadly classified into downhole and surface units.

• The downhole unit consists of drill pipe, casing pipe, downhole tubular, acidizing pipe, water generator, and gas generator.

• The surface unit consists of the wellhead, production pipeline, gas dehydration facility, oil separator, lease tank, and waste water pipeline.

The annual capital expenditure of onshore oil and gas production sector in the USA is estimated at $4.0 billion; of which $320 million (8%) is directly related to corrosion control. The annual operating expenditure of the onshore oil and gas production sector in the USA is estimated at $1.372 billion; of which $1.052 billion (76%) is directly related to corrosion control. Of that $1.052 billion, $589 million is spent on controlling corrosion in downhole units, and $463 million is spent on controlling corrosion of surface units.

There are approximately 0.6 onshore downhole tubular failures per year per well, and 30% of these failures are caused by corrosion. Each onshore downhole tubular failure incurs $3,000 of direct cost. It is difficult to repair and replace downhole tubulars operating offshore. Therefore additional precautions are taken when maintaining these infrastructures. For this reason, the cost of corrosion control for offshore downhole tubulars is higher than onshore downhole tubulars. Table 1.21 presents the average corrosion cost associated with maintaining a surface unit in the USA; as the amount of water produced, along with oil, increases the cost of corrosion also increases.

Table 1.21

Corrosion Cost in Production Pipeline Unit in the USA³

There is a vast network of production pipelines between the wellhead and gas dehydration facilities, as well as between wellhead and oil separators. Figures 1.5, 1.6, and 1.7 present statistics for production pipelines in Alberta, Canada.²⁹,³⁰ Figure 1.8 presents factors that cause failure of production pipelines. Figure 1.9 presents the number of failures caused by corrosion. More than 70% of failures were caused by corrosion; of which about 58% were due to internal corrosion and 12% were due to external corrosion.

FIGURE 1.5 Lengths of Production Pipelines in Alberta, Canada.²⁸,²⁹ (The reduction of pipeline length in 1998 is due to transfer of regulatory responsibility of some pipelines to federal regulator).

FIGURE 1.6 Typical Diameter of Gas Production Pipelines in Alberta, Canada.²⁸,²⁹

FIGURE 1.7 Typical Diameter of Oil Production Pipelines in Alberta, Canada.²⁸,²⁹

FIGURE 1.8 Alberta, Canada Production Pipeline Failure Data for 1980–2005.²⁸,²⁹

FIGURE 1.9 Failures Caused by Corrosion of Production Pipelines in Alberta, Canada.²⁸,²⁹

Some components, such as open mining (see section 2.8), in situ production (see section 2.9), heavy crude oil pipelines (see section 2.12), hydrotransport pipelines (see section 2.13), recovery centers (see section 2.16), upgraders (see section 2.17), and tailing pipelines (see section 2.20), are exclusively used in producing oil from oilsands. This part of the industry is relatively new and expanding rapidly. The corrosion cost of these components is not fully understood. Oilsands plants can cost $10 billion or more to build. Individual companies in Canada spend over $20 million in corrosion control program per year on just one operating field. One study does however indicate that the annual corrosion cost for just one company producing oil from oilsands is over $450 million.³¹

1.7.2 Transportation – pipeline sector

Transmission pipeline sector normally includes pipelines (see section 2.21), compressor stations (see section 2.22), pump stations (see section 2.23), and pipeline accessories (see section 2.24). They operate mostly onshore, transporting large quantities of products across countries or continents. In USA, there are more than 483,000 km (300,000 mi) of natural gas transmission pipelines operated by over 60 companies, and 217,000 km (135,000 mi) of hazardous liquid transmission pipelines operated by more than 150 companies. In Canada there are approximately 45,000 km of oil and gas transmission pipelines.

In the USA as of 1998, total investment for establishing gas pipeline network was $63.1 billion and that for establishing the liquid pipeline network was $30.2 billion; i.e., the total capital investment for the transmission pipeline industry was $93.3 billion. If this transmission pipeline network were to be replaced today the cost would be $541 billion. The annual capital investment is estimated at $8.1 billion, based on construction cost of $746,000 per km ($1.2 million per mi). The annual maintenance cost is estimated at between $470 and $875 million.

Table 1.22 presents the annual cost of corrosion in the USA transmission pipeline sector. The total annual cost ranges between $5.40 billion and $8.56 billion (with an average of approximately $7 billion). Of the 7 billion dollars, 52% is for operation and maintenance (O&M), 38% is capital (including replacement cost), and 10% is for repair after failures (non-related O&M). It should be noted that the corrosion cost estimated in the survey also included the corrosion cost of 45,000 km (38,000 mi) of natural gas gathering pipelines and 34,000 km (21,000 mi) of crude oil gathering pipelines.¹,³

Table 1.22

Summary of the Total Annual Cost of Corrosion in USA Transmission Pipeline Sector³

∗non-related O&M costs include indirect costs associated with fatalities, injuries, loss of throughput, and legal expense

Table 1.23 summarizes the accidents and incidents associated with transmission pipelines. 25% of these accidents were caused by corrosion. Of these, approximately 35% of gas transmission pipeline failures were due to external corrosion, and approximately 65% were caused by internal corrosion. Approximately 65% of oil transmission pipeline failures were due to external corrosion and approximately 35% were due to internal corrosion.

Table 1.23

Transmission Pipeline Accidents and Incidents in USA³

∗Based on data between 1989 and 1998 – this data does not distinguish the accidents/incidents caused by corrosion

∗∗Based on data between 1994 and 1999

Table 1.24 presents the data for the transmission pipeline sector in the USA between 1970 and 1984.³² There were 5,872 failures during this period, of which approximately 17% were caused by corrosion. Of the corrosion failures, 40% were due to external corrosion and 27% were due to internal corrosion. About 40% of the failures occurred in pipelines of diameter 10 or 20 inches; almost all failures were due to corrosion. Most failures of larger diameter pipelines were due to external corrosion, and most failures of smaller diameter pipelines were due to internal corrosion. About 50% of corrosion failures occurred in pipelines that were 30 years old, or older. Over 90% of corrosion failures were due to localized pitting corrosion.

Table 1.24

Service Failures of Natural Gas Transmission and Gathering Lines Between 1970–1984 as Reported to DOT USA³²

1.7.3 Transportation – other modes sector

In addition to pipelines, oil tankers (ships) (see section 2.25), railcars (see section 2.27), and trucks (see section 2.28) transport oil and gas. Table 1.25 presents some characteristics of these modes of transportation.

Table 1.25

Some Modes∗ of Transportation of Oil and Gas³

∗Other than pipelines

Currently there are more than 9,320 tankers and carriers transporting oil across the world. These tankers constitute approximately 11% of the world’s total number of ships. The total gross tonnage of tankers and carriers is 168,011,588 metric tons (185,200,000 tons). They transport oil and gas, chemicals, liquefied gas, ores, and other materials; of which 35% transport oil and gas. The global annual cost of corrosion in the shipping industry is approximately $7.5 billion. Based on the proportion of ships carrying oil and gas, the average annual cost attributable to transport of oil and gas is estimated at approximately $1.835 billion (Table 1.26). This estimate however does not include corrosion costs in liquefaction and regasification facilities for LNG (see section 2.26).

Table 1.26

Average Annual Corrosion Cost for Construction of Ships to Transport Oil and LNG³

More than 483,000 car loads of petroleum and coke are transported annually by railroad cars in USA. Based on the percentage of commodity transported, the annual cost of corrosion in USA for transporting petroleum and coke by the railroad industry is estimated at $11.16 million.

Trucks are used when construction of pipelines is not economical, the materials are only to be transported for shorter distances, or the volume of materials transported is small. In the USA annually, there are at least 300 million shipments transporting over 3.1 billion metric tons of hazardous materials, of which about 2.6 billion metric tons are petroleum products. The average annual cost of corrosion for all hazardous materials transportation is over $887 million. The annual corrosion cost includes the cost of the transporting vehicles ($400 million per year), the cost of specialized packaging ($487 million per year), and indirect costs ($0.5 million per year). The indirect costs include the cost of cleaning due to accidental release of hazardous materials.

1.7.4 Storage tank sector

There are approximately 8.5 million aboveground storage tanks (ASTs) and underground storage tanks (USTs) for storing hazardous materials (HAZMAT) in the USA. Table 1.27 presents details of these storage tanks. Most of these storage tanks are used to store oil (see section 2.30) and gas (see section 2.29). Most of the storage tanks are regulated in the USA by Spill Prevention Countermeasure and Control (SPCC) or by the Office of Underground Storage Tanks (OUST). A total of 2.5 million tanks are regulated by SPCC, 0.75 million tanks are regulated by OUST, and 5.25 million tanks are non-regulated. Table 1.28 presents the volume capacity of the tanks regulated by SPCC. The average annual cost of corrosion for storage tanks in USA is estimated at $7.0 billion.

Table 1.27

Statistics of Aboveground and Underground Storage Tanks in USA³

Table 1.28

Volume Capacity of Storage Tanks Under SPCC Regulation³

∗Based on 1995 survey

1.7.5 Refinery sector

The annual average cost of corrosion in refineries (see section 2.31) in the USA is estimated at $3.692 billion. This cost includes $1.767 billion for maintenance, $1.425 billion for vessel turnaround, and $0.5 billion for cleaning.

1.7.6 Distribution sector

There are approximately 95,000 miles of refined petroleum product pipeline (see section 2.32) in the USA. These pipelines carry refined products from the refineries to consumer terminals (see section 2.33) and to storage tanks.

The natural gas distribution systems connect transmission pipelines to city gates as well as city gates to customers (see section 2.34). In the USA, the gas distribution system consists of 2,785,000 km (1,730,000 mi) of relatively small diameter pipelines operating at relatively low pressure. They may be broadly divided into 1,739,000 km (1,080,000 mi) of mainlines connecting transmission pipelines and city gates and 1,046,000 km (650,000 mi) of service lines connecting city gates and customers. The service lines are connected to approximately 55 million customers. The diameters of distribution mainlines are typically between 40 mm and 150 mm (1.5 in and 6 in) and those of service lines are typically between 13 mm to 20 mm (0.5 to 0.75 in). The distribution mainlines and service lines serving commercial and industrial establishments are typically larger in diameter than those serving homes. In addition the natural gas may also be distributed using compressed natural gas (CNG) cylinders (see section 2.35).

The gas distribution pipelines operate at low pressures, and failures in these pipes result in leaks rather than the ruptures which may occur in high pressure natural gas transmission pipelines. The primary concern regarding the gas distribution pipeline is the accumulation of leaked gases in a confined space, as these will eventually ignite and explode. Table 1.29 presents the causes of failures in gas lines. Corrosion causes approximately 40% of the leaks in mainlines and 24% of the leaks in service lines. In terms of frequency, corrosion causes 8.4–12 leaks per 100 km (13.6–19.3 leaks per 100 mi) in mainlines and 3.9–7.4 leaks per 1,000 services in the service lines. The average annual cost of corrosion in distribution pipelines is approximately $5.0 billion.

Table 1.29

Leak Incidence by Cause for Distribution Pipelines³

One data source shows that over a five year period in the USA, 83,864 corrosion leaks occurred in distribution mainlines and 99,024 leaks occurred in service lines. The majority of these leaks were detected and repaired without major incident, but there were 26 major incidents resulting in 4 fatalities and 16 injuries. The cost of these major incidents was $4,923,000 in property damage. The cost of repairing minor leaks is typically between $1,200 and $2,500 per leak in distribution mainlines and $800 and $1,500 per leak in service lines. Table 1.30 presents another set of data obtained between 1989 and 1998.

Table 1.30

Gas Distribution Pipeline Accidents and Incidences in USA³

∗Based on data between 1989 and 1998 – this data does not distinguish the accidents/incidents caused by corrosion

∗∗Based on data between 1994 and 1999

There is currently a tendency to replace metal distribution lines with plastic, but plastic pipes are also susceptible to aging and degradation processes. There were 36,948 leaks in plastic (polyethylene) distribution mainlines and 134,448 leaks in plastic service lines within one year in the USA. In terms of failure frequency, there were 8.5 leaks per 100 km (13.7 leaks per 100 mi) in polyethylene mainlines and 6.21 leaks per 1,000 polyethylene service lines. The leaks in plastic pipes are slightly smaller than those in metallic pipeline, but their frequency is still significant. Recent studies however have indicated that by improving durability of plastic materials and testing the materials under realistic operating conditions, failure frequency of plastic pipeline may be reduced.

1.7.7 Special sector

The oil and gas industry also operates pipelines for transporting special products. Some of those special pipelines include diluent pipeline (see section 2.36), high vapor pressure pipeline (see section 2.37), CO2 pipeline (see section 2.38), hydrogen pipeline (see section 2.39), ammonia pipeline (see section 2.40), and biofuel infrastructure (see section 2.41). In general, the operating conditions (pressure, temperature, flow conditions, and compositions of fluids) in these infrastructure systems are more severe than those of traditional oil and gas pipelines. As a consequence, the corrosion cost of operating these infrastructures is anticipated to be higher. But this sector has only emerged recently, and its corrosion costs have not yet clearly been documented.

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Chapter 2

Oil and Gas Industry Network

Abstract

To use hydrocarbons as an energy source, they are extracted from under the ground, all other non-energy containing products are separated from them, and the different types of hydrocarbons are further separated from one another. These processes occur at different locations in the oil and gas industry network, operating between the underground wells where the hydrocarbons are found and the locations where they are used as fuels, for example, in an automobile. This chapter presents various operating conditions in different locations on these paths, different types of materials used in those locations, and different types of corrosion that may take place.

Keywords

Drill pipe; Casing pipe; Downhole tubular; Acidizing pipe; Open mining; In situ production; Wellhead; Production pipeline; Gas dehydration; Recovery centers; Upgraders; Transmission pipelines; Oil tankers; LNG; Refineries; Oil and gas storage; CO2 pipeline; Hydrogen pipeline; Biofuel pipeline

2.1 Introduction

For hydrocarbons to be used as an energy source, they need to be extracted from underground, all other non-energy containing products separated from them, and the different types of hydrocarbons further separated from one