Book 1: Chapter 1

History & Development of Petroleum Pipelines

Objectives

• After reading the chapter and reviewing the materials presented the students will be able to:

• Understand the early methods of moving oil• Identify the early pipeline efforts• Describe trunk pipelines and railroads• Identify governmental regulation• Explain pipeline economics

History

• There are approximately 277,620 miles of common carrier pipelines transporting about 45 percent of all crude and refined products moved in the United States.

• Owned by 138 companies with a gross investment of over $21 billion, this vast pipeline network provides employment for more than 22,000 people in addition to thousands employed by contractors, transporters, and suppliers serving the industry.

• Petroleum pipelines gather crude oil from the field and transport it to the refinery, then they transport various refined products to markets.

Birth of the Oil Industry

• The modern oil industry began in 1859 with the Drake well neat Titusville, Pennsylvania.

• It produced 20 barrels of crude oil per day.• The first refinery was constructed at Oil City,

some 11 miles from the field.• A refining complex was developed on the

Allegheny river at Pittsburg, some 75 miles downstream.

• Pittsburg became a major refining and oil transportation center.

Early Methods of Moving Oil

• Oil boats were floated down Oil Creek on the streams to Oil City.

• By 1864 the rail network provided crude oil an outlet to Cleveland and the New York area.

• The first railway tank cars consisted of two large wooden tanks, each with a capacity of approximately 40 barrels.

• By 1869, the wooden tanks were replaced by fabricated steel tank cars.

Early Pipeline Efforts

• The first pipeline was made in the fall of 1862 and connected a well to a refinery 1,000 feet away.

• In 1863, Hutchings constructed a 2 inch, 2½ mile cast iron pipeline from Tarr Farm to Humboldt Refinery on which three pumps were used. Inadequate pumps and severe line leakage caused the project to be abandoned.

• Wrought iron solved the problems of leakage of cast iron pipe. In 1863-4 the Warren Refinery successfully used wrought iron pipe to move distillate from a refinery to the Allegheny River, a distance of about 3 miles.

• The cost of constructing a 2 inch pipeline in 1865 was about $3,000 per mile.

Early Oil Accounting

• In 1866, the Accommodation Pipeline Company introduced the duplicate run ticket as a method of accounting to the producer for the oil drawn by the pipeline.

• Charles Hatch in 1868 introduced certificates of credit for the balance of oil in the pipeline’s possession.

Trunk Pipelines & Railroads

• Railroads favored pipeline development in the late 1860’s.• The pipeline fed oil to loading racks along the railroad for rail

transshipment.• Until 1900, crude oil production had been centered in Pennsylvania,

West Virginia, Kentucky, Ohio, and Indiana.• Between 1901 and 1905 oil was discovered in Texas, Kansas,

Oklahoma, Louisiana, and California. • To meet the demands of growing markets, new refineries were

constructed along navigable waterways of the Great Lakes, Mississippi river, Texas Gulf Coast, and California Coast.

• Crude oil trunk pipelines were constructed from the new oil producing regions to these new refineries and to marine terminals.

Products Pipelines

• Construction of products pipelines did not begin until 1930.

• 3,000 miles of products pipelines were placed in operation during 1930-31.

• Older crude lines were cleaned and the direction of flow reversed to move products from the East Coast to the Midwest.

Pipelining During WW II

• The largest war projects were the government financed War Emergency Pipeline (WEP) – consisting of the Big Inch, a 24 inch, 1,245 mile crude line and the Little Big Inch, a 20 inch, 1,475 mile refined products line. Peak daily deliveries of the WEP systems from Texas to the Philadelphia and New York areas were 334, 456 barrels of crude oil and 239, 844 barrels of refined products.

• Nearly 3,000 miles of 6 inch and 8 inch pipelines were built in the China-Burma-India area.

• In the Mediterranean, 2,380 miles of 6 inch and 1,440 miles of 4 inch portable product pipelines were laid in North Africa, Sicily, Sardinia, Corsica, and Italy.

• In the Western Hemisphere, four large pipelines were laid across the Isthmus of Panama and equipped with sea terminals, thereby avoiding traffic through the canal.

Postwar Activities

• Numerous large diameter trunk lines were constructed in addition to gathering systems and small diameter feeder lines.

• In 1948, a 20 inch, 648 mile crude oil line was completed from Central Texas to Central Illinois.

• In 1949, a 20/22/24 inch crude oil line was competed from New Mexico to Central Illinois.

• The Trans-Alaska Pipeline is a 48 inch, 800 mile zigzag pattern line, which allows for expansion and contraction of the pipe during temperature changes and carries Prudhoe Bay production to Valdez, Alaska from where it is transported by tankers to west and Gulf Coast refineries.

Industry Data on Line Distances

• In 1948, petroleum companies in the United States were operating 47,000 miles of crude gathering lines, 63,000 miles of crude trunk lines, and 13,700 miles of product pipelines.

• By the end of 1974, the common carrier pipeline companies were operating 41,577 miles of crude gathering lines, 57,502 miles of crude trunk lines, 68,609 miles of product lines.

• The Pipeline and Gas Journal reports that by 1984, the pipeline companies were operating 95,168 miles of crude gathering lines, 85,113 miles of crude trunk lines, and 97,339 miles of produce lines.

• The U.S. petroleum expansion has not stopped.

Governmental Regulation

• The original Interstate Commerce Act, enacted in 1887, did not apply to pipelines.

• The act was intended primarily to require the establishment of reasonable rates to prevent shipper discrimination.

• In 1906, the Interstate Commerce Act was extended by the Hepburn Act to include interstate oil pipelines.

Pipeline Cases

• In the Pipe Line Cases of 1914, the U.S. Supreme Court required that pipeline companies must make their pipelines available to all shippers, and file tariffs showing their complete rate structure.

• In 1940, the Interstate Commerce Commission (ICC) ruled that minimum crude oil tender be 10,000 barrels and the tariff rates should be adjusted to allow crude oil pipeline earnings of not more that 8 percent of the fair value of its carrier property.

• For product pipelines, the ICC in 1941 established a minimum tender of 25,000 barrels and allowed earnings not to exceed 10 percent of the fair value of the carrier’s property.

Federal Safety Regulations

• The Federal Energy Regulatory Commission (FERC) regulates the natural gas lines and crude oil and product lines.

• Occupational Health and Safety Administration (OSHA) regulates all aspects of worker safety ranging from wearing of hard hats and steel toed work boots to the easy availability of emergency equipment.

• The U.S. Department of Transportation’s Office of Pipeline Safety Operations handles every facet of pipeline safety ranging from construction to accidents during operation.

Technological Developments

• High tensile strength steel pipes in diameters of up to 40 inches and in lengths of 60 to 80 feet became available in the early 1960s.

• The most accepted early method of corrosion protection was the coal tar enamel coating system, which is still widely used today.

• The automatic welder replaced welding by individuals and gave added speed and uniformity of welds.

• Another new development is directionally drilled river crossing.• Large, sophisticated pipeline barges working offshore are now furnished

with automatic welding machines, coating stations, and X-ray stations.• The Louisiana Offshore Oil Port (LOOP), the first deepwater port in the

United States, will enable ships to maintain a safe distance when transferring crude and reduces the potential of oil spills due to ship collisions.

• Modern pipeline systems are often controlled from one central location. The operator stops and starts pumping units, operates valves, checks on pipeline shipments by comparing meter readings, and monitors tank levels.

Pipeline Economics

• Pipelines were first developed because they offered cheaper transport of oil than either the barge, or the horse drawn wagon.

• Today, pipelines remain the cheapest form of transportation.

• Any new pipeline must be easy to operate and maintain and must be adequate to meet future needs.

Pipeline Development Outside the United States

• New oilfields were discovered in many areas, and petroleum pipelines were built to move the crude oil to the markets.

• The pipeline boom began in the 1950s.• Expenditures for non communist pipeline work

increased from $7 billion spent in 1976 to $18.5 billion spent in 1983.

• Estimated world pipeline construction distance (excluding Russia and China) for 1984 was 21,102 miles.

Foreign Projects for the Near Future

• Non Communist pipeline projects outside the United States include 5,035 miles of crude pipelines, 2,445 miles of product pipelines, and 15, 496 miles of gas pipelines.

• Canada’s projects include 2,183 miles of crude pipelines and 136 miles of product pipelines.

• Latin America projects planned and underway include 312 miles of crude pipelines and 1,265 miles of product pipelines.

• The United Kingdom, Denmark, and Norway have significant pipeline projects in various stages in the North Sea.

• In Australia, a 12 inch 490 mile crude pipeline is being constructed.

• In the Middle East 1,123 miles in crude pipelines and 371 mile s of product pipelines are planned.

• African projects include 905 miles of crude pipelines and 386 miles of product pipelines.

A Brief History of Foreign Pipelines

• Canada: The discovery of oil in Alberta province prompted construction of two major crude oil pipelines to serve Canadian and U.S. refineries.

• Central and South America: Two parallel 10 inch crude lines were built in Columbia. In Mexico a 10 inch, 150 mile crude oil pipeline was built. In Venezuela, a 16 inch, 145 mile crude oil pipeline was built. Several other projects have been undertaken in Mexico, Nicaragua, Guatemala, and Argentina.

• Europe: Since Europe gets most of its crude oil from overseas, large diameter crude oil pipelines were required to move the supply from marine terminals to the new inland refineries.

A Brief History of Foreign Pipelines

• Middle East: Crude oil pipelines were built to connect the fields to marine terminals.

• Africa: Pipelines were built to move North African crude to marine terminals along the Mediterranean. In Nigeria crude oil pipelines were built to move crude oil to the marine terminals.

• Russia: Russia began a program to construct pipelines for transport of oil and gas to fuel deficient areas and to provide outlets for crude exports.

Summary• There are approximately 277,620 miles of common carrier pipelines transporting about 45 percent of all crude and refined

products moved in the United States.• Petroleum pipelines gather crude oil from the field and transport it to the refinery, then they transport various refined products to markets.• The first pipeline was made in the fall of 1862 and connected a well to a refinery 1,000 feet away.• The cost of constructing a 2 inch pipeline in 1865 was about $3,000 per mile. • Until 1900, crude oil production had been centered in Pennsylvania, West Virginia, Kentucky, Ohio, and Indiana.• Between 1901 and 1905 oil was discovered in Texas, Kansas, Oklahoma, Louisiana, and California. • To meet the demands of growing markets, new refineries were constructed along navigable waterways of the Great Lakes, Mississippi

river, Texas Gulf Coast, and California Coast.• Crude oil trunk pipelines were constructed from the new oil producing regions to these new refineries and to marine terminals. • The Trans-Alaska Pipeline is a 48 inch, 800 mile zigzag pattern line, which allows for expansion and contraction of the pipe during

temperature changes and carries Prudhoe Bay production to Valdez, Alaska from where it is transported by tankers to west and Gulf Coast refineries.

• In the Pipe Line Cases of 1914, the U.S. Supreme Court required that pipeline companies must make their pipelines available to all shippers, and file tariffs showing their complete rate structure.

• Large, sophisticated pipeline barges working offshore are now furnished with automatic welding machines, coating stations, and X-ray stations.

• The Louisiana Offshore Oil Port (LOOP), the first deepwater port in the United States, will enable ships to maintain a safe distance when transferring crude and reduces the potential of oil spills due to ship collisions.

• New oilfields were discovered in many areas, and petroleum pipelines were built to move the crude oil to the markets.

Home Work

• 1. What are petroleum pipelines used for?

• 2. Why does the Trans-Alaska Pipeline have a zigzag pattern?

• 3. In the Pipe Line Cases of 1914, what did the U.S. Supreme Court required that pipeline companies must do?

• 4. What is the advantage of deepwater ports?