Work Is Winding Down On Mexico's First Privatized Natural Gas Pipeline.

When Energia Mayakan--a consortium made up of Trans-Canada Pipelines Ltd., InterGen, (a joint venture of Shell International and Bechtel Enterprises), and Mexico's Gutsa Construcciones--set out to build a major project involving construction of the 430-mile Yucatan Peninsula Gas Pipeline in

Mexico, they knew they faced some stiff challenges. Not only is the project the first privatized natural gas pipeline ever built in Mexico, the route of the pipeline stretches from Cuidad Pemex in the state of Tabasco to Valladolid in the Yucatan Peninsula. Over the course of the route, the pipeline crosses four states and some of the most significant archaeological sites in the Western Hemisphere.

Construction on the 370 MMcf/d natural gas pipeline began in early 1998, after the Comision Federal de Electricidad (CFE) awarded Mayakan a build, own and operate (BOO) contract. The contract represents a 26-year commitment by Mayakan to transport natural gas from a reception point at Ciudad Pemex to a number of existing and planned CFE power plants, and to other potential independent power projects and industrial consumers in the states of Tabasco, Chiapas, Campeche and Yucatan. It also creates the possibility to move gas further on into the ever-growing energy market in Quintana Roo, centering on the tourist industry in Cancun.

As part of its commitment to the CFE, Mayakan negotiated an interconnection agreement with Pemex Gas and Basic Petrochemicals (PGPB) to take receipt of gas on behalf of the CFE and other future customers of the pipeline at the interconnection point in Ciudad Pemex. This agreement required the construction of tie-in facilities, pig launching facilities, (as well as receiver installations outside the facility) and approximately one-mile of pipeline across PGPB and other Pemex properties.

The interconnection agreement is seen as an important achievement since it represents the first such agreement in Mexico between Pemex and a privately owned open access pipeline, marking a new era of cooperation in Mexico' competitive natural gas sector.

Following the contract award Mayakan applied for a Permit to Operate from the Energy Regulatory Commission (CRE). Almost simultaneously, the company also embarked on the process of implementing its international financing and contracting services for engineering, procurement and construction to complete the project.

According to Mayakan Project Director Ken Sortland, funding $266 million for a pipeline project usually takes time. So when a comprehensive debt-financing package for the project was completed in just eight months, industry observers were surprised. In fact, the effort set a record as the fastest financing ever for a Mexican energy project.

The Mayakan spokesman said construction of the $266 million gas pipeline is under the direction of San Francisco-based Bechtel Corporation. Under the contract agreement, Bechtel is providing engineering, procurement and construction (EPC) services on the project. Continuing, Sortland said the pipeline, meter stations and compressor station is now 100 percent complete. Mechanical completion, a critical event date in the transportation, construction and loan agreements, was achieved on June 30. Commissioning started in July and the targeted in-service date is September 30, just over a month away.

Pipeline Design and Engineering

By the time of finance closing, basic engineering was under way at Bechtel. The system design selected basically provides a pipeline of three diameters, starting with 24-inch O.D. over the first 167-mile segment, reducing to 22-inch over the next 166 miles and finishing with 99 miles of 16-inch O.D. pipe.

Compression for the pipeline is being built in three phases to match the build up of gas delivery demand to meet CFE's 26-year contract terms. Startup of the first station is set to coincide with initial startup next month, the second in 2004 and the third in 2010.

The system will include receipt, measurement and control equipment at the receipt station as well as block valves, delivery stations, pig launchers and receivers, cathodic protection, SCADA and leak detection systems.

The receipt measurement station is located just outside the interconnection point with Pemex at Ciudad Pemex. Gas filtration, preheating, regulating and measurement facilities are being installed adjacent to the Merida III plant currently being constructed, for both that plant and the existing Merida II; at Valladolid for the existing combined cycle plant which is to be converted and in Campeche for another new plant to be built in two years. Three other stations will be added in future phases as the plants are converted to operate with natural gas.

91 Route Changes

Although the route of the Yucatan Peninsula Gas Pipeline basically follows the path of existing CFE power lines, an abandoned Pemex pipeline, telecommunications cables and major highways over most of its length, routing the pipeline around or away from the seemingly endless number of Mayan archaeological sites scattered throughout the states of Yucatan and Campeche proved to be a significant challenge.

For the most part, the majority of the land rights for the project were obtained through a Real Estate Trust jointly managed by the CFE and Mayakan. In order to get routing for the planned pipeline, land right acquisition and negotiations started as early as possible. In fact, the CFE funded the Trust prior to the EPC contract award to Bechtel. As a condition of the bid, the project was required to subsequently fund the Trust so that all of the costs for land rights would be accounted for as a project cost.

To deal with environmental and archaeological issues associated with the difficult route, Mexico's National Institute of Anthropology and History (INAH) sent representatives into the field with Bechtel personnel to identify archaeological sites. Sortland explained that two INAH representatives were assigned to each of the four states through which the pipeline runs.

In most cases the project team was able to completely avoid vestige areas. Nevertheless, INAH representatives cordoned off a number of sites along the route to ensure against any encroachment by workers during construction.

"Basically, we worked hand-in-hand with the INAH archaeologists every step of the way while we were building the right-of-way," said Gary Herd, Bechtel's project director. "To complete the inspection for vestiges at an average pace of 2.4 miles a day is a tribute to both INAH and the project team."

Despite the fast pace, the inspections were meticulous. A typical pipeline usually requires five to 10 route changes. The route of the Yucatan Peninsula pipeline required 91 route changes, nearly half of which were made for archaeological or environmental reasons. Fortunately, most of these involved only minor offsets of less than 160 feet over lengths of about 1,000 feet.

ROW Acquisition

As in most pipeline projects, acquisition and defense of land rights along the pipeline route proved to be one of the most challenging aspects of the project. Close cooperation was required between CFE, with responsibility for acquisition of the rights, Mayakan as owner of the project and Bechtel as the construction contractor.

Over the 430-mile route there are more than 850 properties, 34 municipalities and four states to pass through. While approximately 90 percent of the permanent easements had been negotiated before cleaning and construction began, there was still a significant amount of work needed to finalize agreements on the remaining properties and to negotiate and obtain rights to temporary work areas. Sortland said this process continued into the construction phase, certainly with some difficulties along the way, but overall with negligible impact on construction progress. By July 1998, access to virtually the entire ROW had been achieved, and final accesses were all completed by the end of September.

Early Construction Start Pays Off

Sortland said that although originally set to commence in July 1998, Bechtel decided to minimize the risk associated with the tight schedule by commencing work in February 1998.

"This proved beneficial since it basically put most of the difficult construction issues behind us a year ahead of scheduled completion," he said.

While several subcontractors are participating in the actual construction phase, Bechtel provided most of the construction equipment used on the project. This included 400 pieces of construction and transportation equipment the company mobilized to Mexico three months ahead of the construction start.

With 250 miles of rock on the project, Bechtel imported three Trencor 1860 rock trenching machines and one Trencor 1080 wheel trencher, plus two slightly smaller Trencor 1040s from a job site in Algeria. The 1860 trenching machines were outfitted with a 4-foot-wide chain with a maximum depth of 7 feet for the Yucatan job. Sortland said the 4-foot-wide chain on the trenching machines grinds through the rock slowly, producing a sand spoil for backfill operations.

Also early on, Bechtel began procurement of materials. Noting that the line pipe itself represents among the largest purchases required on a pipeline project, Sortland said Bechtel finalized these purchases well ahead of the construction start, placing orders with Stupp Corporation of Baton Rouge, LA, and Procarsa of Monterrey, Mexico.

Stupp provided over 333 miles of 24-and 22-inch O.D. pipe for the project, while Procarsa supplied 99 miles of 16-inch diameter pipe. While all the pipe for the project was given an external fusion bonded epoxy coating, 18 miles of pipe required downstream of Compressor Station No. 1 required a temperature resistance epoxy coating to tolerate temperatures up to 95 [degrees] C.

Further lengths of pipe received a concrete coating to control buoyancy in swampy areas and at river locations. This coating process was carried out at a facility set up near the site in Tabasco, employing local contractors and laborers.

Sortland said Gutsa Construcciones, a subcontractor to Bechtel, began initial construction on the project in Tabasco and Chiapas States at the southern most end of the project. This `poor boy' spread started in Cuidad Pemex in Tabasco and proceeds east to the Usumacinta River, a distance of about 57 miles.

There was no rock in this section, and while grading proceeded at 0.3 miles per day, crews had to manage to work in areas where the terrain ranged from swamps to jungle to farmland.

In seven months, substantially all the work on the southern spread was completed, with only two river crossing remaining and tie-ins, testing and ROW cleanup to be completed.

According to Sortland, plans called for work on the southern spread to progress slowly to enable ROW clearing crews to identify problem areas in one of the most densely populated areas along the pipeline route. And there were some problems. First, there were landowners who sought exorbitant compensation, forcing the CFE to alter the route of the line in order to avoid areas entirely. In this same area, the project also encountered numerous community demands for benefits such as road and bridge improvements, community halls and agricultural development support.

Although most of the demands were addressed expeditiously by the land trust administration, there were instances where community protests escalated to the point of work stoppages, roads being blocked and equipment being confiscated. Sortland said this area is very poor and recognizing that a large project does impact the communities it behooves us to provide infrastructure support where possible. We built a cultural center, a small bridge, provided roofing, fencing and paint, as well as the distribution of grains and fertilizers.

Valladolid and Campeche Construction

While work in the south was proceeding, Bechtel began limited ROW clearing, grading and trenching activities near the cities of Campeche and Valladolid, both in areas of hard rock ground conditions. Within a few weeks it was recognized that the surface rock along this 280-mile section was more profuse, resistant to ripping, and not nearly as flat as originally assumed.

Bechtel immediately obtained the concurrence of their Houston office and mobilized a Caterpillar manufactured equipment spread to the site. The construction spread included eight DR8 dozers, along with two D10s, two D11s, four 330 backhoes equipped with hammers, two motor graders and two front end loaders. In addition, six dump trucks, nine air track drills, fuel supplies, buses and a support team of mechanics, safety personnel, surveyors and land men also arrived. Sortland said that although the D10 and D11 dozers are mostly used in the mining industry, they were needed on this project for their huge ripping capability.

Although the difficult limestone was almost continuous for 280 miles, with the use of only one large grading spread and several small fronts, Bechtel was able to maintain the required production rate of 1.25 miles per day.

Trenching crews, following behind the right-of-way crew found the going tough; however, they were able to keep pace with additional shift hours and the new generation machinery. The trench was cut in a single swath by the rock trenchers with perfectly vertical sides, to a depth of at least six feet to provide sufficient cover over the pipe and for better security once installed.

Sortland noted that within three months of the construction start, work activities between clearing, right-of-way, trenching, stringing, bending and welding were well spread out, ensuring that any slowdown in one activity would not hold up the following operation.

In the weeks that followed, the 98-foot-wide ROW along the route was blasted ripped and dozed to achieve a two-tone configuration. Half the width was graded relatively flat to enable the 180 feet long, 240-ton Trencor 1860 rock trenchers (the world's largest) to work and still have space available next to the ditch for pipe stringing and welding crews. The other half of the ROW was used for travel by the heavy stringing trucks and support vehicles with considerable effort expended to provide a smooth surface.

After 280 miles of rock ditching, Sortland said the ground conditions changed. Several long swamp sections were encountered and backhoes were brought in to finish the job. On average, 11 backhoes were used to complete ditching activities, achieving production rates of 2.4 miles per day.

As on any pipeline project, once welding starts, this high cost activity must not stop or catch up to bending, stringing, ditching or grading. To eliminate this possibility, Bechtel started double joining the 16-inch pipe in late June. What made this operation somewhat unique was that instead of it being done in the pipe mill or by setting up racks, rollers and automated submerged arc welding units at a single site, Bechtel's main line welding crew manually stick welded the 39.3-foot single pipe joints into 78.7 foot double joints.

The welding spread averaged 150 men per day, of which 37 were highly skilled Mexican welders, trained and tested by Bechtel. Sortland said that factoring in the welding required on the 22 block valve assemblies on the spread, a total of 46,787 welds were completed with an average repair rate of 5.1 percent, well within the industry average which is 3- to 6 percent.

Despite the many construction achievements on the spread, Sortland said the first few months proved particularly challenging for the project team. Before clearing could begin in any six-mile section, the route had to be walked and approved by INAH before construction could proceed. On several occasions front-end equipment was shut down, while waiting for approval to proceed.

In spite of the many hurdles, Bechtel completed the pipeline construction slightly ahead of schedule.

River Crossings

To complete five major river crossings on the project, Bechtel's subcontractor Ozzies Directional Drilling Company, Scottsdale, AZ, mobilized to the site in September 1998. Within 45 days, all five crossing were complete. The longest, on the southern spread, involved a 1,988-foot crossing under the Usumacinta River that was completed in 18 days.

Ozzies' crews also completed a 1,085-foot crossing at the Chumpan River, and a crossing under the Champoton River that measured 1,257 feet, respectively. The remaining two crossings included a 1,335-foot directional drill under the Tepitatan River and a crossing under the Candelaria River that reached 1,243 feet.

According to Sortland, several factors negatively impacted the directional drilling phase. To start, the work was conducted during the rainy season. Area rivers flooded due to high level rainfall in nearby Guatemala caused by Hurricane Mitch, and crews experienced lost mud circulation several times due to either sandy formations that caved in the hole or voids in the rock formation.

Sortland pointed out that the pipe supplied for the river crossings was coated with urethane over FBE, assembled on site and hydrotested before being pulled into place. On average, the pipe was installed 33 feet beneath the low point of each respective river.

The average time spent per crossing, from inception of drilling to final pipe pullback, was just over eight days.

On several occasions he said the drilling unit was rigged down, moved to the next location and back up drilling the next day.

Lessons Learned

With the pipeline and facilities mechanically completed on June 30, and commercial operation just around the corner, Mayakan officials say the experience has been very positive.

"We look forward to the completion of the first major independent natural gas pipeline in Mexico as a clear demonstration of how successfully the private and public sectors can work together as a driving force in the economic development of Mexico," Sortland said.

Continuing, he noted that with little past experience to go on, the CFE successfully put in place a contract that allowed foreign private investors to invest in the first major pipeline project of this type in Mexico, with strong support from the international financial community.

Maretta Tubb, Managing Editor Pipeline & Gas Journal