The cost of pipelines and compressor stations contributes the most to a typical pipeline project’s expense [
8]. It is, therefore, crucial to analyze and compare the costs of expanding an existing network since the purchase and installation of additional pipelines and compressor stations constitute the major operations in pipeline expansion projects by looping and the use of compressor stations, respectively. Since the cost of this equipment is based on several variables including quotations from vendors, the location of the project, the prevailing economic indices, etc., it is difficult to put a price tag on the cost of looping or compressor stations. However, for this cost analysis, the authors referred to two expedient pipeline looping projects from the US Energy Administration Agency’s inventory of US gas pipeline expansion projects: the 2022 Big Bend Natural Gas Loop Extension project in Florida and the 2021 Columbia Gas Northern Loop Project. From these projects, the average cost of gas pipeline expansion by looping was calculated at
$5,170,000 per kilometre of reinforcement length [
32].
4.3.1.1. Estimating the Cost of Pipeline Expansion by Looping for the Escravos – Lagos, Nigeria Pipeline
The estimate of the pipeline looping project from
Section 4.3.1 can be divided into material, labour, right-of-way (ROW) and miscellaneous expenses in this proportion [
33]:
Given cost in the US: $5,170,000 per km of loop/reinforcement.
Material cost: $1,706,100 per km (33%)
Labor cost: $2,533,300 per km (49%)
Right of way cost: $310,200 per km (6%)
Miscellaneous cost: $620,400 per km (12%)
To estimate the cost of pipeline reinforcement for our case study, the Escravos – Lagos pipeline, the following adjustments are made to, more closely, reflect the Nigerian market.
Adjustment 1: Material costs.
It is assumed that material costs in Nigeria are higher than in the US due to the need to import pipelines and associated materials. According to the United Nations COMTRADE database on international trade, Nigeria’s imports of iron and steel was US
$930.41 Million in 2021 [
34]. Also, The Guardian reported in 2018 that Nigeria still imports an estimated
$3.3 billion worth of steel and associated derivatives annually [
35]. Furthermore, Nigeria’s imports of items made from iron or steel increased by 22.3% in 2021 according to World’s Top Exports [
35]. Since Nigeria relies heavily on imported pipeline construction materials due to the limited availability of locally sourced materials. Import duties and transportation costs can significantly increase the cost of pipeline construction materials in Nigeria. Therefore, material costs for pipeline looping projects in Nigeria can be 50-100% higher than in the US. For this estimate, we will assume a 75% increase in material costs.
So, adjusted material cost: $1,706,100.00 x 1.75 = $2,985,675.00 per km.
Adjustment 2: Labour costs
While labour costs in Nigeria are generally lower than in the US, skilled labour required for pipeline construction may be more expensive due to the engagement of expatriates and the frequent farming out of such projects to (usually) foreign companies. For this estimate, therefore, we will assume a 25% increase in labour costs.
So, adjusted labour cost: $2,533,300 x 1.25 = $3,166,625 per km.
Adjustment 3: Right-of-way-costs
Right-of-way costs may vary depending on the specific location and conditions of the project. Nonetheless, for this estimate, the authors will assume a 50% increase in right-of-way costs. The cost of obtaining the right of way for pipeline construction in Nigeria is assumed to be higher than in the US due to the complexity of the land acquisition process and the need to compensate various stakeholders in the former.
Hence, adjusted right-of-way cost: $310,200 x 1.5 = $465,300 per km.
Adjustment 4: Miscellaneous costs
Miscellaneous costs may include expenses such as permits, taxes, and insurance. These costs may vary depending on the specific conditions of the project. For this estimate, we will assume a 25% increase in miscellaneous costs relative to the US situation.
So, adjusted miscellaneous cost: $620,400 x 1.25 = $775,500 per km
The total estimated cost of pipeline expansion by looping in Nigeria, adjusted from the US market:
Adjusted material cost: $2,985,675 per km
Adjusted labour cost: $3,166,625 per km
Adjusted right-of-way cost: $465,300 per km
Adjusted miscellaneous cost: $775,500 per km.
Total estimated cost in Nigeria (without contingency): $7,393,100.00 per km
Contingency:
As with any construction project, it is important to add a contingency to the estimated cost to account for unexpected expenses. For this estimate, we will add a 10% contingency.
Therefore, the total estimated cost of pipeline expansion by looping in Nigeria, adjusted from the US market (including contingency): is $8,132,410.00 per km.
4.3.1.2. Estimating the Cost of Pipeline Expansion with Compressor Stations for the Escravos – Lagos, Nigeria Pipeline
In a similar fashion to the analysis of the last section, the estimate of pipeline expansion by compression from
Section 4.3.1 of
$12,453 per hp of compressor power can be divided into the material, labour, right-of-way (ROW) and miscellaneous expenses in this proportion [
33]: (i) Labour: 31%; (ii) Right of way: 1%; (iii) Materials: 51% and ; (iv) Miscellaneous: 17%
Adjustments for Nigeria:
Labour: 31% higher due to expatriate engagement and contracting to international firms.
Right of way: 50% higher due to the complexity of the land acquisition process and the need to compensate various stakeholders.
Materials: 25% higher due to Nigeria importing most of its materials.
Miscellaneous: 10% higher due to additional costs associated with doing business in Nigeria.
Calculations:
Labour cost = 0.31 * 1.31 * $12,453 = $5,057.16 per hp
Right of way cost = 0.01 * 1.5 * $12,453 = $186.80 per hp
Materials cost = 0.51 * 1.25 * $12,453 = $7,938.79 per hp
Miscellaneous cost = 0.17 * 1.1 * $12,453 = $2,328.71 per hp
Total cost per hp of compressor power in Nigeria:
$5,057.16 + $186.80 + $7,938.79 + $$2,328.71 = $15,511.46
Adding the 10% contingency cost to the total cost per hp of compressor power in Nigeria gives:
Total cost per hp of compressor power in Nigeria with contingency cost:
$15,511.46×1.1 = $17,062.60
Therefore, it would cost approximately $17,062.60 per hp of compressor power to expand a gas pipeline with a compressor station in Nigeria with a 10% contingency cost.
Please note that this is only a general estimate, and the actual cost may vary depending on the specific prevailing conditions of the intended expansion of the Escravos project. While these cost estimates are adequate for the analysis intended in this section of the paper (i.e., to compare the cost of gas network expansion by looping versus by compression to repurpose them for hydrogen transportation, especially for the Escravos – Lagos pipeline network), it is important to conduct a detailed analysis of the project requirements and costs to generate a more accurate estimate.