ONP Modernization Plan

The modernization of the ONP is a topic with three aspects. The technical is the most relevant because it is a pipeline with more than 40 years and it is necessary to make changes. It is important to remember that it was designed for light crudes and there are various equipment and systems that still date from that time. They must be changed so that they are adequate and guarantee efficiency for the transportation of current crude oil. It is not only making many improvements but overcoming the technological gap and it must be done in an articulated way, so that each change or modification makes sense based on another. It is also an issue that involves the improvement of the leak detection system, that is, installing more pressure transmitters, flow meters and tank levels, in real time, with screens that are more friendly to have greater control.

Apart from the technical aspect, there is the regulatory aspect, that is, compliance with both legislative decree 1292 (safe and reliable operation of the ONP) and compliance with supreme decree 081-2007-EM.

Also, another aspect is the production expectations. In Peru we have crude reserves of 443MMB, distributed in lots 8, 64, 67, 95, 131 and 192, and lots 39, 103 and 116 are under exploration.

So the regulatory issue requires modernization and there is a not inconsiderable potential for reserves. On the other hand, on November 15, 2019, PETROPER√ö signed an agreement with Petroamazonas precisely to evaluate the Ecuadorian reserves for 90MMB in lots 86 and 87 because to the north of these there is a national reserve, which complicates the connection with pipelines of Crudos Pesados Ecuador (OCP). It would only take a pipeline of approximately 100 kilometers to carry 90,000 barrels of that crude to Andoas. Just having a third of that volume would significantly improve the ONP’s profitability prospects for another 20 years.

Modernization, as such, is currently at a standstill. In January 2019, the diagnosis and conceptual engineering, and the transport demand (items of phase 1) concluded. The new rate scheme (the final item in phase 1) is trapped due to an incompatibility in the legislative decree that Osinergmin has detected. Regarding phase 2, the economic evaluation was negative due to the low volume of crude to be transported. This item is in the hands of private investors who operate the Lots, and the solution passes through the establishment of social peace, in order to unravel the issue of prior consultations, apart from issues related to security, the Organic Law of Hydrocarbons, etc.

It is a very complex sequence, but it is a modernization that will benefit the country. You have to invest in social peace, in lowering royalties, but each company involved generates IR and IGV. In addition, there is a canon, over canon, royalties for the lots that go directly to the State quota. Likewise, subcontractors also benefit. Without social peace, production and employment decline, and the quality of life suffers.

Phases and progress

Phase 1 considers the diagnosis and conceptual engineering, transportation demand and the new rate scheme. In this regard, the transport demand evaluation was carried out, and the diagnosis and conceptual engineering was concluded. In this sense, the need to develop projects due to regulatory obligations (compliance with Supreme Decree 081-2007-EM and Ministerial Resolution 453-2016-MEM), equipment obsolescence and energy efficiency has been determined. Likewise, three transport demand scenarios were evaluated: base (30 MBD), medium (59 MBD) and optimistic (95 MBD). Investment costs are estimated to range from $ 600’000,000 to $ 1,200’000,000. From phase 1, only the new rate scheme for ONP is pending until a mechanism is defined to ensure the income of the ONP business and its financing.

Phase 2 includes the economic evaluation, the basic engineering of the project and the modification of the concession contract. In this regard, a market investigation was carried out to contract the extended basic engineering for a base scenario of 30 MBD. The economic evaluation of the Pipeline business was also developed, considering capital expenditure (CAPEX) and operating expenditure (OPEX) for the modernization in the base scenario (lower investment amount), yielding a negative net present value (NPV). It is determined that the income does not cover the operating expense or the required investments. In this scenario, alternatives are analyzed to make the ONP business viable.

Due to the pending issues, it has not been possible to go to phase 3, that is, detailed engineering, procurement and construction.

Prioritized projects and improvements

Significant steps have been taken to improve the Leak Detection System, with the installation of pressure transmitters in ORN and Section I; in the modernization of the SCADA system (installation of fourteen industrial computers and software update in Piura stations and Control Room); the replacement of motor generators for Station 1; and the replacement of three motors for pontoon motor pumps at Station 1.

Likewise, the installation of twenty-one automatic blocking valves is being carried out at the ONP and the replacement of a screw motor pump for the Station; and the modernization of the Cathodic Protection System (CPS) in ten sectors of Section I and II is in the contracting process.

With these prioritized activities being implemented, there will be a gradual improvement in the performance of the ONP. These projects are close to S/ 260’000,000, which is part of the amount planned for the Modernization of the ONP.

These changes have many technological advantages. For example, the 21 valves to sectorize the tube. Until now, the pipeline had manual valves. So if there was a spill, it was necessary to close it manually. The new valves that are being installed are quick-closing ball valves and operate through software. This means that if a pressure drop is detected, the installed transmitters are activated and a mathematical calculation begins. The system determines the exact point of failure and immediately orders the closure of the two continuous valves. So what is going to run towards the point of failure is going to be less. These improvements will result in better protection.

Likewise, the transmitters give a reading of the pipe that will promptly and promptly warn of a failure. We currently have a transmitter at the exit of Station 1 and at the arrival of Station 5, to which four intermediate points have been added, which gives a finer location. Before it was necessary to make a mathematical rule for distances between two points. Now there are six points. There is greater precision to locate a fault in a certain kilometer. In this way, the details of the repair are facilitated to reach the area without problems. In logistical terms, the transport of equipment and personnel can be scheduled more efficiently. Before, the margin of error was much more than a kilometer and that implied a greater uncertainty of what was to be found.

Another relevant implementation is the placement of Cathodic Protection equipment every certain distance that covers 60 kilometers, that is, thirty to the right and thirty to the left, with sacrificial anodes, which are inverters that inject electricity into the pipeline so that it does not wear out. The idea is to protect the pipe to minimize and slow down the corrosion process. In principle, what cathodic protection does is to protect the area where the coating has failed because if it were perfect there would be no contact with oxygen and, therefore, there would be no corrosion.

The level meter provides additional control of the volumes carried by the tube. Flow meters will be placed that offer a firm inlet-outlet balance to both the pipeline and the tanks. In this way, there will be a fall in the tube and a fall in the tank, with which the balance will be very exact.

This will not prevent criminal acts, but it will allow a faster and more efficient response to repair damage or reinforce vulnerable points. As soon as there is a cut in the pipe, it will act more quickly, since there will be an immediate reading of the pressure drop with greater precision of the place. With this precise information on the fault, better decisions will be made, as the valves have already blocked the affected area, reducing the spill and its environmental impact.

The criminal acts that may continue to occur may be reduced with the installation of video surveillance cameras on 16-meter poles, which are also protected. At each video-monitored point there are sensors that report the presence of people outside the ONP. This puts the system on alert. Then, by human action, the camera is directed and focused on the point of interest. This will not prevent criminal acts, but to some extent it will deter perpetrators and, most importantly, allow the point of damage to be quickly detected.