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Chile - 12/08/09
Technical Due Diligence Conducted for a 951 KM Pipeline Project
Citigroup contracted SGS to perform technical due diligence to ensure the quality and status of their potential investment and to evaluate the technical feasibility of the projected operations over a period of 14 years.
Between the months of January and March of 2006, Citigroup presented SGS specialists with a challenging project. The task, spearheaded by José Luis Osorio of SGS, involved the execution of technical due diligence, with the final purpose of verifying the condition and quality of a potential pipeline investment, as well as assessing the technical feasibility of the estimated operations and procedures over a period of 14 years.
The assignment, named the GasAtacama Pipeline Project, is owned by Endesa (Chile) and CMS Energy (USA). At the center of the project are two pipelines dedicated to the transportation of gas mainly from Argentina to the GasAtacama Generacion Power Plant, and to a 240 MW Endesa-owned power plant in Taltal, Chile, as well as to large industrial companies en route.
The main pipeline from Cornejo, Argentina to Mejillones, Chile is 951 km long and 20 inches wide, with 2 compressor stations, having a current capacity of 5.4 million m³ per day and a maximum capacity of 8.5 million m³ per day. The secondary pipeline, from Mejillones to the Taltal Power Plant is 223 km long, and 16 to 22 inches wide, with a maximum capacity of 2.2 million m³ per day.
Inspection and assessment at its best
The SGS team was brought on board, as our Technical Due Diligence services and evaluation expertise were highly required for the GasAtacama Pipeline Project. During the initial assessment, SGS experts came to the conclusion that in order to achieve the best results, their evaluation work had to be carried out in five equally important phases.
The first phase consisted of verifying and assessing the quality of the work performed based on a variety of factors such as design standards, construction expertise and inspection. The SGS team had to ensure that the project was run in accordance with the current regulatory framework and legislation. As soon as the project passed the first test for regulatory compliance and accuracy, visual inspection of the existing conditions of the gas pipeline, surrounding facilities and sites was meticulously completed, thus certifying that all these components exhibited a high level of structural and functional integrity.
The identification of critical operational control variables that could interfere and influence the safe delivery of gas to the Endesa power station formed the third phase of SGS’s involvement in the GasAtacama Pipeline Project. With all on-field inspections accurately completed, the SGS team moved on to manage the numbers and additional factors involved in the successful operation of the pipeline.
The most challenging task of the fourth phase involved identifying and calculating the pipeline operational costs and creating a 14-year projection which represents the exact transport contract with the Endesa power station. Because 14 years constitutes a rather long contractual period, the SGS team performed, during phase five, an accurate analysis of factors that could lead to the breach of contractual aspects, as well as the implications of such breaches. In spite of the project’s overall complexity, the SGS experts assigned to the GasAtacama Pipeline Project were able to provide, in time, the crucial data as requested by the project managers.
About SGS Project Finance Services
SGS, the world’s leading inspection, verification, testing, and certification company, is the preferred international partner for those involved in the infrastructure, trading and commodities and energy fields. The SGS Project Finance Services offers a wide range of services to help you evaluate the feasibility of a project, assessing both its economical and technical risks.
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