Working Papers

Faculty of International Business and Economics

Poznan University of Economics
WP/2013/07

Hanna Kubacka

Modern aspects and challenges of international oil and gas

pipelines transportation

Poznan, August 15, 2013

 Modern aspects and challenges of international oil and gas pipelines
transportation

Hanna Kubacka

Abstract

The purpose of this paper is to introduce the basic modern issues and indentify factors con-
tributed and related to contemporary national oil and gas transport in cross-border networks
(including the refurbishment and reconstruction of the existing pipelines according to interna-
tional standards, operation and system regimes) and also estimate the dominant influence of
technological trends on macroeconomic consequences for producer and consumers of oil and
gas at international pipeline. Although the process of application the newest technologies in-
volves high expenditures and requires large upfront capital investment, this is generally appli-
cable standard on the global scale.

Keywords: oil and gas transport, globalization, international pipelines, control and monitoring
systems, SCADA, petroleum logistics
JEL: A12, E22, E60, E66, F40-42, F51, F62, Q40-49, Q55, R41

Introduction

An extensive pipeline transportation network system is a basic component in the interna-

tional petroleum business. This infrastructure, meeting economical and environmental needs,
should certainly be modern, reliable and secure. Continual exponential increase in energy de-
mand faces the need of optimization and automation of transport methods. For a petrol pro-


Paper accepted for publication as a FIBE WP by Maciej Szymczak. The author would like to thank Mariusz Szuster, Tadeusz Kowalski,
Barbara Jankowska and Ewa Cięślik for helpful comments. All remaining errors are those of the author. The first version of the paper was
presented in Polish at the Wydziałowe Seminarium Doktorskie - „Wyzwania Gospodarki Międzynarodowej”, Poznan University of Eco-
nomics, Poznan 15 December 2012.
The author is a Ph.D. candidate at the International Logistics Department, Faculty of International Business and Economics, Poznan Univer-
sity of Economics and works in the international company that integrates software solutions and complete systems for transportation of flu-
ids such as crude oil, petrochemical products, liquefied gas or water.
E-mail address: Hanna.Kubacka@gmail.com

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ducing consortiums the implementation of effective and trustworthy cross-border networks
improves communication throughout the operation of oil and gas pipeline logistics processes.
Dedicated technology demonstrates power of constant control and monitor of fuel flow in real
time, which has its economical and technological grounds.
In the field of pipeline transport economics the accurate descriptions currently being used,
effective hydraulic modeling, nominations, tools, the batch distribution process control and
supervision, are interesting itself and has a huge area of research interest on global scale.
This paper gives a general overview of modern aspects of international oil and gas indus-
try, as well as future plans and challenges of oil and gas pipelines transportation. Section 1
examines in greater detail the characteristics and consequences of pipeline transport system,
as an integrated part of an energy supply chain. Basic definitions of oil and gas objects, and il-
lustrations are provided. The paper especially focuses on the ways of batch transfer operation-
al regimes and tracking system possibilities that lead to security of supply. The section con-
siders how the pipeline systems managed the consequences of mixing the batch product and
how their management evolved in response to experience and changing circumstances of
nomination schedule. In particular, the first section focuses on the relative responsibilities of
the public and private sector. The architecture of redundant SCADA systems are identified
and discussed in the second section, with a view to identifying which elements in network
should be responsible for monitoring and control of the pipeline transport and how this should
be achieved. The third section contains the fuels transport optimization concept including
mathematical hydraulic models and available optimization algorithms. The paper ends by
summary considering the practices that have been demonstrated to contribute to further de-
velopment of oil and gas transportation on a global scale.

1. Pipeline transportation systems

1.1. General characteristics

A pipeline transport is the most reliable, safest and cheapest medium of transit of large quanti-
ties of oil and gas products (petrol, diesel, crude oil, LPG) from refineries to petrol remote
terminals. This is also the slowest (speed approximately 3-8 m/h) transportation method
[CERD 2008]. A pipeline transportation sector is characterized by very low degree of product
degradation and transmission losses during product transit process and also low level of envi-

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ronmental pollution. Pipeline economics is characterized by long-lived specific projects and
in consequence fixed routes are built once. Once constructed the pipeline is always filled with
product and either shift it or not i.e. pipelines transport petrol products nonstop in all chang-
ing natural circumstances, except for the time when the specific area (network infrastructure
sections) is excluded due to reconstruction or maintenance reason. Pipes are covered with
pipeline anticorrosion and also chemicals coat carried out regularly and with comprehensive
maintenance, so that the risk of leakage and the device failures are reduced to a minimum.
Mentioned above conditions have contributed to the domination of pipeline transport in the
oil and gas delivery networks with assisted process of globalization.
There are three primary components of the international pipeline operations to get the
product to the market (ESMAP, 2003): (1) pipelines itself, (2) cross-border trade i.e. a situa-
tion in which pipeline must cross the territory of a third party; (3) international transit trade.
Today the requirements on the operation of transportation will be successively increased be-
cause of the current laws and ordinances. Moreover, the essential criteria of dispatching, dis-
position and accounting can be met and the required measurement technology infrastructure
can be determined.

1.2. Pipeline management systems

A pipeline transportation schedule involves different parties (public and private sector)
which may have different objectives e.g. a standalone pipeline company will obviously seek
to maximize throughput at the highest tariff it can charge. Those operations require the design
and the presence of systems based on state and framework nominations1 schedule. It allows
to create mechanism of reliable detailed batches transmission. In order to meet mention above
prospects on the one hand pipeline transportation systems are connected to the SCADA2 sys-
tem and on the other can be connected to the billing system e.g. ERP3 class. Structural and
functional elements of the pipeline management system are necessary because they have an
impact on development issues related to the cross-border fuel logistics.

1
Nomination - the amount of fuel ordered by clients to be shipped by the pipeline
2
SCADA - supervisory control and operation of the pipeline. The control and monitoring of the pipeline work, supervising the system or
production process. Its main functions include the collection of current data (measurements), their visualization, process control, alarming,
and data archiving.
3
ERP - software for enterprise resource planning.

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 The vast majority of oil and gas pipelines management systems allow reasonably prudent
dispatchers to control and monitor transmission of refined products from their injection point
to the pipeline outlet (this issue can arise the technical disputes between the parties). Exact
product location information is essential for reducing the probability of both aspects: the mix-
ing and also contamination of the products in the line fill and tank farms. Pipeline manage-
ment system also allows for selecting of specific parameters (confirmation of system and op-
erators ready state, the choice of the transmission network model, transported product type,
etc.) taking into account the dynamic states of caverns (underground storage centers) or tank
farms.
In addition to the economic and geopolitical issues (different legal and regulatory regimes
apply, diverse energy markets are involved i.e. regulation, structure, degree of competition),
the transmission of crude oil and its refined products is an important subject to the safety and
protection of the environment. Transmission safety improved dramatically as a result of in-
volving / introducing the advanced programs (SCADA) systems and automation solutions.
As the industry solutions developed, pipeline management systems provided transparency
in fuels logistics chain and made it more efficient. Modern pipeline management system takes
essentially into account the specific characteristics and changes in the fuel logistics as well as
SCADA system requirements and has control over issues such as pipeline safety or mainte-
nance – factors that increase the risk of unscheduled pipeline downtime. The most important
issues highlight the following (Herran, 2010):
 the applicable environmental laws and safety practices for pipeline operations;
 leak and spills detection system (leak and spills result in significant damage to the envi-
ronment or property);
 the variable structure of the transmitted product (i.e. batch);
 internal characteristics of the supervision and control of the pipeline (SCADA system): the
automatic learning system adapted to changing environmental conditions (such as solar
exposure);
 dynamic analysis of the pipeline hydraulic behavior;
 modeling pipeline systems with respect to technical standards specified in the agreement -
dynamic modeling of pipeline equipment behavior i.e. valves, pumps in order to operat-
ing processes and pipeline regimes implementation;

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 dynamic modeling of hydraulic and thermodynamic processes (it is possible to model and
simulate detailed measurement distribution along the pipeline;
 optimization in terms of different criteria: energy consumption reduction, pipeline exploi-
tation minimization, pumping stations operation optimization etc.;
 pipeline profiles definitions;
 historical events analyzer.

1.3. Pipeline as an integrated part of a value chain

Once built a pipeline is always filled with the product and so its value is immediately tied
up with the value of what is being moved. Interruption to pipeline transportation operations
jeopardizes the return (profit and rent shared between interested parties) on the pipeline and
investments at both pipeline ends: the oilfield upstream and the refineries downstream. Thus,
Figure 1 shows the overview of large-scale structure of pipeline transportation supply chain:
from crude oil manifolds through refineries and pipeline transport systems to the final client.

Figure 1. Pipeline transportation supply chain

Source: [CERD 2008].

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 At the macroeconomic level, there are four stages and subsystems that make up the com-
plexity of tasks in oil and gas energy industry: field exploration, refinery, distribution and
marketing. These four interfering subsystems have to create a functional structure, as a result
of the implementation of a subordinated primary purpose (i.e., taking into account the eco-
nomic aspects involves governance in the pipeline): optimized batch transmission in the pipe-
line. Pipelines transporting different kinds of crude oil and its refined products, one after an-
other, on the same pipeline in the so-called batches. The nomination volume is delivered into
a tank farm whenever a new batch of products is injected into the pipeline.
Figure 2 describes pipeline infrastructure that may have some intermediate points in both
input and output (refineries, tank farms), through which it is possible to inject the product into
the middle pipeline section without having to transport the product injected earlier. Transport-
ed volume of the product can consider tank terminal of different parties sharing the rent of the
pipeline, as a temporal destination, while containers along the oil pipeline can also serve as a
buffer in case of a thin throat product flow between the two pipeline segments or pipelines of
different diameters.

Figure 2. Batches status monitoring: P1-P2-P3-P4

Source: [CERD 2008].

Each new fuel injected into the pipeline batch moves the previous batch forward, enabling
batch delivery i.e. product removal from the pipeline to the terminal reservoir, but only if
enough considered free storage capacity is secured by customer. Otherwise, batch transit is
halted, the hall pipeline is in interrupted operational mode until e.g. storage space is released
and product can be delivered. Such circumstances lead to discrepancies between the official
and actual graphics of nominated batch scheduling. The plan is updated and modified.

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 Oil and gas pipelines transporting products over long distances are divided into sections (to
facilitate logistically and hydraulically monitoring and control pipeline varying on geophysics
profiles of surfaces). Pipeline segments, most often underground, are built from pipes of dif-
ferent diameters. The nature of pipeline transit characterizes large technical economies of
scale. It is presented by exponential factor of the pipeline capacity function 4 i.e. more general
by its surface area: it means that as capacity increases, average fixed costs fall rapidly. In con-
sequence full-capacity operation is the key to pipeline transportation profitability. The most
frequently used are large diameter pipe due to the very high cost of construction of the pipe-
line (the larger the diameter of the pipe, the higher the throughput, the more product volume
transported in time). Mention above aspects, the pipeline high profile (location in relation to
sea level) and also the type of transported product, are the key factors of delivery model opti-
mization.
Construction process is a grand investment with high fix costs, so fundamental decision on
pipeline capacity must be made in advance because in consequence it has complete limited
flexibility and low possibility for extending it. Although the initial costs are estimated, in the
end to complete the project the invested cost increase: most of the overrun is attributed to the
lack of instrumentation to support the project or decision e.g. to replace large section of the
cross border pipeline rather than refurbish it. The cost overrun is shared between parties under
the production sharing agreement.
The success of a major cross-border pipeline depends on the presence of all of the condi-
tions necessary to attract capital on favorable terms. These conditions include the support of
producers and creditworthy parties, the presence of all necessary contracts and agreements, a
sound organizational structure, and favorable economic fundamentals (supply and demand is-
sues, along with other market and competitive consideration). Risk factors such as environ-
mental hazards and volatile world energy markets must be carefully considered and mitigat-
ed, rights of way must be secured, and security issues must be studied and resolved. These
represent only a few of the requirements.
Refined products are injected into the pipeline, then transported with pressure waves gen-
erated in pump stations (in case of oil) /compressor stations (for gas case), and next are
spread along the pipeline transporting fuel up to refinery. Pipeline throughput can be in-
creased by installing additional pumping stations along the pipeline (it controls the mainte-

4
The pipeline capacity is the square of its radius.

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nance of the desired pressure on the line, and thus the right speed of movement of the product
in the pipeline). The selection of the pumping regime is one of the subjects of optimized fac-
tors. Power consumption is the largest operating expense of the pipeline operation, hence the
strategic decision is the optimal pump operational mode. Pumpability factors such as:
switching on /off pumps, pump overheating allowable level etc.; maintenance period and sus-
pension of services are subject of transportation agreement as an indentified technical factors
having crucial influence of pipeline transportation operations.

1.4. Batch transfer and tracking system. Supply balance

Tracking is another essential component of the oil pipeline management system. It pro-
vides complete information and all relevant data for all related applications, even if the topol-
ogy of the pipeline has been changed. The system responds to all of the requirements of cor-
rect scrapper, batch, density, and temperature tracking.
Very often discussed is separating fuel products, which always raises controversy among
importers and pipeline transportation manufacturers. Where one product ends and the other
begins (e.g. at the pipeline junction) leading to mixture of those neighbored products.
First, it may lead to the degradation of product chemical properties i.e. batch chemical
properties are mixed with another class product Figure 3 a). The resultant mixture is no longer
legible to use (does not meet the requirements of any class of the product and must be re-
moved from the pipeline supply volume balance, what results in a significant increase in
pipelines operating costs). Secondly, fallowing batches can be separated by special chemical
mixture: TRANSMIX (Figure 3 b) – in this case mixed product volume record of minimal in-
terference is resent to the refinery and so product properties are fully possible to recover. Fi-
nally, for high diversity of chemical products (density property in particular) pipeline trans-
portation case are used special scrappers so. spherical balls (Figure 3 c) or substances called
chromatography green fat 5. Batch is transported without property degradation due to lack of
contact between neighbor products.

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Figure 3. Mixing a batch of product. The types of separators: a) interface - mixed batch of
the same class, degraded chemical properties, b) TRANSMIX - separator of two products
of different properties, c) Self cleaning (green fat) separating two fuels
a) b) c)

Source: [CERD 2008].

In the consequence, the greater the quantity and the fragmentation of production batches
implicate higher pipeline operating costs due to the increased probability of degradation vol-
ume of mixed batches. The main factor in batch planning and delivery optimization is careful
batch order scheduling in response to a complexes nomination requirement. The main chal-
lenge of managing orders is various interferences with small storage areas which are able to
contract only small batches.
Optimal time of batch delivery to the final client, as one of the basic criteria (except priori-
ty of on - time delivery of ordered batches) is the function of minimization the number of sub-
stances separating mixed volume of products, which minimize the number of batches and op-
timize their sequence in the pipeline. Achieving the primary objective plan is the collection
of orders and collective combination of the same refined products from various refineries in
one batch by manufacturing and transporting them together.
The planning phase of ordered batch production includes the date of delivery of the prod-
uct. If a batch is a combination of the same product class but from different refineries it is
characterized by multi-terminals delivery (clients). Thus, the execution time is a function of
tank farm location, pumping rate and pipeline downtime.
Therefore, ownership of shipment is clearly defined by transportation agreement. Addi-
tionally, receiving terminals generally described by a complex storage reservoir parks, line
fill, tank bottom inventories, common stream operations, direction of flow are also defined

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under oil transportation agreement between interested parties sharing impact of its activity on
operation at the both ends of the pipeline.
Both upstream and downstream ends of the pipeline are characterized to be competitive
markets. The downstream logistics chain (the refineries and distribution centers) parties,
which are private or state-owned enterprises (companies), take into account the time of deliv-
ery to the end customer individual. If crude oil market conditions make the production of
crude uneconomic, throughputs on the system will decline. The participating producers will
be affected in their investments both upstream and in the downstream. In essence, the pro-
ducers have taken on majority of both the transportation and the productions risks.
Distribution of risk for a major international pipelines can be characterized as a proprietary
pipeline as opposed to a common-carried pipeline. That is, the consortium, which often oper-
ating as a single integrated enterprise, constructed the pipeline for the primary purpose of
serving the oil transportation needs of the participating producers and founding states, and the
project is generally reserved to transport production from specific fields to export markets.

2. Pipeline transportation system: IT architecture

Control and visualization system dispatches constant flow of operating line information
and enable access to large variety of combination of data such as: monitor system processes/
services, preview facilities state signals (SCADA object attributes), observe historical chart
measurements in real-time curves etc. In addition, each system is equipped with an event log
and alarm system.
Pipeline identification is done by defining and implementation the object hierarchy of the
SCADA system with its references to the external application (ex reports): a network model,
subnet, the station group (section of the pipeline, the flow path), unit (pumping station, tank
farm), equipment and finally the signal (measured value, set points, counter, command, inte-
grator, logical collector). The supply-chain topology is then built by connecting the nodes rep-
resenting refineries, terminals, and pipeline
networks. All those data are available due to monitor and control pipeline hydraulic behavior
for disposition team localized in main operational station, dispatchers located along the pipe-
line, and maintenance group working form remote access (see Figure 4).

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Figure 4. Standard Hardware configuration.

Source: [PSI 2010].

Redundant (main database and visualization) servers support SCADA system data and da-
tabase in case of sudden and unpredictable lack of communication. The redundant nature of
pipeline transport system is visualized on Figure 5. The pipeline system works principally in
main control system operational mode i.e. the data from manifolds are transmitted by work-
station to the SCADA system, there are recalculated and archived for simulation and reporting
reason. In backup control system slave operational mode the data are omitting main pair of
servers and are transmitted directly to redundant one where are proceed in similar way as it
would take place in main operational mode.

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Figure 5. Redundant nature of the system infrastructure

Source: [PSI 2010].

In energy sector pipeline network architecture is associated with the physical peripherals
distribution in operator stations located along the pipeline. The main goal of each workstation
is to provide and monitor relevant condition of the pipeline, in the limit of user rights allow-
ances (for operator’s case to supervise and control pipeline segments). Figure 6 represents ex-
ample data communication and data processing in meeting basic requirements of pipeline
transportation in energy sector.

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Figure 6. An example of the integration of IT network pipelines

Source: [PSI 2010].

Performing a risk assessment is an important phase in a software integration process and is

essential to assess identified threats to the pipeline, understand the consequences of failure
and estimate the risk of failure (or loss of integrity) of the pipeline to the identified threats.
Furthermore, having a flexible risk model designer capability can benefit the operator which
could enable the dispatcher to obtain a more realistic understanding of the risk profile of the
pipeline by instant update database server and visualization server with measurements from
manifolds and assist in optimizing risk-based mitigation strategies.
Furthermore, reliability of the system: preventative and mitigation activities coming as a
result of both risk assessments and integrity management, can be controlled and tracked in a
software by the redundant nature of the system infrastructure and also on-call service, added
process allowing dispatchers controlling main system to keep a record of the activities done in
the other dispatching workstation, and thus, create and manage an analysis of hydraulic pro-
cess.

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3. Fuels transport optimization

There has been a significant growth in gas demand in recent years in global markets[BP
statistic 2012]. . In an instant, companies began to implement a more "lucrative" business in
the production and transport of oil. The main goal is to implement an efficient and reliable oil
and gas transport methods in order to control safe issues and environmental practices. Each
company use its transmission network SCADA - supervisory and control systems in real time
pipeline operations.
It is required to provide many systems requiring hydraulic featured information due to ob-
taining information about the pipeline sections. The most basic need to be identified are:
measurements (flow, temperature, pressure) transmitted to system form pipeline instrumenta-
tion fields and also equipment such a scrapper (sometimes also called a pig).
The pipeline management centers (containing remote crude pipeline control station) oper-
ates direct batch scheduled transport. From this station run operations to move product in the
pipeline, pump switching on and off commands, opening and closing valves, fill and empty
tank farms.
Continuous data control, monitoring, visualization and transmission inherent include fol-
lowing: pump and batch pressure, product temperature, level, flow and density, the tanks ful-
fillment level, the location of all active and passive elements along the pipe, batch location,
leak detection and location. In addition, the main station obtains information on the products
and other factors, such as average temperatures of ground.
Modern visualization systems are an integral part of the supervisory and control
SCADA system. The visual presentation of the controlled process is the most important part
of the user interface. The user interface uses the most comprehensive solutions, menus and
toolbars. Visualization of the process takes place at the docks, moreover transported product
volume is continuously monitored for each station (linear and central). When the volume of
the batch changes, the operator knows that one party (company) product ends and another
party product has just been injected into its place.
In addition, the operator can monitor the status of pumps, as well as valves, measurement
and pig trap (launchers and receivers), a set of access indicators and power control, lighting
stations, cathodic protection system, etc. The technical aspects of the issue are shown on Fig-
ure 7. SCADA supervision, control and simulation of pipeline flow, which shows the current

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state of pipeline dynamics, includes the propagation of waves. Detection of leak or spill of
containment is based on two independent complementary methods using proprietary algo-
rithms.
An example of the algorithm used to control the flow of product batches in the pipeline is
called method of storage or model compensated mass balance method. Characterized by a
high sensitivity method recognizes by massive track based on even very small changes in
pressure and flow. Information and make decisions of leak alarm making are fully automated
using an advanced expert system, which eliminates the need to engage qualified personnel.
SCADA system is based on a detailed mathematical model that allows the verification of a
pipeline and allows the correct interpretation of the events taking place.

Figure 7. Sample operator SCADA system screen

Source: [PSI 2010].

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 The proposed mathematical models used in SCADA systems design processes of the
batches movement in the pipeline. This includes (ESMAP, Herran, Liu):
• the concept of the process;
• hydraulic calculations of pipelines;
• selection of a mathematical model (SRK, Peng-Robinson, NRTL and others);
• thermodynamic calculations.

Mathematical models are used to simulate the hydraulic behavior and thermodynamic flow
of batch transported at any point of the pipeline. Simulations design and mathematical model
behavior are compared to the real-time calculation of up-to-date measurements. The system
takes measurements from instrumentation (e.g. flow, pressure, temperature, density, etc.) and
updates the model based on the cycle. On full and accurate data model basis the state of the
pipeline in all conditions. System represented and accurate information are provided for the
operator and referring applications.
The hydraulic profile, as a crucial diagnostic factor in pipeline transportation, is a graph
representing function of pressure, flow, temperature at every point of the pipeline covered by
the calculations and simulated mathematic model. Figure 8 shows the basic example of hy-
draulic profile representation including the flow properties such as: density, pressure, tem-
perature of the actual fluid flow and also elevation of the ground downstream along the axis
of the flowing pipe.

Figure 8. Hydraulic profile representation

Source: [PSI 2010].

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 Hydraulic profiles in real time allow the dispatcher to identify changes in the level of pres-
sure, leaks, gas reduce and disruption of infrastructure equipment. Current data can be ob-
served and the simulated graphs outputs which allow to compare difference in measurements,
data on the pipeline, including an elevation profile of the pipeline, changes in pressure, flow,
temperature, density, velocity, optimum operating range of the pipeline transportation.
New versatile hydraulic models and algorithms can appreciably improve the economic per-
formance of pipeline operations. Nowadays we observe the trend of tempting application of
optimization models instead of simulation-based approaches. However there are still many
challenges, including interfaces and communication barriers issues between different pipeline
transportation units.

3. Summary

Planning an oil pipeline transportation schedule based on nomination requests allows to

plan the detailed graph of batches transmission delivered to the selected refinery, and later to
the tank parks / public distribution terminal retailers. Supply fuel and energy distribution
chain has essential features and is governed by characteristic for oil and gas industry regulari-
ties. Apart from certain traditional foundation frames of the delivery logistics channel be-
tween suppliers – customer, the process of fuel pipeline transport must meet a number of oth-
er additional conditions. Basically, the key sections of this area, are technological require-
ments which enable not only the process of reliable transmission of batches in the pipeline,
but also have further implications in compliance "regime" in the subsequent stages of the
transport supply. This aspect, next to safety, security, political and also environment protec-
tion, has paramount importance for the consortium production and transportation of crude oil
and its refined products.
Oil and gas industry is very specific. It combines a number of different areas, and its inter-
disciplinary nature is reflected in the requirement to meet the expectations of providing a reli-
able and automated control and monitoring the batch with SCADA systems. Simulation, op-
timization and visualization of the transport of fuels based on developed mathematical mod-
els, taking into account the hydraulic and thermodynamic phenomena taking place in
pipelines transportation, enable reliable products to flow control. Maximization of the pipe-
line available capacity (successful implementation of international oil pipeline project covers

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leaks, explosions or spills along the pipeline with respect of applicable law and arbitration
clauses) is part of the optimization process of fuel flow. In result to lack of export capacity
party can be forced to cut (decrease) production and interrupt to pipeline operations. By inte-
grating the essential optimization elements: the correct choice of a suitable pumping regime,
minimizing energy and media consumption, maximization of heat utilization, optimal pump
exploitation (compressor stations for gas pipelines), adequate capacitive and optimal utiliza-
tion of reservoir parks etc. formed a comprehensive pipeline management model. Analysis of
oil and gas pipeline transport phenomena and taking into account the dynamics of their con-
tinuously changeable conditions allow to capture newest fuel logistics problems.
Modern aspects and challenges of international oil and gas pipelines transportation on mac-
ro economical level include three main components of getting batches to the market: pipe-
lines itself, cross-border trade and transit use. First, pipeline transport, which is characterized
by economies of scale, grand upfront investments, high fix costs, potential for natural monop-
oly in consequence results in full-capacity operation as key to profitability. Also this charac-
teristic requires regulation and has limited flexibility.
Secondly, cross border transport needs contracts governed by different legal regimes while
the pipeline must cross the territory of a third party to get to market and in consequence ap-
plies different legal and regulatory rules. Here, extremely important is to complete interna-
tional market due to differing energy markets involvement including its regulation, structure
and degree of competition.
The final component, in some cases, is the use of transit. It is characterized by high level of
competition for market share, and transportation of crude export volumes. It requires also
transit agreement. In consequence it involves transit governments (which have different ob-
jectives) and increase number of players. The combination of these consequences can result in
conflict or the potential for conflict.
Specific fuel and energy plans for the distribution shares on the market, the supply of re-
fineries, and transportation of crude export volumes results in significant concentration on
cross-border nature of transport fuels. The global fuel market is characterized by a massive fi-
nancial expenditures and investment, creation and improvement of pipeline infrastructure.
Technological optimization of pipeline transport is a race with good macro-economic conse-
quences. The financial output of these economic behavior is a result of e.g. greatly improve
the transportation possibility from the exploration field or refinery to end user by maximizing

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the volume of the delivered oil barrels per day (bbl) and building economic and strategic posi-
tions up by oil and gas consortia in oil and gas market share. The signaling approach to cover
issues subject polarize directs to further research, including the evolution of actual and possi-
ble economic strategy in oil and gas sector on the global scale.

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