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Alaska Governor Expects Gas Pipeline Contract Soon

Alaska Gov. Frank Murkowski said last week he expects to have a contract in place within the next few months between the state, a producer group and a pipeline company to build the long-anticipated Alaska natural gas pipeline.

The governor, who was keynote speaker at Ziff Energy's North American Gas Strategies Conference in Houston, said he expects the gas line to be built between 2012-2014. Once completed, the pipe is expected to have a capacity of 4.5-6 Bcf/d, transporting gas from the North Slope into Alberta and then down to the Lower 48 states. Construction is expected to cost $18-20 billion.

"With gas above $6/MMBtu, the time is right for the development of Alaskan gas reserves," Murkowski told the audience. He noted that gas reserves in Prudhoe Bay alone may be as high as 37 TCF, with offshore reserves between 60 and 70 Tcf.

He declined to provide specifics on exactly when the signed contract will be in place, and he admitted there still are some problems to overcome, including acceptance by the Alaska legislature.

North Slope producers ExxonMobil Corp. and ConocoPhillips, along with transporter TransCanada Corp. currently are negotiating with the state to build the gas pipeline. However, Canada's Enbridge Inc. also is competing for the project.

Murkowski said the state is looking at a lot of possibilities on how to move the North Slope's stranded gas. Last week, the Alaska Gasline Port Authority filed an application under the state's Stranded Gas Act, making it the third such group that now has a pending application before state officials.

"We are committed to finding the project that gets our stranded natural gas to market and provides the best financial terms for all Alaskans, and we are happy to have another group in the mix," Murkowski said.

While the state is in negotiations with the producer group and TransCanada, the port authority is proposing an "All-Alaska Gas Pipeline Project," which consists of an 800-mile pipeline from the North Slope to Valdez, AK and a gas liquefaction facility at the water front to export gas to the West Coast.

Ziff Energy Group CEO Paul Ziff said, "The hopes of U.S. consumers -- residential, industrial and power generators -- are pinned on the Alaska Gas Pipeline project, as liquefied natural gas expansion by itself will not be sufficient to meet future U.S. natural gas needs."

Because of the tight supply situation, Ziff noted that gas prices "are now the highest in the world, hurting U.S. competitiveness. Growing oil imports weaken energy security, and the energy bill contributes to the huge U.S. imbalance of payments."

According to Ziff, about 7 Bcf/d is currently produced at Prudhoe Bay oil fields and reinjected because of a lack of market. A report said that a gas pipeline would likely start at 4 Bcf/d and could grow even larger, because Alaska gas resources are unexplored. According to Ziff Energy, the average price of gas by 2010 is expected to be about $6.57/MMBtu.

Murkowski also took time to criticize the U.S. Senate's decision in March to approve only 2,000 acres for drilling inside the 19 million acres of the Arctic National Wildlife Refuge.

"That's about the size of a small farm," said Murkowski.

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