It’s a long way off, and some think it will never get built, but a gas pipeline from Alaska’s North Slope to serve Lower 48 markets via Canada would be a mixed blessing to the Canadian market, a Calgary-based consultant said last week, noting Canada’s gas industry needs to prepare now to preserve the value of its product.

“While construction of the Alaskan pipeline will likely have a positive impact on Canada’s economy in the shorter term, once it is up and running it will make Alaska into a direct and effective competitor for Alberta and [British Columbia’s (BC)] natural gas industry,” said Ralph Glass, AJM Petroleum Consultants vice president of operations. “Looking ahead, we have to consider the fact that the Alaskan pipeline will increase natural gas volumes into the U.S. market. This could keep natural gas prices low in future years -‐ low natural gas prices will have a significant impact on future drilling here in Canada.”

Recent studies have indicated that Western Canadian gas plays require gas prices to be C$7‐8/Mcf at AECO to be viable, with even higher prices required in Alberta’s deeper Foothills areas, according to AJM. The increase in production from U.S. gas shale plays has raised gas storage levels in the U.S., depressing prices to $6/Mcf.

While Glass said he anticipates the additional quantities of gas expected from Alaska could continue to keep gas prices low, he said he doesn’t feel the Alaskan pipeline needs to signify doom and gloom for Canada’s gas industry.

“We need to reduce our dependency on the U.S. as the primary market for our natural gas, and now is the time to begin planning, rather than waiting for the impacts of the pipeline to force us into action,” he said. “In light of the changes that will be inevitable with the completion of the Alaskan pipeline, this is the ideal time to begin aggressively pursuing an LNG [liquefied natural gas] and oil export terminal on BC’s coast so Western Canadian hydrocarbons can gain access to world markets.”

Such an export terminal is proposed by Kitimat LNG Inc., which is touting a project at Bish Cove, BC (see NGI, Dec. 1). In September Calgary-based Kitimat cited shifting global gas supply and demand fundamentals as reason to revise its plans for a LNG import terminal to instead construct an export terminal at Bish Cove (see NGI, Sept. 29). Rising gas demand in Asia and recent increases in supply in North America — including in the U.S., Canada’s traditional export market — have led to significantly higher natural gas prices in Asia than North America.

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