Calling it “the most important energy project currently underconstruction” in North America, Arctic Resources Co.’s new chairmanForrest E. Hoglund began a public relations campaign in Houstonyesterday to push the Northern Gas Pipeline Project that wouldtransport natural gas from the Alaskan North Slope and the CanadianMackenzie Delta to the Lower 48.

The buzz for Hoglund’s plan was so great, and the information sointriguing, that one of the callers in to the teleconferenceincluded former U.S. Energy Secretary Federico Pena, who asked fora meeting with the Arctic group in Washington, D.C. “as soon aspossible.”

There was no earth-shattering news yesterday; there is nopipeline yet. The natural gas pipeline remains a 25-year-old pipedream, but Hoglund said that his group has a new strategy that willwork where others have failed. Hoglund, who retired less than ayear ago as chairman of the former Enron Oil and Gas (now EOGResources), currentlyis the point man for Arctic Resources, whichis working to build support for their version of an AlaskanPipelinea pipeline.

“In my mind, this is the most critical high profile project I’veever been involved in,” said Hoglund, who at one time worked ondeveloping a natural gas pipeline from Alaska for the former ExxonCorp. “I consider this idea to be on the same concept as buildingthe first railroad to California. It will open new frontiers and anew area.”

Alaskan natural gas possibilities are seeing a renewed rushtoward exploration and production with the rising demand fornatural gas. Nearly all of the 6.5 Bcf/d of gas now produced on theNorth Slope is reinjected to enhance gas production or used for oilequipment. All of the ideas so far to bring the huge estimatedreserves lying dormant there have fizzled, in part because of lowergas prices and the high cost of building a pipeline.

While many of the inherent problems that Hoglund said he saw 25years ago are the same today, with producers and pipeline companiesarguing about who should be in charge, and who should make themoney, he said Arctic has a better idea. The company is developinga consortium of producers, pipeline companies, Aboriginal groupsand government authorities to make the pipeline areality—something that its main competitor for a pipeline,Foothills Pipe Lines, has so far failed to do.

“I have seen, first hand, the issues that can prevent asuccessful pipeline from being developed in a safe and timelyfashion,” Hoglund said. “To have a pipeline in place by 2005 or2006, when Alaskan gas is projected to be available and when themarkets in the U.S. and Canada will be needing that gas, aconsensus approach is needed.”

To that end, Arctic is wooing what it calls the “seven or eight”largest U.S. and Canadian gas producers and pipeline companies,including BP Amoco, ExxonMobil, Phillips, Imperial, ReliantEnergy, Westcoast, Enron, Kinder Morgan and El Paso. “All of themare reviewing the proposals now,” he said.

Arctic’s planned pipeline route includes an offshore pipelinethat would extend eastward from Prudhoe Bay in Alaska and returnonshore in the Mackenzie Delta area in northern Canada. Thepipeline would follow the Mackenzie River south through theNorthwest Territories to interconnected pipeline in Alberta withaccess to U.S. markets. A northern route was chosen by Arcticbecause it avoids “costly mountain ranges,” and still providesopportunities for more natural gas exploration and development inAlaska and Canada, including access to gas reserves in the northernYukon.

Following a ramp-up period, Arctic estimates it would transport4 Bcf/d through the high-pressure line. According to Hoglund, theproject has brought on board several “key” international andnorthern/arctic technical companies that are expected toparticipate, including Cimarron Engineering, SNC-Lavalin, EBAEngineering, Saipem/Snamprogetti, C-Core and Rocksaw Technology.

Construction costs for the 1,200 mile, fully-trenched routewould be $4 billion, and financing and reserves would add another$1-plus billion, Hoglund said. What could make Arctic’s plan moreattractive than an alternative plan is its financial approach,which would coordinate governmental and aboriginal groups in Alaskaand the Northwest Territories.

Arctic’s funding approach centers on using 100% debt financinginstead of the equity and debt financing used to construct andfinance typical pipeline projects. Tariff-backed bonds would beissued by special purpose entities to be owned by aboriginal andgovernment groups, which could own the pipeline. Hoglund said the100% debt financing also would be more attractive to shippersbecause it would offer a more favorable tariff structure.

Key to the Arctic proposal is what Hoglund said is the “rightcorporate structure.” After he joined the effort, he brought on boardHarvie Andre, a former senior minister with the Canadian government ,who will serve as chair of Arctic’s Canadian affiliate, ArctigasResources Corp. Andre will direct the company’s efforts to coordinateits activities with Canadian federal and provincial governmentdepartments, aboriginal groups and the Canadian producer and operatorcommunity. (see Daily GPI, Nov. 8,1999).

But what of the competitors’ pipeline efforts? TransCanada andWestcoast, two pipelinesthat Hoglund mentioned as having interestin the Arctic consortium, have laid plans for a joint competingproject —ANGTS, which is sponsored by Foothills Pipe Lines Ltd.

ANGTS or the Alaska Natural Gas Transportation System, whichhas been on the books more than 20 years with approvals from thechief executives of both nations, has a different route thanArctic’s, transporting North Slope gas from Prudhoe Bay south alongthe Alaskan Highway, across the Yukon, northern British Columbiaand Alberta, with a terminus at the U.S. border. Only the northernportion remains to be constructed. The southern portion, fromAlberta into the U.S., which includes Foothills and Northern BorderPipeline, was completed long ago.

Foothills has its allies. The government of Canada’s Yukonterritory threw its endorsement toward the Foothills plan in March(see Daily GPI, March 13). Then,Economic Development Minister Trevor Harding said a pipeline unit hadbeen added to his department, and that it would take the initiative indiscussions to revive ANGTS.

Still, Hoglund is sure the consortium is the best approach.”Extraordinary projects take an extraordinary approach,” Hoglundsaid.

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